Calif. Utility Giant Files for Bankruptcy
S A N F R A N C I S C O, April 6 -- Pacific Gas and Electric, California'slargest utility, filed for Chapter 11 bankruptcy protection todaydespite months of efforts by state officials to bail out thecash-starved company.
The utility's 13 million customers probably will be among theleast affected, since bankruptcy proceedings allow companies tocontinue operating while trying to dig out of their financial hole.
But lenders, bondholders and power generators may have to writeoff billions advanced to the utility as losses. And the company'sfinancial reputation could be damaged for years, making it moredifficult to raise money to upgrade transmission lines and plants.
Turning to the Courts for Help
"The regulatory and political processes have failed us, and nowwe are turning to the court," company Chairman Robert D. Glynn Jr.said. "We expect the court will provide the venue needed to reacha solution, which thus far the state and the state's regulatorshave been unable to achieve." The company, a subsidiary of PG&E Corp., had run up an $8.9billion deficit buying electricity as of Feb. 28. Like otherCalifornia utilities, it has been pinched by skyrocketing wholesalepower costs and the state's 1996 deregulation law barring rateincreases. As of March 29, the utility had $2.6 billion in cash andoutstanding bills of $4.4 billion. Shares of PG&E Corp. were haltedon the New York Stock Exchange, where they last traded at $11.36,down 2 cents. The company provides natural gas and electric service acrossNorthern and Central California. It has 21,500 employees.
Negotions With State 'Going Nowhere'
The bankruptcy filing came one day after Gov. Gray Davis, in astatewide address, proposed relieving utilities' debts by givingthem a share of a record rate increase approved last week and bycontinuing to negotiate the state's purchase of their transmissionlines.PG&E Corp., however, said those negotiations were "goingnowhere." Davis spokesman Steve Maviglio said the bankruptcy filing was acomplete surprise. He said aides were meeting with the attorneygeneral's office and bankruptcy lawyers to discuss theimplications.
