PG&E suspends dividends; makes appeal on gas

In light of an ongoing liquidity crisis, PG&E Corp. and its utility subsidiary Pacific Gas and Electric Co. Wednesday suspended fourth quarter dividends.

PG&E Corp. Chairman Robert D. Glynn Jr. said it took action to conserve cash and meet operational expenses, including buying power and natural gas for customers.

"The wholesale power crisis has created a severe liquidity crisis for California's utility companies," said Glynn. "This challenge has forced Pacific Gas and Electric Co. to evaluate all of its options for extending its cash reserves. The utility's decision to eliminate the dividend payments is a necessary step and in the best interest of its ability to continue serving customers."

The utility also appealed to California Gov. Gray Davis to use his emergency powers to enable it to buy natural gas for its customers or for the state to become the interim purchaser. The cash and credit squeeze created by the electricity crisis in California has prompted 15-20 natural gas suppliers to decline to sell gas to the company beyond current commitments, Pacific Gas and Electric Co., said earlier this month.

The utility delivers natural gas to 3.8 million customers, including residential consumers.

In filings with the US Securities and Exchange Commission, PG&E said it had cash reserves of $500 million as of Wednesday. It has a payment of $583 million due Feb. 1 to the California Independent System Operator (ISO) for power purchases and another payment of $431 million due 2 weeks later to the California Power Exchange.

In addition, Pacific Gas and Electric has another $1.2 billion bill that will come due March 2 from the ISO.

PG&E Corp. eliminated the common stock dividend of 30�/share declared by the board in October and payable Jan. 15. Pacific Gas and Electric said it will not declare the regular preferred stock dividend for the 3-month period ending Jan. 31, normally payable Feb. 15, 2001, and will not pay the $110 million dividend owed its parent.

Future payment of dividends will depend on the restoration of the financial health of both companies, PG&E said. The corporation has also deferred annual merit salary increases for all corporation and utility nonunion employees, suspended charitable contributions, and reduced other expenditures.

PG&E said it will postpone release of its financial results for the fourth quarter of 2000, pending the outcome of ongoing state and federal efforts to resolve the state energy crisis. The outcome could affect the quarterly and full year results, PG&E said.

Glynn said the company is looking to Gov. Davis and the state's legislature to act during a special legislative session called by the governor.

"We will continue our vigorous efforts to urge state and federal leaders to act decisively to end this crisis," said Glynn.