Judge Rejects PG&E;'s Request That He Block Enforcement of PUC Order

TIMES STAFF WRITER

Saying he wanted to avoid "jurisdictional chaos," a federal bankruptcy judge Friday denied a Pacific Gas & Electric Co. request that challenged the authority of state utility regulators to set its electricity rates.

"The public interest is better served by deference to the regulatory scheme and leaving the entire regulatory function to the regulator," Judge Dennis Montali ruled.

PG&E; has contended that accounting changes made by the state Public Utilities Commission effectively prevented the company from escaping a rate freeze and forced the firm to sell power at a loss.

The company asked Montali to prevent enforcement of the PUC's order. But the judge made it clear, as he has in previous statements, that he has no intention of substituting himself for the state regulatory apparatus.

Montali conceded that "PG&E; believes--perhaps rightly--that the [PUC] decision will have immense adverse consequences to it and perhaps to its ability to reorganize successfully in this Chapter 11 case."

But he disagreed with the company's contention that the PUC should be restrained because its accounting orders would cause the company to lose $4 billion before the rate freeze ends March 31, 2002.

"The fact that the result may be a negative impact on PG&E;, and a positive economic impact on PG&E;'s customers, does not change the fact that the PUC's rate-making implements public policy," Montali wrote.

PG&E; said it would "continue to pursue all legal challenges to this unlawful PUC action." And PUC President Loretta Lynch said she was "pleased but not surprised that [the judge] ruled that PG&E; cannot evade proper state regulation by choosing to file for bankruptcy."

PG&E; filed for federal protection from creditors April 6, saying it had fallen $9 billion into debt. Three days later, the company filed papers to block the PUC's accounting order, which was adopted March 27 along with the state's biggest rate increase ever.

On Friday, Montali denied motions from two sets of alternative energy providers that wanted PG&E; to immediately assume their power purchase contracts or be allowed to sell the power on the open market.

However, he ordered PG&E; to set a date by June 28 for deciding whether it would execute new contracts with the companies.

The judge also set up what he called a template for resolving the disputes between PG&E; and more than 20 so-called alternative providers, many of them cogeneration plants.

He ordered PG&E; to begin paying four Central Valley plants at least 20% of the $57 million the utility already owes them. The payments would be conditioned on the companies' providing power to PG&E; over four months at PUC-authorized rates that the companies contend are unfairly low.

The judge also denied a motion by Puget Sound Energy, which has an energy-sharing arrangement with PG&E.; The Washington utility contended that PG&E; curtailed some power deliveries early this year and wanted assurances that PG&E; would hold up its end of the deal in the future.

Montali said there was no evidence that PG&E; acted in bad faith when it curtailed deliveries during power shortages.

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