KCRA-TV

Davis Aides Call Bankruptcy 'Complete Surprise'

PG&E Seeks Chapter 11 Protection

SACRAMENTO, 6:38 p.m. EDT April 6, 2001 -- Plunged into uncharted territory Friday, stunned lawmakers and utility customers scrambled to decipher what Pacific Gas and Electric Co.'s bankruptcy filing means for the state.

Legislators huddled with advisers. Customers fretted about what it could mean for their wallets. And Gov. Gray Davis, whose aides called the filing "a complete surprise," consulted with energy advisers and bankruptcy lawyers to determine the implications.

"The whole playing field just changed this morning," said Sen. Debra Bowen, D-Marina del Rey, chairwoman of the Senate Energy Committee.

California's largest utility voluntarily filed for Chapter 11 federal bankruptcy protection Friday morning despite months of efforts by Davis and lawmakers to rescue the company.

Now, the state's leaders are faced with major questions about their ability to keep the lights on as an even more power-strapped summer draws near. They must determine where the state stands on several fronts:

- Where California will rank in a line of PG&E creditors as it tries to recoup billions it has spent buying power for the utility's customers.

- How PG&E's bankruptcy case will affect the state's future electricity purchases on behalf of it and two other struggling investor-owned utilities, Southern California Edison and San Diego Gas & Electric. The power buys are expected to top $50 billion over the next decade, money the state plans to raise through revenue bonds that will be repaid by the utilities' customers.

- Whether Edison is at risk of following PG&E to bankruptcy court.

- The status of the governor's plan to purchase transmission lines from PG&E, Edison and SDG&E to help them pay their bills, a deal that only Edison has agreed to so far.

Commenting in San Diego, Davis said that he always considered PG&E's bankruptcy filing a possibility. He said that Edison CEO John Bryson told him by phone that Edison doesn't want to pursue bankruptcy.

"PG&E's action is not going to affect Southern California Edison's decision to try and negotiate rather than put themselves into bankruptcy," Davis said.

PG&E's decision will speed up the timetable on talks with Edison and SDG&E, Davis said.

Bowen said the state may now be forced into a bidding war over PG&E's transmission lines.

"I've been saying it may be cheaper for the state to just buy the whole company and then figure out what assets to sell to the private sector" rather than buying assets piecemeal, such as PG&E's power lines or hydroelectric facilities, Bowen said.

The company, a subsidiary of PG&E Corp., says it accumulated an $8.9 billion deficit buying costly wholesale electricity as of Feb. 28.

Like other California utilities, it has been hit by soaring wholesale power prices. The state's 1996 deregulation law prevents PG&E from fully recovering those costs from customers.

PG&E electric customers have seen their rates rise despite the deregulation rate cap. State regulators raised rates for Edison and PG&E customers 9 to 15 percent in January and up to 46 percent more last week; an additional 10 percent rate increase is planned next year.

And PG&E's natural gas customers, unprotected by rate caps, have watched their bills double or even triple in recent months as wholesale gas prices climbed.

State Senate leader John Burton, D-San Francisco, said the bankruptcy filing is about its debts and "will not harm consumers or the company's employees or retirees."

PG&E's filing came a day after Davis, facing growing political pressure amid widespread blackouts and rate increases, delivered a statewide address assuring residents he would resolve the energy crisis.

Reacting to the speech Thursday night, PG&E released a statement saying Davis failed to offer a comprehensive solution.

Charles Davis, 75, a PG&E gas and electric customer in West Sacramento, said he is resigned to paying more for power.

"I can stand the extra charges without any problems but there's others that can't," said Davis, a retired truck driver. "It's up to the people we elected to do something about this."

-- Anonymous, April 06, 2001

Answers

The governing class of California is dumber than the Romanovs in 1917 and more clueless than Marie Antonette and King Louie in 1789.

I nominate Governor Davis of California for the first ever King George III award for excellence in kakistocratic government.

Robert Waldrop, Oklahoma City energy conservation news and resources

-- Anonymous, April 06, 2001

I don't see how Davis, who has been in office for over two years, can avoid primary responsibility for what is shaping up as one of the biggest fuckups of all time. And "completely unexpected"? Give me a break.

-- Anonymous, April 07, 2001

Davis is more worried about getting re-elected then the power crisis. He was a rising star and was expected to make a run for the presidency. How would you like this guy running the whole country? Blessings, David

-- Anonymous, April 07, 2001

I agree that this was no "surprise" to Davis. I have no doubt that the utility reps have been meeting constantly with the California government during the last few months and laying it all on the table. The government just couldn't deal with it in a timely manner. Perhaps the government is unable to move swiftly, or perhaps they just didn't believe the situation was really desperate.

I remember seeing some postings a few months back when the rolling blackouts started. Some posters were suggesting it was all a scam, and that the California utilities were just posturing in order to get more rate increases, but that there was no true emergency. So, if some of the government folks were thinking along those same lines they now are getting a reality lesson. Chapter 11, and plenty more trouble to follow. Time to quit playing political games with the voters. Time to face the facts. And the facts are pretty bleak.

The next question will be whether the bankrupcy filing will further slow down the supply of electric power and create even more shortage. It's hard to see how it can be "business as usual" under Chapter 11. I sure hope other states, including my own, are paying attention here.

-- Anonymous, April 07, 2001

"Bowen said the state may now be forced into a bidding war over PG&E's transmission lines."

that would be the key comment in this piece. there is a battle to control energy production and it's associated revenues. another chink in the davis armor. the sooner he stops trying to build his power, the sooner we'll have reliable, longterm power.

-- Anonymous, April 07, 2001

BWD,

I agree with your assessment of Davis. I don't think he ever understood what was at stake here and how it could all unravel. He had tried to maintain low rates and reliable power. Now he has to explain huge rate increases and unreliable power. What a doofus!

-- Anonymous, April 07, 2001