SAN FRANCISCO: Consumers would pick up the costs of helping Pacific Gas and Electric Co. pay its debts under an agreement reached by California power regulators and the bankrupt utility’s creditors.
The deal reached Thursday would enable U.S. Bankruptcy Judge Dennis Montali to require that PG&E‘s rates be high enough to meet the utility’s financial obligations. Public Utilities Commission general counsel Gary Cohen said it’s necessary to let Montali influence rates to reassure creditors and investors they will get paid.
The commission and a committee of PG&E creditors will work with investment banking firm UBS Warburg to design a financial plan that would leave PG&E with enough cash to pay its debts, become creditworthy and resume buying electricity for its customers, commission attorneys said.
Now, the state buys power for customers of PG&E and two other electric utilities. Those companies went deep into debt in 2000 and 2001, when they were caught between skyrocketing energy prices and a freeze on electric rates. California officials say the price surge was caused by market manipulation by energy firms such as now-bankrupt Enron Corp.
Thursday’s agreement angered consumer advocates, who said they will fight it in court.
“We’re not going to let five unelected (Gov. Gray) Davis appointees impose $20 billion in bailout charges on the ratepayers to cover the deregulation debacle,” said Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights, a consumer advocacy group.
The PG&E plan resembles one state officials crafted last fall to help fellow utility Southern California Edison pay its debts. That plan requires Edison customers for the next several years to continue paying record electric rate hikes approved during the spring of 2001.
California’s heaviest residential users have been paying about 40 percent more on average since the rate hikes were adopted.
State officials have said PG&E‘s customers must help pull the company out of bankruptcy or the state could lose its oversight over much of the company’s dealings to federal regulators, whom the state accuses of moving too slowly to rein in out-of-control prices.
The plan the state and creditors committee hope to put before creditors calls not only for the utility’s 4.6 million ratepayers to pay billions, but for PG&E to sell stock and its parent, PG&E Corp., to forgo a huge chunk of profits.
PG&E opposes the plan. It wants to transfer transmission lines, power plants and other assets away from state oversight and into three new companies that would be regulated by the federal government. Analysts say that would allow PG&E to borrow more money because it would escape state control over wholesale electricity rates.
Montali is scheduled to choose one of the scenarios Nov. 12.