Feb. 28, 2002 — U.S. Bankruptcy Judge Dennis Montali has ruled that the California Public Utilities Commission (PUC) may file its alternative plan of reorganization in Pacific Gas & Electric Co.’s (PG&E) bankruptcy case.
Judge Montali on Wednesday terminated PG&E’s exclusive right to propose a plan and solicit creditor support, and gave the Commission until April 15, 2002 to file its plan and a draft disclosure statement.
“This is an enormous victory for ratepayers and for the state,” said Commission General Counsel Gary Cohen. “For the first time in the eleven months since PG&E filed for bankruptcy protection, we are now on a level playing field. Today’s ruling allows the PUC to present a plan that will enable the company to pay its creditors, become creditworthy, and resume buying power for its customers — without having the utility escape from regulatory supervision. We will file our plan on April 15th and expect that it will be supported by creditors and confirmed by the Court.”
PG&E Co. immediately issued a statement on the ruling. “The CPUC was forced to admit today that its hopes of an all cash plan would not work and that its January 2003 timeframe might not be achievable. Unless the CPUC can address these flaws effectively, its plan of reorganization would relegate PG&E to junk bond status and keep the state in the power buying business for years to come.
“The CPUC faces significant obstacles as to how to return PG&E to investment grade status, how to address the $4.5 billion in debt their term sheet comes up short, and whether or not they will need junk bonds to finance any shortfall. The CPUC will also need to resolve the serious constitutional and regulatory barriers that were raised today.
“PG&E continues to believe the structure of its plan of reorganization, which pays all creditors in full without selling assets or asking Bankruptcy Court to raise rates or the state for a bailout, is the only feasible solution to getting the company out of bankruptcy.”
Earlier this month, Judge Montali ruled that PG&E’s proposed plan was not confirmable as a matter of law. PG&E is expected to file a new plan on March 6, 2002.
“We expect to see more of the same deregulation scheme in PG&E’s new plan,” said Cohen. “We do not believe that PG&E can overcome the major legal hurdles that Judge Montali’s February 7th ruling presents for its plan.”