SAN FRANCISCO — State Attorney General Bill Lockyer sued PG&E Corp. Thursday, alleging the company siphoned $4.6 billion from its utility Pacific Gas and Electric and then illegally drove the subsidiary into bankruptcy.
The unfair business practices suit, filed in San Francisco Superior Court, paints a sinister image of San Francisco-based PG&E Corp., a holding company formed five years ago as part of California’s deregulated electricity market.
In the suit, Lockyer alleges PG&E Corp. used the state’s largest utility as a piggy bank to finance its nonregulated businesses and then broke a promise to state regulators to support the utility during financial crises.
PG&E Corp. dumped the utility into bankruptcy court nine months ago after rising wholesale electricity prices during 2001 and 2001 saddled Pacific Gas and Electric with billions in losses.
“Instead of keeping its promise, PG&E Corp. drained the assets of its California utility and put billions of dollars into unregulated affiliates in order to achieve its ultimate objective of becoming one of the largest unregulated power companies in the nation,” Lockyer said.
The suit seeks $600 million to $4 billion in damages on behalf of the utility’s customers.
PG&E denied the allegations and vowed to defend itself vigorously against the civil complaint. Calling the allegations “unwarranted, discriminatory and harmful,” the corporation cast the suit as a waste of taxpayer money.
“This misdirection of state resources is harmful to California during a time when we are working hard to recharge our economy,” PG&E spokeswoman Erica Jacobs said.
PG&E Corp. said the California Public Utilities Commission has already reviewed the financial transactions and “found nothing inappropriate or illegal in the company’s transactions with the utility.”
The utility itself did not immediately return calls seeking comment on the suit against its corporate parent.
Lockyer’s lawsuit worsens the tensions developing between state officials and PG&E Corp. The California PUC, the chief regulator of Pacific Gas and Electric, has also lambasted the holding company for abandoning the utility in its time of need.
Executives in the holding company are trying to free themselves of state oversight as part of the utility’s proposed reorganization from bankruptcy. The PUC and most consumer groups are opposing PG&E’s proposal.
Several key bankruptcy court hearings are scheduled in the dispute during the next few weeks.
The state-regulated utility was allowed to restructure into a holding company with both utility and nonutility activities in 1996. There were several conditions to that approved restructuring, including one that it give priority to the financial needs of the utility and keep it afloat with the necessary operating funds.
Lockyer said after that restructuring, money was funneled away from the utility and into the parent corporation, thus allegedly violating the utility’s legal agreement to protect state ratepayers from holding company abuses.
“The evidence of the illegality is the billions of dollars that were drained out of the utility into the coffers of the parent corporation,” Lockyer said. “The parent (corporation) acted like the child was the cash cow that could be milked.”
Lockyer’s suit alleges that from 1997 through the summer of 2000, the utility provided $4.6 billion in cash to PG&E Corp. in shareholder dividends and repurchases of the utility’s common stock — all while the utility sank further into financial difficulties.
Mike Florio, a lawyer with The Utility Reform Network, said his nonprofit organization was delighted with Lockyer’s decision to go after PG&E. He said PG&E “basically wants to secede from the State of California and take the money with them.”
On the Net:
PG&E Corp.: http://www.pgecorp.com