California utility files for bankruptcy


SAN FRANCISCO, AP

Pacific Gas & Electric turned to the courts for relief from California’s deregulation debacle, becoming the biggest public utility in U.S. history to file for bankruptcy.

Friday’s move in itself will not turn out the lights, but it could mean political and financial turmoil for years to come.

In filing for Chapter 11 protection from its creditors, the state’s largest utility said efforts by Gov. Gray Davis and other state officials to ease the crisis had gone nowhere.

“The regulatory and political processes have failed us, and now we are turning to the court,” said Robert D. Glynn Jr., chairman of corporate parent PG&E Corp. “We expect the court will provide the venue needed to reach a solution.”

The 13 million people served by the utility probably will be among the least affected, since bankruptcy proceedings allow companies to continue operating while they try to solve their financial problems under the supervision of a federal judge.

But lenders, bondholders and wholesale power suppliers may have to write off billions of dollars in losses, and the move could affect more than 20,000 utility employees across Central and Northern California.

The company’s financial reputation also could be damaged for years, making it more difficult to buy power and raise money to upgrade transmission lines and plants.

The bankruptcy filing came the morning after Davis, in a statewide address, proposed relieving utilities’ debts by giving them a share of a record rate increase approved last week by state regulators and by continuing to negotiate state acquisition of their transmission lines.

The governor said Friday he was disappointed by PG&E’s filing.

“I want to stress this one fact: PG&E put itself into bankruptcy. No creditor pushed them,” Davis said. “They decided on their own initiative to go in. We have been working for weeks and weeks on negotiations that we thought were fair to the consumers and fair to PG&E.”

PG&E executives said they had been making daily evaluations since December of whether the utility would be better off going bankrupt. They said they concluded after Davis’ speech that there was little hope of getting financial relief from the state.

“We believe we that we are better able to serve our customers inside Chapter 11 than outside Chapter 11,” PG&E President Gordon Smith said in a conference call. “We believe (the bankruptcy judge) will provide a more disciplined and organized approach” to solving the utility’s financial crisis.

Southern California Edison, the state’s second-largest utility, said it did not plan to seek bankruptcy protection.

Ted Craver, Edison International chief financial officer, said PG&E’s filing could increase the possibility that Edison’s creditors might try to force it into bankruptcy, citing the utilities’ similar financial problems.

The two utilities have been pinched for months by skyrocketing wholesale power prices and the state’s 1996 deregulation law, which bars them from passing those costs on to customers. The two utilities say they have lost more than US$13 billion since June and are having trouble buying power and natural gas because of their credit is so poor.