Pacific Gas And Electric Company Issues Statement On Utility Financial Crisis


(San Francisco, CA)- Pacific Gas and Electric Company President and CEO Gordon R. Smith today issued the following statement in response to remarks by Standard & Poor's on today's conference call:

"For months, California's utilities, including Pacific Gas and Electric Company, have faced a growing financial challenge, due to a badly broken wholesale power market and price gouging by wholesale power sellers. In order to ensure continued service to our customers during this time, Pacific Gas and Electric has virtually exhausted its financial resources, borrowing an average of $1 million per hour to pay for the power we deliver to Californians. No company can continue to operate indefinitely under such conditions.

"Standard & Poor's communicated this message loudly and clearly this morning on a public conference call with the financial community. S&P warned that utilities will no longer be able to finance wholesale power purchases without clear and definitive action from decision makers that ensures these costs can be repaid. Citing the threat of imminent default, S&P said it must see dramatic action by California decision makers within 24 to 48 hours in order to prevent a downgrade of the utility's credit rating to 'deeply speculative' levels.

"Today's S&P conference call sends a message to Governor Davis and California's leadership that now is the time for action. We need to agree on a solution that immediately addresses the problems created by the outrageous actions of generators and marketers and the failure of the Federal Energy Regulatory Commission to restrain them. However, the future of California's economy cannot depend on when the federal government acts. The solution to this problem is now in the hands of the Governor and the California Public Utilities Commission. They ultimately will determine if Pacific Gas and Electric Company can continue to provide essential services to the 14 million Californians in PG&E's service territory.

"It is astounding that only hours after Standard & Poor's warnings, TURN and others are still questioning the severity of this crisis and advocating steps that will make the problem worse, including one proposal that S&P called 'devastating.' To its credit, the Public Utilities Commission removed TURN's proposal from consideration at this time. With the severity of the crisis facing California's utilities, the effort now is exactly where it should be, namely on finding solutions, not continuing to debate the existence of the problem.

"The time for pointing fingers has passed. This challenge requires the utmost leadership from all parties in order to find a solution."


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