Regulators, PG&E Creditors OK Deal

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Associated Press

SAN FRANCISCO: California power regulators have reached a deal with creditors of Pacific Gas and Electric Co. that could force millions of customers to continue paying among the nation’s highest electricity rates for years.

Attorneys representing the state Public Utilities Commission said Thursday at a news conference the state would work with PG&E‘s creditors and UBS Warburg to design a financial plan that will help PG&E settle its debts, become creditworthy and resume buying electricity for its customers.

The state currently buys power for customers of PG&E and two other electric utilities. PG&E provides natural gas and electricity to about 13 million people in northern and central California.

PUC leaders have said PG&E customers must pitch in to help move PG&E from bankruptcy court or the state could lose oversight over much of PG&E‘s infrastructure and utilities to the federal government.

Thursday’s agreement would allow U.S. Bankruptcy Judge Dennis Montali to require that PG&E‘s electricity rates be high enough to meet the utility’s financial obligations.

PUC general counsel Gary Cohen said the court must have some control over rates to reassure creditors and investors they will get paid.

PG&E said the tardiness of the state’s announcement in the bankruptcy process only enhanced its view that the state’s plan is flawed.

“Since many of the important details of the CPUC’s arrangement have not been made public, PG&E will need to obtain and thoroughly review additional information in order to provide a detailed analysis,” the company said in a statement.

Consumer advocates were enraged by the plan, which resembles a similar agreement crafted in secret last fall by Gov. Gray Davis‘ administration and the PUC.

That plan requires Edison customers to continue paying record electric rate hikes approved during the spring of 2001 for the next several years to help the beleaguered utility pay an estimated $3 billion debt incurred during the state’s energy crisis.

California’s heaviest residential users have been paying about 40 percent more on average since the rate hikes were adopted during the spring of 2001.

The issue faces a court fight, said Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights, a Santa Monica-based consumer advocacy group.

“We’re not going to let five unelected Davis appointees impose $20 billion in bailout charges on the ratepayers to cover the deregulation debacle,” Rosenfield said.

Four of five commissioners at the PUC were appointed by Davis, a Democrat up for re-election this November. The state Supreme Court recently dismissed a case brought against the PUC by consumer groups that claimed the state was wrong to make such agreements without allowing public comment and participation.

Davis’ spokesman, Steve Maviglio, did not immediately return a call for comment.

Thousands of creditors recently finished voting on a pair of plans for PG&E‘s future to help Montali determine how the debts will be paid.

The utility hopes to regain its good credit by transferring transmission lines, power plants and other assets away from state oversight and into three new companies that would be regulated by the federal government. Analysts say that 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 wholesale electricity.

The plan the state and creditors committee hope to put before creditors calls for the utility’s 4.6 million ratepayers to pay billions, for PG&E to sell stock and its parent, PG&E Corp., to forgo a huge chunk of profits.

Montali is scheduled to decide on one of the scenarios Nov. 12, although Cohen said the agreement’s future relies on the judge extending the voting period to give creditors a chance to examine the changes and perhaps switch their votes.

PG&E‘s creditors committee, which initially backed PG&E, now recommends that creditors support the state’s revised plan.

Both PG&E and the state call the other’s plan fatally flawed.


Associated Press Writer Jennifer Coleman contributed to this report.

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