Judge nixes PG&E bankruptcy strategy

SAN FRANCISCO - A federal bankruptcy judge refused to free Pacific Gas and Electric Co. from state laws and regulations it claims will prevent it from paying off thousands of creditors. <br> <br> In a decision issued late Thursday, U.S. Bankruptcy Judge Dennis Montali rejected the utility&#39;s legal basis for its plan to transfer $8 billion worth of assets - power plants, hydroelectric dams, transmission networks and thousands of acres of land - to its federally regulated parent corporation in order to put them beyond the reach of state regulators. <br> <br> The utility also wants to charge market rates for the electricity it generates. State regulators currently set those prices. <br> <br> The judge suggested PG&E went too far with its ``across-the-board, take-no-prisoners&#39;&#39; strategy and said he could not approve it given the strenuous opposition to the plan. <br> <br> But he invited an appeal, and said he would approve the plan if PG&E could convince him it was the utility&#39;s only way into the black and that the exemptions would not compromise Californians&#39; safety. <br> <br> PG&E said it would modify its legal strategy in accordance with the judge&#39;s wishes and prove that being freed of state oversight is key to paying off its creditors. <br> <br> The state Public Utilities Commission, consumer advocates and several federal agencies vehemently oppose the plan, arguing that electric bills would go up - despite PG&E&#39;s assurance it would provide 12 years of stable prices. <br> <br> Environmentalists and state officials also fear that without state oversight, PG&E would sell lucrative timberland inhabited by endangered species. <br> <br> ``This is certainly a victory for us,&#39;&#39; said PUC spokeswoman Terrie Prosper. <br> <br> California&#39;s largest utility slid into Chapter 11 bankruptcy last year in a crisis caused in part by the state&#39;s attempt at deregulating the electric power industry. <br> <br> During the power crisis, Californians saw rolling blackouts and soaring electric bills, and the state&#39;s biggest utilities lost billions of dollars.