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Shareholders will shoulder a substantial share of the burden in lifting Pacific Gas & Electric Co. out of bankruptcy. So says the alternative reorganization plan filed by the California Public Utilities Commission in federal bankruptcy court Monday. The plan promises to repay all creditors in full by January while returning the utility to investment grade status and freezing energy rates at their current levels. And unlike PG&E’s own reorganization plan, which seeks to split PG&E into three separate entities, the CPUC plan keeps the utility intact and under state jurisdiction. The commission intends to achieve all this by making PG&E shareholders contribute $3.35 billion to the cause. About half of this would come from diverting $1.6 billion in cash earned by PG&E from its return on equity over a three-year period. Instead of going to parent company PG&E Corp., that money would now be used to repay creditors. The plan proposes to raise another $1.75 billion by selling shares of PG&E common stock in a public or private offering. Such a move would dilute the parent company’s ownership in the utility by nearly 20 percent, said CPUC General Counsel Gary Cohen at a press conference Monday. PG&E issued a statement late the same day lambasting the rival plan. “The CPUC’s plan to eliminate any return on equity violates federal and state law,” said the statement. “The proposed equity sale violates the rights of shareholders.” The alternative plan comes a little more than a year after PG&E initially declared bankruptcy. The commission won the right to file a rival bankruptcy reorganization plan in February. While it’s not unheard of for an outside party to file an alternative bankruptcy reorganization plan, this is believed to be the first time that such a plan has been filed by a state agency such as the CPUC. “I’ve never seen a plan filed by a regulatory agency,” said Michael Lubic, head of the West Coast bankruptcy practice at Sonnenschein Nath & Rosenthal. The CPUC must now get its plan’s disclosure statement approved by the bankruptcy court in a relatively compressed, two-month period. U.S. Bankruptcy Judge Dennis Montali has said he would like PG&E’s creditors to receive the competing plans and their disclosure statements by mid-June. By contrast, it took more than seven months for PG&E’s own disclosure statement to get approved. During that time, the utility weathered 73 objections to its plan and was required to make several amended versions of it. But because the commission’s plan does not seek to break up the utility or to pre-empt state law — both controversial elements in PG&E’s plan — its backers are confident that it won’t face as many obstacles in court. “I’m looking forward to a very prompt hearing on the disclosure statement and fully expect that it will be disseminated at the same time as the PG&E disclosure statement,” said the CPUC’s Cohen.

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