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PG&E poised to exit from bankruptcy

29 March 2004 – Pacific Gas and Electric Co., California’s largest power utility, plans to end three years of bankruptcy on April 12, concluding one of the bleakest episodes in a statewide electricity crisis that will haunt customers for years to come.

Officials at PG&E said that it had satisfied all the conditions of a reorganization plan approved three months ago, enabling the San Francisco-based utility to drop the scarlet letter of bankruptcy.

Unable to pay the bills that piled up during an electricity crisis that began in mid-2000, PG&E sought refuge in bankruptcy court in April 2001.

PG&E is repaying more than $11bn in debts, with a major assist from its 4.8m electricity customers. The bailout requires ratepayers to subsidize the utility’s recovery by paying abnormally high retail prices through 2012. PG&E’s rehabilitation could cost customers as much $8.2bn, or an average of $1700 a piece.

The shareholders of the utility’s parent company, PG&E Corp., also have shouldered some of the financial pain by forgoing quarterly dividends since 2000. By the time the holding company restores the dividend during the second half of 2005, PG&E estimates the shareholders will have lost out on more than $2bn in suspended dividends.

PG&E’s management blamed the utility’s bankruptcy on California reforms that lifted price controls on wholesale electricity while freezing retail rates. PG&E supported the reforms when they were approved in 1996.

But when the wholesale prices began to soar in mid-2000, state regulators initially refused to raise retail rates to the same levels, creating an imbalance that put PG&E in a financial bind.

Wholesale prices began to fall shortly after PG&E’s bankruptcy, allowing the utility to thrive in recent years. PG&E Corp.’s stock has quadrupled since the utility went bankrupt.