Bankrupt PG&E asks federal judge to give more time for reorganization

By Karen Gaudette The Associated Press
Thursday January 17, 2002

SAN FRANCISCO— Pacific Gas and Electric Co. and California power regulators vented their frustration with one another before a federal bankruptcy judge Wednesday, as the state sought permission to develop an alternative plan under which PG&E would emerge from bankruptcy. 

U.S. Bankruptcy Judge Dennis Montali allowed PG&E to continue as the sole designer of a plan to emerge from its $13.2 billion bankruptcy and pay its thousands of creditors. 

However, Montali decided to give the state Public Utilities Commission nearly a month to prove they have a “sensible” plan worthy of competing with PG&E’s. 

Montali’s decision came after more than two hours of debate, during which PG&E complained that the state, disenchanted with PG&E’s reorganization plan, only wants to stall the bankruptcy process. 

“What the PUC is doing today, your honor, is opening another front in the war against PG&E,” said Jim Lopes, an attorney representing the utility. “They are attempting to manipulate the bankruptcy court to their end to defeat our plan on any basis.” 

Lopes said PG&E should retain “exclusivity” in designing a reorganization plan because of how far it has progressed since filing for federal bankruptcy protection last April. Competing plans only would confuse creditors and slow PG&E’s return to financial stability, he said. 

Alan Kornberg, an attorney representing the PUC, said the state’s goal is to prevent PG&E from transferring its transmission lines, power plants and other assets from state to federal regulation and pay creditors. The PUC believes it can accomplish this without overly delaying the bankruptcy process, Kornberg said. 

At Montali’s order, the PUC will provide an outline of an alternate plan by Feb. 13. Kornberg lacked details of the state’s proposal, but said some creditors would be paid using millions of dollars in cash PG&E already has on hand. 

“Progress is in the eye of the beholder,” Kornberg said of PG&E’s claims to expediency. “I don’t believe we are whizzing along.” 

PG&E says switching its assets from state to federal regulation would allow the utility to raise enough money to pay its creditors in full. 

The state argues the plan is PG&E’s gambit to free itself from PUC control and charge more for electricity from its hydroelectric and nuclear power plants. 

“The reason we’re here is the problems were not solved by the state and PUC before we had to file for bankruptcy,” Lopes countered. 

Both sides admit they have done little to build consensus between them. Montali ordered the two sides to come prepared Jan. 25 to argue why he shouldn’t appoint a mediator to try and resolve some of their myriad issues. 

“I’ve thought about the perfect person, and that person would be knowlegable in bankruptcy law, constitutional law, energy law and mediation skills. Unfortunately, I’m not available,” Montali joked. 

Regardless of the merits of PG&E’s plan, its feasibility rests on whether Montali decides next week to ignore precedent in federal bankruptcy code and allow PG&E to override state law to put its plan in motion. Even with Montali’s blessing, Kornberg argued creditors could have to wait months to get paid as the case languishes in appellate court, at the expense of millions of dollars to PG&E’s estate in legal fees. 

“We have a vested interest in seeing PG&E emerge from bankruptcy as soon as possible,” Kornberg said, referring to the billions of dollars the state has spent buying electricity for PG&E’s customers over the past year. 

Robert Moore, an attorney representing the official creditors committee, said creditors are backing PG&E’s plan because the utility has promised to resolve the bankruptcy quickly. Alternate plans would delay the process, he said. 

Creditors, Montali, federal regulators and possibly state regulators would have to approve PG&E’s plan before it can go into effect. 

California’s largest utility filed for federal bankruptcy protection nine months ago after its inability to collect the full cost of spiking power prices from its customers drove it into debt. 


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