SAN FRANCISCO: They’ve trained for the past 19 months, scouring legal documents, calculating data, hunting for the best witnesses. Most have logged more hours at work than at home during the last few weeks.
Teams of lawyers and consultants representing Pacific Gas and Electric Co. and state power regulators will head back into federal bankruptcy court Monday to start a grueling, weeks-long process to argue in favor of their plans which will determine the future of California’s largest utility.
Aside from record electric rate hikes that appear likely to remain in place for months to come, things haven’t changed much for the average customer since PG&E filed for Chapter 11 bankruptcy protection in April 2001. The dishwasher hums. The blue trucks still show up when big trees tackle power lines. The bills still come in the mail.
Behind the scenes, PG&E is feeling pressure from all sides. Its parent corporation said last week it will lose $20 million per quarter if the utility remains stuck in bankruptcy beyond the end of May. Federal judges can’t agree whether the utility’s post-bankruptcy plans are legal. PG&E had to spend more than $2 million to fight a public takeover in San Francisco, its hometown. Major creditors, including some of the nation’s largest banks and energy companies, still are owed billions. Depending how PG&E emerges from debt, ratepayers could be on the hook to come up with the cash.
Everyone involved, from creditors to the Public Utilities Commission, agrees it’s imperative to help PG&E settle its debts and become creditworthy again. California wants to stop being a power buyer or financer and can’t until energy sellers believe PG&E is able to pay its bills. Creditors, of course, want their money sooner rather than later.
Trouble is, the state and the utility couldn’t agree less on how to make it happen and have threatened to take the matter before the U.S. Supreme Court if it comes to that.
PG&E brushed aside offers of help from Gov. Gray Davis and state energy regulators just days before it entered bankruptcy court. It entered the court months after the utility warned soaring power costs were pushing it into tens of billions of dollars of debt and asked for higher rates to make up the difference.
The utility is trying to convince U.S. Bankruptcy Judge Dennis Montali that it would become a more stable entity by weakening its ties to the state. PG&E hopes to transfer billions of dollars worth of transmission lines, pipelines and other assets into new federally regulated companies, then borrow against those assets to pay its debts.
Analysts say federal regulation would enable the utility to earn more money should energy prices climb again, enhancing the value of those assets. Currently, the state controls how much PG&E can charge for the electricity it churns from its power plants and hydroelectric dams.
The state and a major committee of PG&E‘s creditors, on the other hand, want to force PG&E, its shareholders and its ratepayers to generate money to pay the debts through selling stock and maintaining electricity rates that already are among the most expensive in the nation.
PG&E‘s woes are just one piece of California’s puzzling energy bill, the cost of which increasingly is trickling down to millions of customers of PG&E and two other major utilities as more bills come due.
The Public Utilities Commission maintains that current rates are high enough to handle paying off tens of billions of dollars worth of bonds, long-term energy contracts and past energy debts. But groups including The Utility Reform Network say Californians never needed to endure some of the nation’s highest electric and natural gas rates, pointing to increasing evidence the state’s power market was gamed for profits.
The Federal Energy Regulatory Commission released a report last week that indicated employees of Oklahoma-based Williams Cos. and Virginia-based AES Corp. discussed prolonging an outage at one Southern California power plant to take advantage of higher prices the state was paying at the height of the energy crisis.
The report also showed employees at the two firms cut deals to shut down a second power plant AES operated for Williams. Last month, the former head of Enron Corp.’s Portland, Ore. trading office pleaded guilty to using trading strategies with names like “Death Star” and “Get Shorty” to boost power prices.
“It demonstrates again that market manipulation was not the rogue act of Enron but an industry-wide practice in which power companies purposefully created energy shortages to gouge California consumers,” said Doug Heller of the Foundation for Taxpayer and Consumer Rights, a Santa Monica-based consumer advocacy group. “How many smoking guns do we need?”
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