By the OGJ Online Staff
HOUSTON, Sept. 20, 2001Pacific Gas & Electric Co. filed its reorganization plan today with the bankruptcy court that will allow the utility to emerge from bankruptcy and pay all valid creditor claims including unsecured creditors and not seek a state bailout.
“We will pay all valid creditors in full with interest. And we will do that without raising rates or asking the state for a bailout,” said Robert Glynn, CEO of parent PG&E Corp., San Francisco.
The plan restructures the company into two separate stand-alone companies. The utility will retain the electric and gas distribution businesses. The generation and transmission assets will go to PG&E Corp.
“This is straight bankruptcy business practice. Restructure, refinance pieces of the business, and pay off creditors,” Glynn said. The official creditors committee supports PG&E’s plan that will become effective if the federal bankruptcy judge also approves it. PG&E expects the entire process to be completed by the end of 2002. The utility filed for protection under federal bankruptcy laws on April 6, 2001.
By placing the electric generation assets, electric transmission and gas transmission operations into new businesses, PG&E can issue debt that will be combined with new financing at the utility to help pay creditors’ claims. The company will also use $3.3 billion of cash on hand to pay claims.
The plan will provide for $9.1 billion in cash and $4.1 billion in notes. Secured creditors will get their claims paid in cash as well as the claims of all other small unsecured creditors owed less than $100,000. Unsecured creditors with claims beyond $100,000 will receive 60% cash and 40% in notes.
The new financing will be possible because the generation assets will move to Federal Energy Regulatory Commission jurisdiction and will eventually charge market based rates in the wholesale market, the company said. The California pipeline system will be reconfigured to become an interstate pipeline regulated by FERC.
The 7,000 megawatts owned by PG&E include hydroelectric facilities and the Diablo Canyon nuclear plant. The output of those plants will be sold to the utility to serve its customers under a 12-year contract. After that, the generating facilities will charge market-based rates, Glynn said.
The long term contract prices power at 5¢/kw-hr. That rate is below the cheapest rate of 6.6¢/kw-hr arranged by the state in some of its long term contracts and also less than 7.9¢/kw-hr rate that the smaller independent generators or qualifying facilities are charging PG&E, Glynn said.