Lawmakers, customers ponder where state stands

This story appeared in the Antelope Valley Press April 7, 2001.

By ALEXA HAUSSLER
Associated Press Writer

SACRAMENTO - Plunged into uncharted territory Friday, stunned lawmakers and utility customers scrambled to decipher what Pacific Gas and Electric Co.'s bankruptcy filing means for the state.

Legislators huddled with advisers. Customers worried about what it could mean for their wallets. And Gov. Gray Davis - whose aides called the filing "a complete surprise" - consulted with energy advisers and bankruptcy lawyers to determine the implications.

"The whole playing field just changed this morning," said Sen. Debra Bowen, D-Marina del Rey, chairwoman of the Senate Energy Committee.

California's largest utility voluntarily filed for Chapter 11 federal bankruptcy protection Friday morning despite months of efforts by Davis and lawmakers to rescue the company.

Now the state's leaders are faced with major questions about their ability to keep the lights on as an even more power-strapped summer draws near. They must determine where the state stands on several fronts:

Where California will rank in a line of PG&E creditors as it tries to recoup billions it has spent buying power for the utility's customers.

How PG&E's bankruptcy case will affect the state's future electricity purchases on behalf of it and two other struggling investor-owned utilities, Southern California Edison and San Diego Gas & Electric. The power buys are expected to top $50 billion over the next decade, money the state plans to raise through revenue bonds that will be repaid by the utilities' customers.

Whether Edison is at risk of following PG&E to bankruptcy court.

The status of the governor's plan to purchase transmission lines from PG&E, Edison and SDG&E to help them pay their bills, a deal that only Edison has agreed to so far.

Commenting in San Diego, Davis said he always considered PG&E's bankruptcy filing a possibility. He said Edison CEO John Bryson told him by phone that Edison doesn't want to pursue bankruptcy.

"PG&E's action is not going to affect Southern California Edison's decision to try and negotiate rather than put themselves into bankruptcy," Davis said.

PG&E's decision will speed up the timetable on talks with Edison and SDG&E, Davis said.

Bowen said the state may now be forced into a bidding war over PG&E's transmission lines.

"I've been saying it may be cheaper for the state to just buy the whole company and then figure out what assets to sell to the private sector" rather than buying assets piecemeal, such as PG&E's power lines or hydroelectric facilities, Bowen said.

The company, a subsidiary of PG&E Corp., says it accumulated an $8.9 billion deficit buying costly wholesale electricity as of Feb. 28.

Like other California utilities, it has been hit by soaring wholesale power prices. The state's 1996 deregulation law prevents PG&E from fully recovering those costs from customers.

PG&E electric customers have seen their rates rise despite the deregulation rate cap. State regulators raised rates for Edison and PG&E customers 9% to 15% in January and up to 46% more last week; an additional 10% rate increase is planned next year.

And PG&E's natural gas customers - unprotected by rate caps - have watched their bills double or even triple in recent months as wholesale gas prices climbed.

PG&E gas customer Norma Gomez, 27, a drug abuse counselor from Natomas, said she was shocked by the bankruptcy filing.

"What is my bill going to look like? It's scary. If we pay so much to PG&E, then what are they doing with it? There must be a way out of this," she said.

"I just think they are trying to get out of paying their bills," said Nila Bernstengel, 23, a college student in Davis, who said her combined PG&E gas and electric bill went from $40 to $98 last month.

"If I'm paying this much and everybody else is paying this much, it doesn't make sense that they don't have any money," she said.

State Senate leader John Burton, D-San Francisco, said the bankruptcy filing is about its debts and "will not harm consumers or the company's employees or retirees."

PG&E's filing came a day after Davis - facing growing political pressure amid widespread blackouts and rate increases - delivered a statewide address assuring residents he would resolve the energy crisis.

Reacting to the speech Thursday night, PG&E released a statement saying Davis failed to offer a comprehensive solution.

Charles Davis, 75, a PG&E gas and electric customer in West Sacramento, said he is resigned to paying more for power.

"I can stand the extra charges without any problems but there's others that can't," said Davis, a retired truck driver. "It's up to the people we elected to do something about this."