Consumer advocates propose suing energy suppliers, which is consistent with 
the focus of the subpoena that PG&E wants the bankruptcy court to issue to 
suppliers.---sch
Who'll pay billions in PG&E debt?  Consumers, taxpayers and asset sales are 
among the options. 
By Claire Cooper
Bee Legal Affairs Writer
(Published June 11, 2001) 
A judge's decision not to meddle with electric rates has left open the 
biggest question in the Pacific Gas and Electric Co. bankruptcy case: Who 
will pay the utility's nearly $10 billion in bills?  
Ratepayers?  Last week's decision by U.S. Bankruptcy Judge Dennis Montali left 
rate-setting to the state Public Utilities Commission.  But experts aren't 
ruling out PUC approval of major increases in the prices charged to PG&E's 
customers.  
Taxpayers?  They'd foot the bill if the state bailed out the utility, another 
reportedly live option.  
Creditors?  They could, as one consumer advocate says, "cannibalize" each 
other in competing for PG&E's assets.  Though PG&E says creditors will all be 
paid in full, it hasn't said how long that will take.  
PG&E Corp., the utility's parent?  It might be forced to infuse the utility 
with cash.  PG&E also could sue energy wholesalers to recoup overcharges or 
could sell off its own power generators to raise cash.  
Until last week, when Montali made it known that he won't raise retail rates, 
the two major players in the bankruptcy proceedings -- the utility and the 
official creditors committee -- had agreed on most matters that came up in 
court, including the need for a rate increase.  
"Now, it's going to get maybe a little uglier and less friendly," predicts 
Jesse Fried, a bankruptcy law professor at the University of California, 
Berkeley. " It looks like they're just going to have to sit down and decide 
who's going to eat the loss."  
Fried says the "right answer" should be PG&E Corp., which requested 
deregulation of the energy market and profited from it until soaring 
wholesale prices left the utility subsidiary with massive debt, in part 
because retail rates were frozen.  
Between the time deregulation was passed and the end of 2000, the utility 
transferred $3.9 billion to its parent corporation before filing for 
bankruptcy protection April 6, according to a state-ordered audit.  
To force the corporation to repay the money, says Sacramento bankruptcy 
lawyer W. Austin Cooper, Montali would have to conclude that the transfer 
defrauded the utility's creditors.  
Montali has the power "to pierce the corporate veil" to find the answer, says 
Harvey Rosenfield, president of the Foundation for Taxpayer and Consumer 
Rights.  
But Cooper predicted a different scenario: sale of significant portions of 
PG&E assets -- such as generators or transmission lines -- to pay creditors 
and repay the state for electricity it has purchased on the wholesale market.  
At a meeting Thursday between the utility and some of its creditors, PG&E 
chief financial officer Kent Harvey said the utility's hydroelectric 
facilities are worth between $3.9 billion and $4.2 billion.  James Lopes, the 
utility's bankruptcy lawyer, declared the subject of a possible sale off 
limits at the meeting.  
Rosenfield predicts it will remain off limits because, he says, the state 
would begin talking about seizing the generators rather than risk a sale to 
an out-of-state buyer.  
He favors another option: suing the out-of-state companies that have been 
charging the highest wholesale energy rates.  
"If I were the small business that supplies pencils and paper clips to PG&E, 
I would want to collect some money from the energy companies that overcharged 
PG&E for power until the state stepped in to buy the power in the utility's 
place," he said.  
If PG&E filed an antitrust case against those companies, it could be tried in 
Bankruptcy Court, according to Cooper.  
Discussion on that subject also was ruled off limits by Lopes.  
However, Harvey said the utility has requested a probe by the Federal Energy 
Regulatory Commission.  
And PG&E has been providing information to state agencies probing the 
out-of-state firms, spokesman Ron Low said.  
Rosenfield predicts growing pressure for a state-sponsored PG&E bailout like 
the $2.76 billion plan proposed by Gov. Gray Davis to keep Southern 
California Edison out of bankruptcy.  
Under the Davis proposal, the state would have spent $2.76 billion to buy 
that utility's power transmission lines.  But the Legislature shelved Davis' 
plan, and Rosenfield warned that any such bailout would be forced to a public 
referendum, "along with any politicians who supported it."  
Stanford University bankruptcy law professor Marcus Cole says the long-range 
success of any plan for PG&E "depends entirely on the prospects for 
profitability" -- that is, pegging retail energy rates to wholesale costs.  
"PG&E is not a charity," Cole says. " It's there to provide a service.  The 
only way it's going to do that is if it can generate profits."