Many Factors Unknown

Millions of Californians are likely to be affected by Pacific Gas & Electric Co.’s bankruptcy filing Friday, but exactly how will depend on what happens in the next weeks and months as the utility, the U.S. Bankruptcy Court, regulators and the state struggle in largely uncharted territory.

As in any Chapter 11 filing, the company can conduct business as usual. Power will still be delivered, meters will be read, customers will be billed--and expected to pay those bills. But no one knows how much the electricity will ultimately cost and what the utility will look like at the end of these proceedings.

Here are the answers to some frequently asked questions about the bankruptcy filing:

Q. How will the bankruptcy filing affect electricity rates?

A. That’s unclear. State regulators have already approved a rate increase for customers of Pacific Gas & Electric and Southern California Edison Co. Legal experts disagree about whether a bankruptcy judge could order another rate increase for PG&E; customers.

But state regulators or the Legislature could feel pressured by the bankruptcy filing to come up with a solution, and part of that solution could be another rate increase for the troubled utilities, said David Huard, a Los Angeles attorney who formerly worked for the Federal Energy Regulatory Commission.

The PG&E; filing is not expected to affect customers of municipally owned utilities such as Los Angeles’ Department of Water and Power and Anaheim Public Utilities.

Q. Will this increase the possibility of rolling blackouts?

A. The possibility of rolling blackouts was already high and expected to climb this summer as air conditioners and other seasonal power users tax California’s straining energy grid. If PG&E;’s bankruptcy filing is approved, however, the power companies that sell to the utility would have to get the judge’s approval to cut back. That could help keep the situation from getting worse.

Q. How long could a bankruptcy take?

A. This could be over in weeks--or it could take years.

PG&E; could make a deal with regulators, the state and its creditors and have the bankruptcy petition dismissed. If no deal is struck, coming up with a reorganization plan could take about 18 months, although related lawsuits can drag on for years beyond that, said Kenneth N. Klee, a UCLA law professor who counseled the Public Service of New Hampshire utility in its bankruptcy filing.

Previous utility bankruptcies have taken three to four years for plans to be approved by courts and regulators, but none has had to face the kinds of massive problems facing PG&E;, said Rich Levin, a Los Angeles bankruptcy specialist who helped handle the New Hampshire case and one in Texas.

“The real issue is the deregulation mess. They’ve got to solve the underlying business problem” before a bankruptcy plan can succeed, Levin said.

Q. How would bankruptcy affect investors?

A. Technically, stockholders can lose all their investment in bankruptcy. Shareholders are at the bottom of the pecking order in Bankruptcy Court, with every other party--lenders, bondholders, employees, vendors--taking priority.

Many financial experts, however, say a total wipeout for stock investors is unlikely. Shareholders actually own stock in the utility’s parent, PG&E; Corp., which has other, unregulated business that should be unaffected by the bankruptcy filing, said Steven Fleishman, a Merrill Lynch analyst.

Utility Chairman Robert D. Glynn said shareholders should view the filing as a sign that the company is trying to stop its financial drain from the unresolved energy crisis.

Q. How does this affect anyone who has invested in the utility’s bonds?

A. Bondholders are in a better position than shareholders, depending on the type of bonds they hold. Although they may still lose money, investors in so-called secured bonds--bonds that were used to build power plants, for example--have a very high priority in Bankruptcy Court. Investors in bonds that are not secured have a lower priority but still get paid before shareholders get anything.

The utility has said it will continue making interest payments on its secured bonds, but plans for interest payments on unsecured bonds would be part of the reorganization plan.

Q. How will PG&E; employees and retirees fare?

A. The utility has said that it plans no layoffs and that its pension fund, which is protected by federal law, won’t be affected.