The Boston Herald
Yesterday’s bankruptcy filing by Pacific Gas & Electric Co. should have little or no impact on Massachusetts plants owned by a sister subsidiary, experts said yesterday.
Pacific Gas & Electric Co., which sought protection from creditors after running up $ 8.9 billion in debt to buy power for its 13 million customers, is wholly owned by PG&E Corp. So is PG&E National Energy Group, which owns plants in Salem, Somerset and Pittsfield.
“We expect (the bankruptcy filing) should have no effect on PG&E National Energy Group,” said Thomas Powers, external and environmental affairs director.
Arlene Spangler, of Standard & Poor’s in New York, said the bond-rating service analyzed PG&E Corp.’s legal structure and concluded the generating operation is effectively shielded from the California utility’s financial woes.
“We still stand by (that),” she said. That analysis did conclude, however, that in extreme circumstances it was conceivable a bankruptcy judge could go after the National Energy Group assets.
But even if a judge let them, creditors would be unlikely to pursue the generating assets because they’d be able recoup more by leaving the National Energy Group intact and benefitting from its profits, she said.
Some activists have accused PG&E of dodging responsibility by creating separate entities. “The parent company would prefer to kill off their firstborn and keep all of the rewards,” said Douglas Heller, of California’s Foundation for Taxpayer and Consumer Rights.
PG&E fled to the protection of bankruptcy a day after California Gov. Gray Davis went on statewide television Thursday night to outline a plan to save both PG&E and another strapped Golden State power company, Southern California Edison. But it wasn’t enough, PG&E decided.
“The regulatory and political processes have failed us, and now we are turning to the court,” said Robert D. Glynn Jr., PG&E‘s chairman. “We expect the court will provide the venue needed to reach a solution, which thus far the state and the state’s regulators have been unable to achieve.”
While PG&E‘s customers probably won’t see much difference, lenders, bondholders and power generators may have to write off billions they advanced to the utility. And long-term damage to the company’s financial reputation could make it more expensive for PG&E to borrow money to upgrade transmission lines and plants.
Davis proposed relieving utilities’ debts by giving them a share of a record rate increase approved last week and by trying to buy their transmission lines. PG&E said sale negotiations were “going nowhere.”