Agence France Presse
SAN FRANCISCO, April 6 (AFP) – Frustrated with stalled negotiations with California state officials to stop financial hemorrhaging, Pacific Gas and Electric Company filed Friday for bankruptcy protection.
PG and E said rising costs, now increasing by more than 300 million dollars per month, and the failure of Governor Gray Davis to resolve the ongoing crisis, had forced its hand.
“We chose Chapter 11 because we expect the court will provide the venue needed to reach a solution that, thus far, the state and state regulators have not been able to achieve,” company Chairman Bob Glynn said in a conference call Friday.
The filing in federal court here came the morning after Davis went on statewide television to blame California’s power woes on those running the state in the 12 years before he was elected.
“We listened to the governor’s speech last night,” Glynn said. “We heard a lot of the words, but have not seen actions.”
Davis outlined a tiered set of rate increases he said were needed to deal with the power shortage, which has caused rolling blackouts throughout California.
Glynn and CEO Gordon Smith said they had been telling Davis and his staff they were in crisis since last summer.
But the governor rejected responsibility for the company’s failure.
“PG and E put itself into bankruptcy,” Davis told reporters. “We have moved heaven and earth to try to fix a scheme that was inherently flawed.”
Glynn said PG and E’s decision would protect investors from further slide in stock price and to find a more receptive forum than the governor’s office.
On Wall Street the utility sector was sharply lower after the news. PG and E lost 4.18 to close at 7.20, while Edison International shed 4.39 to 8.25.
The company said until earlier this week, its representatives had been ignored by state officials reportedly focusing on finishing talks with Southern California Edison, the state’s other major investor-owned utility.
Edison said Friday it had no plans to file for bankruptcy.
“We at Southern California Edison continue to believe that working out a comprehensive solution to our current crisis is a preferable course,” John Bryson, chairman of parent company Edison International, said in a statement.
PG and E — which serves an estimated 13 million Californians — says it has incurred nine billion dollars in debt as a result of flawed 1996 deregulation laws.
Those laws cap rates companies can charge consumers while leaving independent generators free to charge whatever the market will bear.
“Almost every day since this crisis started, we have looked at the consequences of going into bankruptcy and of staying out of court,” Glynn said. “We chose Chapter 11 because we feel it is the best venue to address the situation.”
Smith said customers and employees would not be effected.
Glynn said PG and E officials listened carefully to the governor’s speech late Thursday and the decision to file Friday was triggered by the impression that Davis was not going to address the company’s financial needs.
PG and E wants to be allowed to recover the full cost of power from its customers, Glynn said.
Glynn and Smith dodged questions regarding whether the state’s determination to take over the company’s transmission lines as part of any taxpayer bail out was a sticking point in talks.
“The state’s proposal to buy our transmission system was one element,” Glynn said. “It was not that element per se that was the problem, it was reaching agreement on all relevant issues.”
PG and E has asked the Federal Energy Regulating Commission to investigate alleged market manipulation and price gouging by the independent power generators.
Last month the state’s Public Utilities Commission authorized a 40 percent rate hike for electricity users, after outages that hit hundreds of thousands of homes and businesses.
Consumer advocates said the filing would not affect the crisis.
“I don’t think the lights will go out because of bankruptcy,” said Doug Heller of the Foundation for Taxpayer and Consumer Rights. “They will go out because of the same reason they did in January.”