By the OGJ Online Staff
HOUSTON, Sept. 20 -- Pacific Gas & Electric Co. filed a reorganization plan Thursday that will allow the California utility to emerge from bankruptcy protection and pay creditors' claims, including unsecured creditors.
"We will pay all valid creditors in full with interest. And we will do that without raising rates or asking the state for a bailout," said Robert Glynn, CEO of parent PG&E Corp., San Francisco.
The plan would restructure the utility into two separate stand-alone companies. The utility will retain the electric and gas distribution businesses. The generation and transmission assets will become part of PG&E Corp.
"This is straight bankruptcy business practice. Restructure, refinance pieces of the business, and pay off creditors," Glynn said. He said the plan has the support of the creditors' committee and will become effective if the federal bankruptcy judge also approves it. The company said it expects the process to be completed by the end of 2002. The utility filed for protection under federal bankruptcy laws Apr. 6.
By placing electric generation assets, electric transmission, and gas transmission operations into new businesses, PG&E can issue debt that will be combined with new financing at the utility to help pay creditors' claims. The company will also use $3.3 billion of cash on hand to pay claims.
The plan will provide for $9.1 billion in cash and $4.1 billion in notes. Secured creditors and small unsecured creditors owed less than $100,000 will be paid in cash. Unsecured creditors with claims of more than $100,000 will receive 60% cash and 40% in notes.
The new financing will be possible because the generation assets will become subject to Federal Energy Regulatory Commission jurisdiction and will eventually charge market-based rates in the wholesale market, the company said. The company's California gas pipeline system will be reconfigured to become an interstate pipeline regulated by FERC.
The 7,000 Mw still owned by the utility include hydroelectric facilities and the Diablo Canyon nuclear plant. The output of the plants will be sold to the utility to serve its customers under a 12-year contract. Once the contract expires, the generating facilities will charge market-based rates, Glynn said.
The utility will pay 5¢/kw-hr for power under the contract. That rate is less than the cheapest rate of 6.6¢/kw-hr the state is paying for power under some of its long-term contracts and is also less than the 7.9¢/kw-hr rate the smaller independent generators or qualifying facilities are charging PG&E, Glynn said.