Low Ratings Estimated for PG&E; Unit

PG&E; Corp.’s Pacific Gas & Electric utility unit would receive the lowest investment-grade ratings from Standard & Poor’s and Fitch Ratings under a reorganization plan submitted by state regulators.

Standard & Poor’s would give most securities under the California Public Utilities Commission’s plan for the state’s largest utility a “marginal investment grade credit” rating, S&P; told the PUC in a letter. S&P;’s lowest investment-grade rating is BBB-minus. Fitch’s estimate for the securities was BBB, PUC general counsel Gary Cohen said.

The estimates were presented during a bankruptcy trial to decide whether PG&E;’s and the PUC’s rival plans to rehabilitate Pacific Gas are viable. Investment-grade ratings are crucial because many institutional investors would require such ratings before purchasing bonds issued under the plans.

The ratings estimate is a “body blow” to the PUC’s plan, said PG&E; attorney Stephen Neal.