SAN FRANCISCO — Creditors of Pacific Gas and Electric Co. have teamed with California power regulators to promote a plan to settle PG&E’s debts that could require millions of customers to keep paying among the nation’s highest electricity rates for an unknown number of years.
The Public Utilities Commission and creditors committee will work with investment banking firm UBS Warburg to design a financial plan that would leave PG&E with enough cash to pay its debts, become creditworthy and resume buying electricity for its customers, attorneys for the state Public Utilities Commission said Thursday at a news conference.
Now, the state buys power for customers of PG&E and two other electric utilities, the result of a freeze on electric rates that kept them from collecting enough money to pay bills as energy costs skyrocketed in 2000 and 2001. California officials say the price surge was caused by market manipulation by energy firms such as now-bankrupt Enron Corp. Separately on Thursday, the PUC voted to allow utilities to begin buying long-term power contracts through the state to help keep energy prices stable.
State officials have said PG&E customers must help pull the company from Chapter 11 or the state could lose its oversight over much of the company’s dealings to federal energy regulators whom the state has blamed for moving too slowly to rein in out-of-control prices. Those include the utility’s use of its Sierra lands and the prices it charges for power generated at its power plants and hydroelectric dams.
Thursday’s agreement would enable U.S. Bankruptcy Judge Dennis Montali to require that PG&E’s rates be high enough to meet the utility’s financial obligations. PUC general counsel Gary Cohen said it’s necessary to let Montali shape rates to reassure creditors and investors they will get paid.
Rates could even drop, Cohen said, although he acknowledged the state’s ratepayers still are on the hook for billions spent keeping the lights on.
The agreement angered consumer advocates, who said they’re going to court to kill it. The new plan resembles one state officials crafted in to help fellow utility Southern California Edison pay its debts.
That plan requires Edison customers to continue paying record electric rate hikes for the next several years to help the beleaguered utility pay an estimated $3 billion debt incurred during the state’s energy crisis.
“We’re not going to let five unelected (Gov. Gray) Davis appointees impose $20 billion in bailout charges on the ratepayers to cover the deregulation debacle,” said Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer Rights, a Santa Monica-based consumer advocacy group.
Four of five commissioners at the PUC were appointed by Davis, a Democrat up for re-election this November. The state Supreme Court recently dismissed a case brought against the PUC by consumer groups that claimed the state was wrong to make such agreements without allowing public comment and participation.
Davis’ spokesman, Steve Maviglio, said Thursday the governor was not aware of the agreement and did not have comment. PG&E said the tardiness of the state’s announcement in the bankruptcy process only enhanced its view that the state’s plan is flawed.
“Since many of the important details of the CPUC’s arrangement have not been made public, PG&E will need to obtain and thoroughly review additional information in order to provide a detailed analysis,” the company said in a statement.
Thousands of creditors recently finished voting on a pair of plans for PG&E’s future to help Montali determine how the debts will be paid.
The utility hopes to regain its good credit by disregarding state laws and regulations and transferring transmission lines, power plants and other assets away from state oversight and into three new companies that would be regulated by the federal government. Analysts say that would allow PG&E to borrow more money to pay its debts, since it would escape state control over how much it can charge for wholesale electricity.
The revised plan the state and creditors committee hope to put before creditors calls for the utility’s 4.6 million ratepayers to pay billions, for PG&E to sell preferred stock and its parent — PG&E Corp. — to forgo a huge chunk of profits.
Montali is scheduled to decide on one or a combination of the scenarios Nov. 12, although Cohen said the revised plan’s future relies on the judge extending the voting period to give creditors a chance to examine the changes and perhaps switch their votes.
Both PG&E and the state say the other’s plan is fatally flawed.
PG&E’s creditors committee came full circle with Thursday’s announcement of allegiance with the state. The committee initially backed PG&E but fears its ambitious plan will be appealed for months with creditors left unpaid in the meantime.
“PG&E’s plan is a viable plan, in many senses it’s a very good plan,” said Paul Aronzon, the committee’s spokesman. “The problem is it’s going to be argued many times up to the United States Supreme Court.”