PG&E hopes bankruptcy judge likes its reorganization plan

By Karen Gaudette The Associated Press
Tuesday January 15, 2002

SAN FRANCISCO — Pacific Gas & Electric Co. and its creditors spent hours in bankruptcy court Monday poring over the nitty gritty of the utility’s plan to emerge from bankruptcy. 

Months before California’s largest utility can put its plan in motion, it must get U.S. Bankruptcy Judge Dennis Montali’s approval of its disclosure statement — an explanation of how it plans to reorganize itself and pay its creditors. 

Montali could approve the statement as early as Wednesday. 

The statement will serve as a type of voter’s guide for PG&E’s thousands of creditors as they decide whether to support or reject the utility’s plan. 

Attorneys representing major banks, disabled workers and power companies told Montali various details they’d like to see fleshed out before they vote. Creditors whose claims have yet to be resolved questioned whether the utility is setting aside enough money to pay them if they should prevail. 

Former PG&E employees expressed concern about whether they will receive workers’ compensation from PG&E, or from the new companies it hopes to spin off. 

The largest creditors are to have 60 percent of their debts paid in cash, and 40 percent in long-term bank notes. Some told Montali they wonder if the value of those notes would slide if a flood of notes hits the market simultaneously. 

PG&E attorney Jim Lopes assured Montali the notes would trade at full value. The utility also reported it has successfully resolved 23 of the 73 objections it has received to the rough draft of its disclosure statement. 

The true test for PG&E’s plan comes on Jan. 25. State officials will argue that PG&E’s plan requires Montali to override state law — which is frowned upon in the bankruptcy code. 

Montali will have to rule whether PG&E’s plan is feasible enough to merit pre-empting state law to allow PG&E to transfer power plants, transmission lines and other assets from state to federal regulation. 

PG&E says the transfers will allow it to raise the $13.2 billion it needs to pay all its debts and resume buying its own electricity without a rate increase. The state spent billions of dollars buying power for PG&E and two other financially troubled utilities last year. 

Consumer advocates and members of the Public Utilities Commission worry that the transfers will push electricity prices higher, since the state no longer would set the price of power that PG&E sells from its plants. 

PG&E filed for federal bankruptcy protection nine months ago, after a state-ordered rate freeze prevented it from collecting the full cost of electricity and natural gas from its customers. 


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