PG&E Vows to Renege if Regulators Accept Bankruptcy Alternative

Pacific Gas & Electric threatened to pull out of its bankruptcy settlement with the California Public Utilities Commission staff if the CPUC embraces The Utility Reform Network?s financing proposal. PG&E will consider only what it deems nonsubstantive changes to the deal. In documents PG&E filed October 10, it said TURN?s proposal to finance $2.2 billion through bonds, along with the possibility that a CPUC-approved agreement would not bind future commissions, would send the utility back to federal bankruptcy court and to its original reorganization plan. ?Adoption of TURN?s proposal would be a substantive modification that, if adopted by the commission, would amount to a rejection of the settlement agreement,? PG&E's brief states. TURN?s alternative would replace PG&E?s $2.2 billion paper ?regulatory asset? with a dedicated rate component, which would set aside a certain percentage of rates to pay off the bond. Reworking the borrowing mechanism, according to TURN, would save ratepayers as much as $2.9 billion over nine years. ?The commission will have to get some backbone and call [PG&E?s] bluff,? said Mike Florio, TURN senior attorney. ?They?re being so vehement because they don?t have anywhere to go." Florio noted that returning to federal bankruptcy court is not desirable because it would leave creditors without full payment and dilute shareholder interests. The financial community has exhibited skittishness over the lack of finality inherent in the deal reached between CPUC staff and PG&E. Investors are somewhat split on support for the pending settlement and PG&E?s federal court reorganization plan, which seeks to eliminate the CPUC?s authority over utility assets. PG&E said that if the commission were to approve the tentative settlement, it would have to make sure future commissions?appointed by future governors?do not undo it. ?If the commission were to adopt the view that it cannot bind future commissions, the PG&E plan would be the only confirmable plan," PG&E told the commission, referring to its original plan still in limbo at federal bankruptcy court. Trial on the confirmation of that plan in the courtroom of federal bankruptcy judge Dennis Montali will begin next month. PG&E is also pushing the CPUC to approve the deal by the end of the year as planned. The utility maintains that any delay?including the possibility of sending the agreement back to federal bankruptcy court?would risk up to $2 billion in higher exit financing costs.

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PG&E Vows to Renege if Regulators Accept Bankruptcy Alternative

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