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The burden that ratepayers will bear in lifting Pacific Gas & Electric Co. out of bankruptcy took center stage Wednesday as a new phase of proceedings got under way in the utility’s protracted Chapter 11 case. Lawyers representing PG&E, the official creditors committee and numerous interveners squared off at special evidentiary hearings before the California Public Utilities Commission in San Francisco. State regulators must decide whether PG&E’s latest bankruptcy reorganization plan, the product of secret settlement negotiations between the utility, the creditors committee and the PUC’s own staff, is in the public interest. According to The Utility Reform Network, the proposed settlement is too expensive for ratepayers. “Consumers should not be forced to bail PG&E out,” said TURN Executive Director Nettie Hoge in a statement released in advance of the hearings. TURN is one of several groups, including the city of San Francisco, the Office of Ratepayer Advocates and the Consumers Union, that have gained status as interveners in the CPUC hearings in order to argue for modifications to the proposed settlement agreement. According to TURN, its modified plan would save consumers $2.8 billion. PG&E contends that TURN’s failure to guarantee the utility an investment-grade credit status would end up costing more money in higher interest rates. On Wednesday morning, PG&E President and CEO Gordon Smith sat in the courtroom waiting to testify in favor of the settlement agreement as the interveners spent hours cross-examining Paul Clanon, director of the CPUC’s energy division. Clanon, who was also presented as an advocate of the settlement agreement, caused contention almost as soon as he took the stand. Attempts to ascertain his role in the settlement negotiations, and his analysis of the resulting settlement agreement, led to sparring over how much information Clanon could divulge in light of the settlement agreement’s gag order. PG&E attorneys maintained that the order barred discussions of the content of all communications during the negotiations, including the identity of those involved in the talks. Robert Barnett, the administrative law judge overseeing the CPUC hearings, appeared irritated by this position. “This is a public hearing, we’re trying to find out something that involves billions of dollars,” Barnett lashed out. “Everybody’s trying to hide behind attorney-client privilege and the gag order,” Barnett added later on. “That doesn’t sound very public to me.” PG&E filed for Chapter 11 bankruptcy protection in April 2001 and filed a reorganization plan that called for splitting the company into four separate units, with three of them under federal regulation. The CPUC filed an alternative reorganization plan with the bankruptcy court that kept the utility intact. The two competing plans had been locked in a lengthy bankruptcy court confirmation trial when Judge Dennis Montali ordered the two parties into private, judicially supervised settlement talks last spring. In June, the parties announced a settlement agreement that called for a new reorganization plan. Clanon testified that he didn’t believe there could be a quick exit from bankruptcy court that wasn’t consensual. He maintained that the settlement agreement, while still expensive to ratepayers, was the best balance of benefit and cost to ratepayers, and that it would cause rates to drop. Barnett has scheduled eight days of evidentiary hearings, after which he will propose his findings to the CPUC commissioners. If the CPUC commissioners ratify the settlement agreement, the resulting plan must still be confirmed by the bankruptcy court.

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