SAN FRANCISCO — The thousands of banks, businesses and power companies owed money by California’s largest utility may get to vote as early as June on one of two dueling plans to settle their debts.
U.S. Bankruptcy Judge Dennis Montali told Pacific Gas and Electric Co., as well as the state of California and other creditors, on Tuesday that he hopes PG&E’s $13 billion bankruptcy will have reached that phase by mid-June.
That gives PG&E and the Public Utilities Commission less than three months to persuade the utility’s creditors to vote for their drastically different plans for the utility’s future.
PG&E claims the only viable way to climb out of debt and relieve the state of having to buy electricity for its 4.6 million customers is to transfer $8 billion of assets to its federally regulated parent company, away from state oversight.
It then would borrow against the value of those power plants, transmission lines and lands and pay its creditors with the money, and claims debts would be paid in full with interest without a rate hike.
But the state, consumer advocates and even some federal agencies claim PG&E’s intentions go beyond raising money. They say the utility is using bankruptcy to challenge dozens of state laws that prevent it from, among other things, charging potentially lucrative market prices for electricity.
The PUC, which regulates PG&E, would lose control over how much PG&E can charge for the electricity it churns at its hydroelectric, nuclear, renewable and gas-fired power plants under that deal. It hopes instead to convince creditors that PG&E should use the roughly $5 billion of cash it has accumulated from ratepayers over the past year and borrow more money to pay its debts.
The official creditors committee currently backs PG&E’s plan, which they claim will get them paid faster.
But the PUC has pledged to mire PG&E’s plan in legal challenges should it win, and hopes creditors will side with the state because of that threat.
Montali has agreed in part with PG&E’s critics by ruling last month that federal bankruptcy law does not expressly allow PG&E to disregard dozens of state laws and regulations while crafting its plan to emerge from bankruptcy.
However, he has allowed PG&E to appeal his ruling in federal court, and said the utility can move forward as long as it convinces him that the public won’t be harmed by escaping those laws and that there’s simply no other way to dig the utility out of its financial woes.
At a bankruptcy hearing Tuesday, various creditors, including California counties wanting to know the future of property tax revenues from PG&E lands within their borders, asked Montali to order PG&E to release more details about its intentions.
Montali agreed with The Utility Reform Network that PG&E must provide a more detailed breakdown of how much it intends to charge for electricity and natural gas in the coming years. He said, however, that PG&E is not required to discuss the legal feasibility of its plan at this point, only to describe its machinations.
To start the voting process by mid-June, Montali prescribed a speedy schedule for both sides to campaign for their plans and respond to objections. The PUC must file a detailed description of how its plan will work by April 15. Meanwhile, PG&E will continue ironing out the details in its own so-called disclosure statement — what Montali describes as a voter’s pamphlet to help creditors decide whom to support.
PG&E filed for federal bankruptcy protection nearly a year ago after after high power prices spawned by the state’s energy crunch forced it into debt.
Ongoing antagonism between PG&E and its regulators at the PUC prompted Montali to order the two groups to work with a mediator to at least discuss their differences.
On the Net:
U.S. Bankruptcy Court, Northern District of California: http://www.canb.ca.gov
California Public Utilities Commission: http://www.cpuc.ca.gov