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Bankruptcy Update: PG&E Files Motion To Require Caiso To Follow Federal Law

05/03/2001

San Francisco, CA -- Pacific Gas and Electric Company has filed a motion in the U.S. Bankruptcy Court asking the court to direct the California Independent System Operator (CAISO) to comply with bankruptcy law, its Tariff, and a recent Federal Energy Regulatory Commission (FERC) ruling, and stop billing the utility for wholesale power purchased.

Pacific Gas and Electric Company's motion, which includes a request for a preliminary injunction, asks the court to enjoin the CAISO from requiring the utility to pay costs the CAISO has incurred and continues to incur to purchase wholesale power on its behalf, unless the utility can fully recover these costs.

Bankruptcy law imposes an automatic stay to prevent parties from making certain claims or taking certain actions that would interfere with the estate or property of the estate of a Chapter 11 debtor. By purchasing power at costs higher than existing retail prices, and then sending the bill to the utility, the CAISO is violating the automatic stay provision and could be reducing the value of the company's assets by potentially hundreds of millions of dollars per month, depending on the average retail rate, the wholesale price, and the amount of power purchased by the CAISO. Recently, the CAISO sent Pacific Gas and Electric Company a bill for January and February spot market purchases that totaled nearly $1 billion.

The action alleges that requiring the utility to pay more than it can collect in its existing generation-related rates would be improper under federal Bankruptcy Code because it is not in the best interest of the estate, would be an unauthorized post-petition use of Pacific Gas and Electric Company's property, and would force the utility to undertake credit on onerous terms.

In addition, on April 6, 2001, FERC ordered the CAISO to comply with its February 14 order, in which FERC ordered that the CAISO could only buy power on behalf of creditworthy entities. Both Pacific Gas and Electric Company and Southern California Edison Company are no longer creditworthy companies. By continuing to purchase power on behalf of Pacific Gas and Electric Company, the CAISO is in violation of its own Tariff, FERC orders, and federal law.

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