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California officials on March 19 lambasted Pacific Gas & Electric Co.’s plan to emerge from bankruptcy, calling it inaccurate, misleading and an attempt to escape several state regulations. The criticism comes ahead of a court hearing on Tuesday in which a bankruptcy judge is expected to rule on whether the San Francisco-based utility may proceed with its reorganization plan. PG&E is seeking court approval to sidestep certain state authority, contending that such an arrangement will help it repay creditors and emerge from Chapter 11 as a stronger company. In separate court filings, the California Public Utilities Commission and the state attorney general’s office urged U.S. Bankruptcy Court Judge Dennis Montali to deny PG&E’s request. Attorney General Bill Lockyer said federal bankruptcy law can take precedence over state law, but PG&E’s plan relies on misstatements regarding the standard for preempting state authority. PG&E “appears to be seeking relief beyond what is available under the bankruptcy code,” according to the attorney general’s filing. Company officials were not available for immediate comment. But Robert Glynn Jr., CEO of the utility’s parent, PG&E Corp., has continually defended the plan, calling it “the only feasible solution.” In particular, PG&E wants exemption from state provisions prohibiting it from selling property and assets, issuing debt or equity and operating its affiliates. PG&E’s reorganization plan would create four entities, three of which would no longer fall under state regulation. Once reshuffled, the affiliates would raise money by leveraging their assets to pay back the approximately $13 billion PG&E owes its creditors. PG&E this month resubmitted its reorganization plan after Montali criticized the first proposal a “full-scale attack” on state law. Montali said that a “balancing test” must be applied to the state’s interests and to PG&E’s. The attorney general’s office claims PG&E’s revised reorganization plan fails to correct some of the provisions that Montali found objectionable the first time. The revised plan also contains some misrepresentations, Lockyer said. In one example, PG&E exaggerates its debt carrying capacity by $2 billion, the attorney general said. The California Public Utilities Commission, which has court permission to file an alternative bankruptcy plan for PG&E, has opposed allowing the utility to circumvent state laws. The CPUC proposes the utility use the $6.1 billion it estimates PG&E will have in cash by January 2003 to repay certain creditors, while refinancing and reinstating balances owed to holders of long-term notes, and meeting other obligations not immediately due. Additionally, the CPUC wants PG&E to stop paying dividends through 2003 and reap additional cash from ratepayers through 2003 to pay its creditors. In urging the bankruptcy judge to reject PG&E’s reorganization plan, the CPUC said: “PG&E’s agenda is to escape from commission and state regulation. From the outset of this case, it has been clear that PG&E seeks to employ this court as a super-legislature.” PG&E, California’s largest utility, filed for Chapter 11 protection in April 2001. At that time the company posted $9 billion in losses, which the utility attributed to buying power at prices higher than state law allowed it to charge customers. Copyright (c)2002 TDD, LLC. All rights reserved.

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