PG&E Loses Remaining Credit Lines

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January 18, 2001 PG&E Loses Remaining Credit Lines By THE ASSOCIATED PRESS Filed at 12:25 a.m. ET

SAN FRANCISCO (AP) -- Treating Pacific Gas and Electric Co. like a deadbeat borrower, lenders essentially cut up the utility's credit card Wednesday in a move that could mean even more rolling blackouts for Northern Californians this week.

Stripped of its financial lifelines, PG&E warned in a shareholder update that it could essentially be marooned in the power market.

In the shareholder documents filed with the Securities and Exchange Commission, PG&E said it will be blocked off the California Power Exchange -- a critical energy source -- beginning Friday unless it can negotiate a deal that grants the utility more wiggle room to pay its bills.

The Power Exchange, or PX, is a government-created energy broker that has secured up to one-third of PG&E's power during the past month, said utility spokesman Shawn Cooper.

A reprieve would require the cooperation of out-of-state energy generators, many of whom are reluctant to sell electricity to California without being paid in cash up front. The generators fear California's two largest utilities are on the verge of bankruptcy, a threat PG&E acknowledged as a distinct possibility in its SEC filing.

After missing a $215 million payment to the PX on Tuesday, Southern California Edison also is facing a suspension from the exchange. A decision on SoCal Edison's fate is expected Thursday.

San Francisco-based PG&E said its financial bind worsened Wednesday after losing access to the remaining $128 million available under two credit lines previously granted to the utility and its parent company.

PG&E attributed the lenders' hard-nosed attitude to the utility's shoddy credit rating. Standard & Poor's downgraded PG&E to junk status Tuesday and another major service, Moody's, took similar action Wednesday.

Before the downgrades, the utility still had $62 million available under a $1 billion credit line and the corporate parent had $66 million left, according to the company's filing. The utility and holding company also had other credit lines totaling $1.29 billion, but those had been exhausted as collateral to secure debt.

Losing the remaining credit lines had an immediate ripple effect on PG&E's other debt.

The utility had been borrowing from its credit lines to make the scheduled payments on its corporate notes sold to investors. PG&E and its holding company skipped $76 million in scheduled payments on notes that matured Wednesday, marking the first time the utility had missed a bill during the past 7 1/2 months since it began accumulating massive debt to buy high-priced electricity.

SoCal Edison, considered to be in even weaker condition than PG&E, defaulted on payments totaling $596 million Tuesday.

Both utilities have run up at least $10 billion in debts since May, buying electricity at prices much higher than what they can charge their customers under a nearly 3-year-old rate freeze. State regulators this month granted the utilities 90-day electricity rate increases ranging from 7 percent to 15 percent, but the companies portray the additional money as a pittance.

The Legislature and Gov. Gray Davis are exploring possible ways to bolster the utilities to keep them out of federal bankruptcy court, but politicians aren't moving quick enough to satisfy industry executives, bankers and investors.

The outcome of the political wrangling ``is uncertain and the solution is not likely to be immediate,'' PG&E said in its Wednesday filing.

In those documents, PG&E said the power utility and its parent company have a combined $1.05 billion in cash remaining. PG&E estimates that $2.7 billion in electricity-related bills will come due between early February and early March.

http://www.nytimes.com/aponline/business/AP-Power-Woes-PGE-Finances.html?printpage=yes

-- Martin Thompson (mthom1927@aol.com), January 18, 2001


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