Sources say PG&E timed bankruptcy to shift blame
SAN FRANCISCO- Pacific Gas and Electric Co. insiders say the utility’s bankruptcy filing was timed to put maximum blame on Gov. Gray Davis and avoid being disadvantaged by the governor’s apparently successful negotiations with Southern California Edison, a newspaper reported Sunday.
PG&E Corp. Chairman Robert Glynn decided days before Davis’ televised address on the energy crisis Thursday evening to file for bankruptcy immediately thereafter, the San Francisco Chronicle reported, citing unidentified sources inside the utility.
Davis was not made aware of the company’s plans – which included giving last-minute raises and bonuses to 6,000 top PG&E executives and workers – until after it filed for protection Friday morning.
After months of contemplating bankruptcy, sources told the Chronicle that this was the most advantageous time for the utility to move forward with its plan. Any further delay, and it might have been pressured to forgo $9 billion it hopes to recoup from California ratepayers.
”We had this thing ready to go long before that,” PG&E spokesman Greg Pruett said of the bankruptcy filing and its timing to Davis’ speech.
Glynn told a different story on Friday, blaming the filing on the inability of Davis and other state lawmakers to reach a political solution.
”We listened carefully to the (governor’s) statement and the commentary that followed, and this decision is the result,” Glynn said.
Davis later lashed out at PG&E, declaring that his administration has ”moved heaven and earth” to try to avoid Chapter 11 for the utility serving 13 million Californians.
”PG&E’s management is suffering from two afflictions: denial and greed,” Davis said in a statement Saturday.
”The governor was led to believe that we were dealing in good faith, and clearly that was not the case,” added Steve Maviglio, the governor’s spokesman. ”Instead of looking in the mirror, they pointed fingers.”
Some say the proposed state bailout for the utilities – the key part of which was a cash infusion in exchange for the state’s purchase of their transmission lines – had grown too cumbersome and would be a hard sell to lawmakers.
SoCal Edison had reached a tentative agreement in February to sell its lines to the state for nearly $2.8 billion, and was about to agree to drop its lawsuit seeking to make consumers pay for past electricity costs racked up during the rate freeze, the Chronicle reported.
Negotiators from the governor’s office and SoCal Edison met Sunday in San Francisco to discuss the ”few remaining issues” involved in an agreement to keep the utility from bankruptcy.
PG&E had balked at selling its lines and dropping the suit, and its negotiations had grown to include land deals, changes in regulatory laws, multi-billion dollar bond offerings and potentially huge rate increases – demands that Davis might not have the clout to deliver.
”Although a reasonable deal could have been reached, it’s unclear whether all the parties in the state would have signed on,” said Paul Patterson, an energy-industry analyst at Credit Suisse First Boston in New York.
PG&E hired bankruptcy lawyers from New York in August. They were first there to help resist filing for Chapter 11, but their focus shifted as the utility’s debt grew. By the first of the year, sources told the Chronicle the lawyers had drawn up papers and were ready to file for bankruptcy at any time.
If SoCal Edison agreed to drop its cost recovery efforts of $4.2 billion before PG&E filed for bankruptcy, PG&E would have faced pressure to do the same, and would have had a difficult time publicly defending its efforts to recover the $9 billion in debt it took on buying energy for customers whose rates have been capped.
”It’s possible they would be seen as a spoiler if Edison has a deal in place and then PG&E filed for bankruptcy,” Patterson said.
Now PG&E’s fate is in the hands of federal bankruptcy Judge Dennis Montali, a legal process that could take years to conclude. Montali will provide a framework for the utility’s creditors to collect some of their money, while allowing PG&E to operate normally.
The judge also has the power to order consumers to pay PG&E’s debts.
In filing for Chapter 11 federal bankruptcy protection, PG&E said it also has $2.6 billion in cash and bills of $4.4 billion.
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