SAN FRANCISCO - California's largest utility hopes it can shake off state regulation in bankruptcy court Friday by convincing a federal judge to let it shift its power plants and transmission systems out of the state's control.
Nine months after Pacific Gas and Electric Co.'s $13.2 billion bankruptcy, U.S. Bankruptcy Judge Dennis Montali will determine who oversees the utility's activities and how much it charges for energy in California. His decision could set the course for the bankruptcy case and PG&E's future.
Bankruptcy experts say Montali's decision will make or break PG&E's plan to emerge from bankruptcy because the plan relies on breaking dozens of state laws and regulations that govern its operations. The PUC and the attorney general vehemently oppose PG&E's plan.
``This is most complex because of the political environment in it. There's so many people potentially affected,'' said Linda Ekstrom Stanley, the U.S. Trustee who serves as a neutral enforcer of the federal bankruptcy code.
The bankruptcy's resolution will have broader consequences beyond whether 4.5 million customers pay more for energy or thousands of creditors get paid:
- Farmers, environmental groups and campers worry that a post-bankruptcy PG&E might sell some of the nearly 140,000 acres it owns. That could block grazing and public recreation in the wilderness due to logging and compromise access to irrigation and drinking water that pours through the utility's dams in the Sierra Nevada.
- Shareholders wonder if PG&E is a solid investment, and whether shares of the nearly 100-year-old utility will return to pre-bankruptcy heights.
- Consumer advocates fear a federally regulated PG&E would control much of California's power market and use the advantage to drive up prices, just as officials allege out-of-state power companies forced prices skyward last year.
In the hearing Friday, PG&E hopes to persuade Montali that federal law trumps state law when it comes to bankruptcy, and win his approval to transfer lands and assets worth billions of dollars away from state environmental reviews and regulation.
The utility wants to form three new companies to handle transmission, generation and natural gas, borrow against its assets to pay debts, then resume buying electricity for its customers - all without a rate increase.
``I think it's important for the court to understand that legally the state and PUC will do almost anything to derail this plan,'' PG&E attorney Jim Lopes told Montali at a recent bankruptcy hearing.
PG&E says customers won't see rates rise under the plan because it plans to lock in a price for energy over the next 12 years.
But consumer advocates and state regulators say it'll still be more than customers pay now, and that PG&E is using the bankruptcy court to retool itself into a deregulated entity. Instead of transferring away its most valuable assets, it should use its available $4.9 billion and borrow money to pay creditors instead, they say.
Nettie Hoge, executive director of The Utility Reform Network, said since customers paid for the power plants and transmission lines in their rates, they should be reimbursed if they no longer get the benefit of relatively cheap power.
``I think the PUC and the state attorney general are poised to go as far as they have to, fighting this thing,'' Hoge said. ``It should be a message to the creditors committee that this isn't going to come down as easily as they thought.''
TURN says PG&E's plan would cost ratepayers $20 billion extra over the next 12 years, based on its analysis of PG&E's bankruptcy plan and financial figures. State regulators issued a record rate hike last spring after high power prices drove PG&E to bankruptcy and two other utilities into financial trouble. The state spent billions buying power for customers of those utilities.
No one's sure of the outcome, but Lynn LoPucki, a University of California, Los Angeles bankruptcy professor, said he doubts Montali would let PG&E bypass so many state laws because it would set a precedent for future utility bankruptcies.
It would prove ``that a debtor in bankruptcy can sell anything regardless of what state law might say about it or why state law says it. Imagine a debtor saying they want to sell alcohol to minors?'' LoPucki said.
Before PG&E can emerge from bankruptcy, it must win support for its reorganization plan from the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission, the Securities and Exchange Commission, Judge Montali, and a majority of its thousands of creditors, which have included America's largest banks, ice cream shops, home builders, power sellers and the state.
Tuesday
January 7th, 2025
6:01PM
