The Los Angeles Times
State utility regulators and Pacific Gas & Electric Co. creditors announced a deal Thursday that would raise electricity rates, if necessary, to pay the company’s debts and restore California’s largest utility to financial health.
The announcement was a victory for the Public Utilities Commission because the creditors’ committee had taken a neutral position on whether PG&E should be reorganized under its own plan or a PUC alternative. The judge overseeing the bankruptcy case is expected to consider the creditors’ wishes as he decides which reorganization plan to adopt.
The PUC has opposed PG&E‘s proposed reorganization, in part, because it contemplates spinning off parts of the company in such a way that they would not be subject to regulation by the state agency.
With Thursday’s announcement, the official committee of unsecured creditors is joining forces with the PUC to push a modified plan that requires regulators to keep rates high enough to cover PG&E‘s costs of financing $1.75 billion in debts.
“We obviously support this proposal,” said creditors’ committee attorney Paul Aronzon, contending it would bring PG&E out of bankruptcy more quickly. The PUC plan also has fewer regulatory hurdles, and it provides payment of debts entirely in cash, while PG&E‘s would pay 40% of the debt with notes.
Proponents of the PUC plan say they will ask a bankruptcy judge to approve a new round of voting by creditors on the competing proposals. The first round ended Aug. 12, and the results have not been announced.
In a written statement, PG&E said, “The PUC announcement today, weeks after the voting period ended, underscores the fact that its current plan is not feasible and cannot be confirmed.
“PG&E continues to believe its plan of reorganization is the fastest, fairest and most feasible solution.”
PG&E needs more information about the PUC‘s modified proposal before commenting further, the statement added.
Judge Dennis Montali will approve one of the plans or neither in early November.
PG&E filed for Chapter 11 protection from creditors on April 6, 2001, saying it had incurred billions of dollars in energy-related debts. PG&E blamed the PUC for its financial plight and proposed to reorganize by spinning power-generation assets into a new subsidiary of its parent, PG&E Corp. The PUC condemned the
plan as a “regulatory jailbreak” and proposed its own plan that would maintain its jurisdiction over PG&E.
Consumer groups have condemned both deals as consumer-financed bailouts of a failed deregulation scheme once supported by utilities.
“This renegade PUC has once again raped the ratepayers in violation of state law,” said Harvey Rosenfield, president of the Santa Monica-based Foundation for Taxpayer and Consumer Rights. The organization would go to court to try to stop the plan, he said.
PUC General Counsel Gary Cohen said “rates should be able to come down shortly after PG&E comes out of bankruptcy” next year because last year’s record rate increases should more than cover the utility’s costs and debt payments.
