Pacific Gas and Electric Co. filed for Chapter 11 bankruptcy protection in April 2001, driven into debt in part by soaring power prices it could not recover from its customers because of a freeze on electric rates. California’s largest utility claims more than $13 billion in debts.
Main points of PG&E‘s plan of reorganization:
-The utility hopes to return to financial health by transferring billions of dollars worth of transmission lines, power plants and other assets away from state oversight and into three new companies that would be regulated by the federal government.
-Financial analysts say the transfers would allow PG&E to borrow more money to pay its debts, since it would escape state control over how much it can charge for the electricity it generates at its power plants, hydroelectric dams and nuclear power plant.
–PG&E would have to pre-empt dozens of state laws and regulations for the transfers to occur, which has prompted critics to accuse the utility of using the bankruptcy to escape state oversight and drawn criticism from U.S. Bankruptcy Judge Dennis Montali.
-The state claims PG&E‘s plan would raise electric rates and worries it would shift oversight of the utility’s lands, assets and activities in California to regulators based in Washington, D.C. PG&E says the plan will pay creditors in full and hold rates steady for the next 12 years.
-Ratepayers would contribute $4.7 billion by continuing to pay among the nation’s highest electric rates.
–PG&E‘s parent company would forego $1.6 billion in profits.
-The utility would sell $1.75 billion of common stock and borrow the remaining money it needs to pay its debts.
A consumer advocacy group, the Foundation for Taxpayer and Consumer Rights, hopes to block the plan, claiming it keeps electric rates at record-high levels without going through the deliberative process required for rate changes. The PUC says its plan will retain state oversight and input over PG&E‘s activities, control over how much it charges for the electricity it makes and access to the utility’s lands.