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Pacific Gas and Electric Co. creditors will get another chance to choose between competing plans to lift the utility from Chapter 11, a judge ruled Friday. U.S. Bankruptcy Judge Dennis Montali in San Francisco ruled that the California Public Utilities Commission may have creditors vote on whether they prefer the reorganization plan proposed by the PUC or the plan put forth by PG&E. Montali then will weigh the results of the so-called “preference vote” when he decides which plan to approve later this year or early next year. Montali’s ruling gives the PUC a chance to win more creditor backing. In the first vote, conducted from June to August, PG&E won approval from nine of 10 voting creditors’ classes, while the plan from the PUC won approval from only one voting. Montali will determine at a later hearing how many creditors will get to vote. The vote might be tallied by December, attorneys said. The PUC had requested Montali reopen the entire voting process again. Montali rejected that, however, saying, “at some point you have to close the voting booth.” San Francisco-based PG&E, which declared Chapter 11 in April 2001, wants to transfer its power plants, transmission lines and gas pipelines to new companies that would fall under federal, rather than state, regulation. That move would allow the utility to raise funds to pay off the utility’s creditors, owed about $14 billion. “PG&E continues to believe it has developed the only practical solution that allows the utility to emerge from Chapter 11 as an investment-grade company,” PG&E said in a statement. The PUC, however, wants to keep the utility intact and have the company repay creditors through a combination of new equity, new debt and cash. Both plans promise to repay creditors in full. PG&E’s plan has been gaining momentum of late. In addition to the favorable creditor vote, the utility won a federal court order Aug. 30 that lifted a cloud from over its plan. A U.S. district judge in San Francisco ruled that federal bankruptcy law overrides state laws that interfere with a debtor’s proposed reorganization. That ruling enables PG&E to sidestep several state laws to spin off new businesses — a major underpinning of PG&E’s plan. PG&E said it wanted to emerge from bankruptcy by January 2003. But with the new voting period, it is unlikely to meet that deadline. PG&E declared bankruptcy after running up about $9 billion in losses. It blamed its financial insolvency on having to buy power at prices higher than it could charge customers. �Copyright 2002, The Deal, LLC. All rights reserved.

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