Gov. Gray Davis lashed out Pacific Gas and Electric’s decision to file for bankruptcy, calling it selfish and ”a slap in the face for Californians.”
”I want to stress this one fact: PG&E put itself into bankruptcy,” the governor said. ”We have been working for weeks and weeks on negotiations that we thought were fair to the consumers and fair to PG&E.”
Friday’s bankruptcy filing by the state’s largest utility came the morning after Davis, in a statewide address, proposed relieving utilities’ debts by giving them a share of a record rate increase approved last week by state regulators and continuing to negotiate a state plan to buy the utilities’ transmission lines.
Bankruptcy won’t turn out the lights or immediately increase the bills of PG&E‘s 13 million customers, but it could increase the political and financial turmoil on Wall Street and across the West for years to come.
Only two other U.S. power utilities have gone bankrupt since the Depression: Public Service Co. of New Hampshire in 1988 and Texas’ El Paso Electric in 1992, and PG&E‘s case is much larger.
”I think it’s a farce,” said Charles Davis, a retired truck driver. ”Our energy (bills) will definitely go up now, but I guess you have to roll with the punches. It’s up to the people we elected to do something about this.”
In seeking Chapter 11 protection from its creditors, PG&E said efforts by Davis and other state officials to ease the crisis had gone nowhere.
”The regulatory and political processes have failed us, and now we are turning to the court,” said Robert D. Glynn Jr., chairman of corporate parent PG&E Corp.
PG&E and other California utilities profited handsomely from the first two years of energy deregulation in the state, but then a combination of weather, economic growth and skyrocketing wholesale costs turned the tables.
PG&E, which serves more than one of every three Californians, says it ran up an $8.9 billion deficit buying electricity from June through February. The growing debt caused the utility to start defaulting on its bills in January. That’s when the state stepped in; it has been spending about $45 million a day to buy power for PG&E customers since then.
The utility had $2.6 billion in cash and outstanding bills of $4.4 billion as of March 29.
Filing for bankruptcy court protection allows the utility to protect its assets from creditors, but it could devastate PG&E Corp.’s shareholders and hurt the company’s 20,000 employees.
Shareholders have lost a combined $10 billion on paper since PG&E Corp.’s stock reached its 52-week high of $32.50 last summer. On Friday, shares fell more than 37 percent when trading resumed after a halt of more than two hours. The shares closed at $7.20, down $4.18, on the New York Stock Exchange.
PG&E executives said they had been making daily evaluations since December of whether the utility would be better off going bankrupt. After listening to the proposals outlined in Davis’ speech Thursday night, the executives said they concluded there was little hope of getting financial relief from the state.
”We believe (the bankruptcy judge) will provide a more disciplined and organized approach” to solving the utility’s financial crisis, PG&E President Gordon Smith said Friday.
Company officials said the utility’s insolvency shouldn’t lead to any more blackouts than are already expected this summer, and Attorney James Lopes, who is handling the case for the utility, said PG&E has no immediate plans to use the courts to push through further rate increases.
The state’s second largest utility, Southern California Edison, issued a statement suggesting it had no immediate plans to file for bankruptcy protection. And Sempra Energy, parent company to San Diego Gas and Electric, said it continues to remain viable.
Sen. Debra Bowen, chairwoman of the Senate Energy Committee, said the bankruptcy filing could derail the state’s negotiations to purchase transmission lines from PG&E and Southern California Edison and force the state into a bidding war for the lines.
”We’ve lost control over doing any kind of transaction that solves the problem ourselves,” she said.
Consumer activists, meanwhile, were quick to pounce on the news as more evidence that the utility is not getting enough help from its parent company, which has profited during California’s energy crisis.
”PG&E Corp. will walk away from this unscathed,” said Douglas Heller of the Foundation for Taxpayer and Consumer Rights. ”They are killing their first born to keep the corporate family very well off. It’s a sacrifice the ratepayers of northern California are being forced to pay.”
The bankruptcy doesn’t affect the parent company or another PG&E Corp. subsidiary, National Energy Corp., which was cashing in on the high wholesale electricity prices even as the utility sank into debt.