Utility’s Bonds in Demand

Pacific Gas & Electric Co. is finding that demand for $3 billion of bonds backed by a charge on electricity bills is so great there aren’t enough bonds to fill orders for them.

The company leads three California utilities expected to sell a combined $7.4 billion of so-called rate-reduction bonds before the end of the year, as part of a restructuring of the state’s utility industry that takes effect Jan. 1.

The new bonds are created by bundling together a special charge on consumers’ electric bills that by law will be used to pay bondholders. In return, consumers in California will get a 10% rate cut on their utility bills over four years.

Utilities will use cash from the sales to pay off old debts, for such projects as nuclear plants, as they prepare for a competitive market.