The California Public Utilities Commission (CPUC) Monday unveiled its version of how PG&E Corp. should get itself out of bankruptcy, using $2.7 billion in power payment overcollections, $1.6 billion in foregone dividends, issuing $1.75 billion in shares of its utility business and borrowing $3.86 billion.
State regulators are fighting a PG&E bankruptcy plan that would move assets from the utility to unregulated new businesses, effectively freeing the company from state regulation in favor of federal oversight.
“PG&E‘s plan is illegal and is never going to happen,” Gary Cohen, general counsel for the CPUC, stated bluntly.
The bankruptcy judge informed PG&E in February that he could not accept the company’s “across-the-board” preemption strategy that would ignore several state laws and CPUC regulations in moving the assets to unregulated business units. Instead, Judge Dennis Montali asked the company to resubmit a plan and invited state regulators to propose their own method to allow PG&E to emerge from bankruptcy.
Under the CPUC’s plan, creditors will be paid in full in cash by the end of January 2003- one month after PG&E proposed to pay off its debts.
The regulator’s proposal would subject PG&E to cost-of-service rates for its generation facilities, rather than the long-term fixed-price contracts called for in the company’s plan. The CPUC also proposes the issuance of stock in Pacific Gas & Electric Co., the utility subsidiary of PG&E.
Shares in Pacific Gas & Electric have not been traded since PG&E created its holding company formation in the 1990s.
“When PG&E comes out of bankruptcy…it will meet the characteristics of an investment-grade utility,” Cohen told reporters.
“The state of California in all respects certainly supports keeping PG&E as a regulated utility, instead of the jailbreak the company has proposed,”said CPUC President Loretta Lynch.
Creditors will be able to vote on the plans in June, assuming a Superior Court challenge by a consumer advocacy group does not derail the CPUC’s efforts.
The Foundation for Taxpayer and Consumer Rights argues the CPUC plan still demands too much ratepayer money to bail out PG&E. According to the CPUC, the proposal will ask $4.7 billion of the state’s ratepayers, as compared to $16.2 billion it estimates the PG&E plan would cost ratepayers.