State’s PG&E; Plan Moves Ahead

Over vehement objections from Pacific Gas & Electric Co., a federal bankruptcy judge granted state regulators permission Wednesday to submit an alternative to the utility’s own plan for reorganizing its finances.

PG&E; argued that a proposal outlined by the California Public Utilities Commission was off by billions of dollars and was not credible. Judge Dennis Montali called the plan challenging but said it was legally permissible and deserved consideration.

The ruling was the second recent victory for state regulators. Montali previously declared that the PG&E; plan was fatally flawed because it attempts to preempt dozens of state laws. But the company will submit a modified version next week and hopes it will be confirmed.

PG&E; filed for protection from creditors almost a year ago. The company submitted a reorganization plan that called for shifting its generation and transmission assets to new subsidiaries of its parent company and outside the reach of the utilities commission.

Calling PG&E;’s plan a regulatory jailbreak, California officials moved to submit their own plan and to challenge PG&E;’s exclusive right to have the only plan under consideration.

The commission’s proposal keeps PG&E;’s hydroelectric facilities under state regulation and promises to pay creditors in full and to restore the utility to financial health. Ratepayers would continue to pay record high electricity rates, and dividends would be suspended to help pay off the company’s debts.

At Wednesday’s hearing, PG&E; lead counsel Jim Lopes attacked the commission’s plan, saying that it distorts the company’s finances by as much as $5 billion and would not work. But commission lawyers blamed PG&E; information for some of the inaccuracies and said the errors would be fixed when their plan is filed.

Utilities commission General Counsel Gary Cohen told the judge: “We will move heaven and Earth to meet any timetable you set. This case is hugely important to ... the state of California.”

Montali said he wanted the plan submitted by April 15 or sooner.

The judge also approved the selection of San Francisco mediators Anthony Piazza and Marc Feder to try to resolve all matters of dispute among the state, PG&E; and the official creditors committee. The judge authorized a $51,000 payment for three days of mediation. The dates and locations were not disclosed.

PG&E; is engaged in several actions with the commission, including a federal lawsuit over the company’s contention that it should have been allowed to fully collect wholesale power costs from ratepayers during the energy crisis.

PG&E; also has announced its intention to appeal Montali’s ruling against its plan to preempt state laws.