(San Francisco, CA) - Pacific
Gas and Electric Company, the utility unit of PG&E Corporation (NYSE:
PCG), today filed for reorganization under Chapter 11 of the U.S.
Bankruptcy Code in San Francisco bankruptcy court. The company said
it is taking this action in light of its unreimbursed energy costs
which are now increasing by more than $300 million per month, continuing
CPUC decisions that economically disadvantage the company, and the
now unmistakable fact that negotiations with Governor Gray Davis
and his representatives are going nowhere.
Neither PG&E Corporation
nor any of its other subsidiaries, including its National Energy
Group, have filed for Chapter 11 reorganization or are affected
by the utility's filing.
"We chose to file for Chapter
11 reorganization affirmatively because we expect the court will
provide the venue needed to reach a solution, which thus far the
State and the State's regulators have been unable to achieve," said
Robert D. Glynn, Jr., Chairman of Pacific Gas and Electric Company.
"The regulatory and political processes have failed us, and now
we are turning to the court."
Glynn added, "Our objective
is to move through the Chapter 11 reorganization process as quickly
as possible, without disruption to our operations or inconvenience
to our customers. Throughout this crisis, our 20,000 employees have
been and remain committed to providing safe and reliable service
to the 13 million Californians who depend on us to deliver their
gas and electricity."
Pacific Gas and Electric
Company decided to file for the protection of Chapter 11 primarily
due to:
-
Failure by the state
to assume the full procurement responsibility for Pacific Gas
and Electric's "net open position" as was provided under AB1X.
This has the result of increasing financial exposure to unreimbursed
wholesale energy procurement costs, which the utility estimates
to be approximately $300 million or more per month.
-
The impact of actions
by the California Public Utilities Commission (CPUC) on March
27, 2001, and April 3, 2001, that created new payment obligations
for the company and undermined its ability to return to financial
viability.
-
Lack of progress in
negotiations with the state to provide recovery of $9 billion
in wholesale power purchases made by the utility since June
2000, which have not been recoverable in frozen rates.
-
The adoption by the
CPUC of an illegal and retroactive accounting change that would
appear to eliminate our true uncollected wholesale costs.
"In addition, despite
Pacific Gas & Electric's best efforts to work with the State of
California to reach a consensual, responsible, fair and comprehensive
solution to California's energy crisis, no agreement has been reached
with the Governor and the Governor's representatives have dramatically
slowed the pace and the progress of discussions over the past month.
"Furthermore since last
fall, we have filed comprehensive plans for resolving this matter
with the CPUC, but they have not acted affirmatively on them," said
Glynn.
On October 4, 2000, Pacific
Gas and Electric sought emergency rate action by the CPUC. In November
2000, we filed our rate stabilization plan, which, if adopted, would
have increased electric prices by an initial 25 percent, compared
with the 46 percent recently adopted by the CPUC. Neither request
was acted upon. Had the state acted at that time:
-
Pacific Gas and Electric
would have been kept creditworthy;
-
Pacific Gas and Electric
would have been able to enter into long-term power purchase
contracts at prices lower than those announced by the state;
-
The state would not
have had to almost exhaust the state's budget surplus by spending
billions of dollars to purchase power for the utility's customers;
-
The state would not
now need to issue billions of dollars in bonds to cover these
power purchases; and
-
The state would not
now be advancing a proposal to spend billions of dollars to
purchase the state's three investor-owned utility's electric
transmission systems.
"This year, the state
has spent more than $3 billion on power purchases and, with the
CPUC, has arranged to be reimbursed for these expenses," noted Glynn.
"In contrast, since June Pacific Gas and Electric Company has spent
$9 billion in excess of revenues to pay for power for its customers
and exhausted its ability to continue borrowing, but there has been
no progress on a plan to reimburse it for those expenditures as
provided by law.
"Statements by the Governor
and other public officials since last September gave us reason to
believe that a solution could be reached outside the context of
Chapter 11 that would restore the utility's financial viability
and enable it to meet its financial obligations equitably. However,
these statements have not been followed up by constructive actions,
and a reorganization in Chapter 11 is now the most feasible means
of resolution."
The utility will utilize
existing resources to continue operating its business during bankruptcy,
including paying vendors and suppliers in full for goods and services
received after the filing. The utility will pay electric commodity
suppliers as provided by law. The utility intends to continue normal
electric and gas transmission and distribution functions during
the Chapter 11 process. Employees will continue to be paid. Health
care plans and other benefits for employees and most retirees will
continue. The utility's qualified retirement plans for retirees
and vested employees are fully funded and protected by federal law.
Notice
A media teleconference will
be held today at 10:15 A.M. Pacific Daylight Time to discuss this
announcement. Pacific Gas and Electric Company Chairman Robert D.
Glynn, Jr., and Pacific Gas and Electric Company President and CEO
Gordon R. Smith will be available for questions. The dial-in number
is (888) 469-2078, and the password for access is "media." An investment
community conference call to discuss Pacific Gas and Electric Company's
Chapter 11 filing has been scheduled for 11:15 A.M. Pacific Daylight
Time today. A real-time webcast of this conference call can be accessed
at www.pgecorp.com