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California power regulators can still order the state’s largest utility to perform an accounting change the company claims will end its chance to recover billions in undercollected electric rates from its customers, a federal bankruptcy judge ruled Friday. 

In his decision, U.S. Bankruptcy Judge Dennis Montali dismissed Pacific Gas and Electric Co.’s complaint against the Public Utilities Commission, saying the bankrupt utility must defer to the PUC’s regulation. 

“The public interest is better served by deference to the regulatory scheme and leaving the entire regulatory function to the regulator, rather than selectively enjoining the specific aspects of one regulatory decision that PG&E disputes,” Montali wrote in his decision. 

The decision settles weeks of speculation over whether PG&E could successfully avoid what it considered an illegal order from the PUC by asking Montali to halt the request, hence, potentially pitting the federal bankruptcy court against a state regulatory agency. 

The dispute emerged after the cash-starved utility filed for federal bankruptcy protection April 6, unable to collect enough money from ratepayers to pay its expenses due to a rate freeze and soaring wholesale power prices. 

The PUC had ordered PG&E, as well as fellow financially floundering utility Southern California Edison Co., to rebalance their accounts to better reflect how much money they earned selling off power plants under the state’s 1996 deregulation law against how much money they lost being unable to charge the full cost of electricity. 

The accounting change order emerged from a request by San Francisco-based consumer group The Utility Reform Network. The group told the PUC that without the change, ratepayers would be forced unfairly to empty their pockets to rescue the utility from its debt. 

PG&E has repeatedly called the change illegal, and one of its first motions after bankruptcy was to ask Montali on April 9 to block the PUC’s March 27 order. 

In a printed statement Friday, PG&E said it was “disappointed that the court did not grant immediate relief from the unlawful and retroactive CPUC order. However, today’s decision was not on the overall merits of the CPUC action.” 

The utility “will continue to pursue all legal challenges to this unlawful CPUC decision,” the statement said. 

In its own printed statement, the PUC said it was pleased by Montali’s decision to dismiss PG&E’s complaint against the commission. 

“The Commission is pleased, but not surprised, that Judge Montali has ruled that PG&E cannot evade proper state regulation by choosing to file for bankruptcy and seeking protection from Bankruptcy Court,” said PUC President Loretta Lynch. 

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On the Net: 

http://www.pge.com 

http://www.cpuc.ca.gov 

http://www.canb.uscourts.gov