-Caveat Lector-
http://www.sierratimes.com/archive/starticles/2001/apr/arst01-040701.htm
PG&E Bankruptcy Bombshell Deepens California Energy Crisis
by Andrew Quinn - Reuters - 04.07.01
SAN FRANCISCO (Reuters) - California's energy crisis lurched into a dangerous
new phase on Friday as Pacific Gas & Electric, the state's largest utility,
declared bankruptcy and accused Gov. Gray Davis of woefully mismanaging the
emergency.
While officials vowed that the largest utility bankruptcy in U.S. history
would not turn the lights off for the 13 million Californians Pacific Gas &
Electric serves, it threw a new question mark over the state's ability to get
through the summer without more power blackouts.
The bankruptcy filing came just one day after Davis outlined a bailout
strategy designed to help the cash-strapped utility back to its feet after
months of bleeding money thanks to California's botched 1996 power
deregulation law.
Pacific Gas & Electric blamed Davis for forcing it into bankruptcy, saying
his plan to save it was unacceptable and charging that in the last three
weeks the governor had only bothered to hold one face-to-face meeting to
bargain directly with the utility.
"The regulatory and political processes have failed us, and now we are
turning to the court,'' Robert Glynn, chairman of Pacific Gas & Electric,
said in a statement.
Davis reacted angrily, saying the massive utility had ''dishonored itself''
by asking for bankruptcy protection.
"PG&E was not pushed into bankruptcy but plunged themselves into bankruptcy
for their own strategic advantage -- not the best interests of the people of
California,'' Davis said.
Analysts said the filing marked the biggest utility bankruptcy in U.S.
history and could throw a wrench into Davis' efforts to resolve the power
crunch hobbling the nation's most populous state.
In its Chapter 11 filing with the U.S. Bankruptcy Court for the Northern
District of California, the utility said it owed close to $9 billion because
state power deregulation laws block utilities from passing along skyrocketing
wholesale power costs to consumers.
This law, combined with soaring demand and a lack of new power plants, has
created a disastrous energy crunch in California and already caused four days
of rolling blackouts across the state and forced state agencies to spend more
than $50 million per day for emergency power purchases.
More blackouts are feared this summer as higher temperatures lead to
increased energy demand, and the growing uncertainty over Pacific Gas &
Electric's future Friday only added to fears of continued chaos.
"This certainly changes the situation pretty significantly and will probably
lengthen the crisis rather than shorten it,'' said Gerald Keenan, lead
strategy partner at PricewaterhouseCoopers.
Utility Will Continue To Operate
Pacific Gas & Electric is a unit of PG&E Corp. which did not file for court
protection. The utility, which serves a vast stretch of northern and central
California, said it would operate ''subject to the jurisdiction of the
Bankruptcy Court,'' meaning the lights will stay on for its customers.
The utility has 15 days to complete the paperwork for the bankruptcy filing,
and Federal Bankruptcy Judge Dennis Montali has set a May 8 meeting to
discuss the next step.
In a statement, PG&E Corp. Chairman Robert Glynn said the utility felt that
talks with regulators and the Davis administration had failed, leaving it no
choice but to turn to the court as the best venue to protect its shareholders.
With unrecovered costs increasing by more than $300 million per month, Glynn
accused Davis of ignoring the deepening financial peril of a company that has
been a pillar of California business for almost 100 years.
The last straw, Glynn said, was Davis' live television speech on Thursday
evening in which the Democratic governor said that any bailout deal would
hinge on the utilities' agreement to sell their vast power transmission grid
to the state -- a demand that Pacific Gas & Electric has resisted.
"We listened carefully to the statement and the commentary that followed and
this decision is the result,'' Glynn told a news teleconference following the
bankruptcy filing.
Confusion In Sacramento
For Davis, who had billed his Thursday speech outlining rate hikes and
conservation as a major step toward resolving the energy crisis, the
bankruptcy move came as a shock.
While upbraiding Pacific Gas & Electric's "selfish'' move, Davis pledged
Friday to continue bailout negotiations with Edison International unit
Southern California Edison (news - web sites) and hoped to have a result
within days, "proving that negotiation, not bankruptcy, is the appropriate
path.''
But Glynn said Davis' concentration on the Southern California Edison talks
had cost PG&E dearly, noting that it had been three weeks since the two sides
had had "face-to-face'' talks before one meeting during the last couple of
days. "The negotiations we have been involv
