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PG&E Files for Bankruptcy

Aired April 6, 2001 - 13:08   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU WATERS, CNN ANCHOR: Power shortages in the state are causing new and significant problems today in the Golden State.

Casey Wian is in Los Angeles to fill us in -- Casey, what's up?

CASEY WIAN, CNN CORRESPONDENT: Well, Lou, we've had the event that a lot of us have been waiting for here in California for months, since this energy crisis began snowballing. Pacific Gas & Electric, the utility unit of PG&E Corp., which is the largest utility in the State of California -- it serves much of Northern California -- has today decided to file for Chapter 11 bankruptcy protection.

And what that means, of course, is all of its debts, which total in the billions of dollars, are now frozen, and a bankruptcy judge will figure out how best the utility can pay off those debts. During the bankruptcy process, Pacific, Gas & Electric says it continue to serve its customers as best as it can and will continue to provide power doesn't expect there to be any additional power interruptions beyond the normal supply concerns that we've had for months in California.

What this does represent, though, is a significant setback in Governor -- California Governor Gray Davis's efforts to solve the crisis. He's been trying to negotiate with the utilities in California -- Pacific Gas & Electric and Southern California Edison here in the southern part of the state -- to buy their transmission lines as a way to help them pay back their debts.

But PG&E today saying that those negotiations, those efforts have not gone far enough, have not gone fast enough. It's been under a lot of pressure from its creditors to get something done. It hasn't happened fast enough. So they've taken the extraordinary step of putting themselves into bankruptcy protection to allow them to reorganize their debts and keep operating as a going business -- Lou.

WATERS: And, Casey, at first blush -- and I acknowledge I don't know the mechanics of a Chapter 11 bankruptcy, but would it not be more difficult in a case like this for a power supplier to get more power from suppliers who are seeing other investments frozen?

WIAN: It's possible that that -- it could have an impact on the supply situation in the state. The suppliers -- one of the reasons that the people who supply companies like PG&E and Southern California Edison with power have not pushed them into bankruptcy so far is because they figured they had a better chance of getting their money back through a negotiated settlement between the utilities and the state.

Now PG&E says that -- the prospects of that happening don't look good. So it's now in the hands of federal bankruptcy judge in San Francisco to determine how much they're going to get paid, you know, of the billions of dollars that PG&E owes them. Separately, though, there are initiatives underway in the state to build more power plants.

The governor's office has taken some aggressive steps in recent months to address the state's electricity supply concerns. Those issues should not be affected by this bankruptcy filing.

WATERS: So -- so either way -- I mean, the solution to this problem would necessitate either raising taxes or raising rates on California customers, would it not?

WIAN: And the -- absolutely. And the state public utilities commission several days ago put forth a proposal that would call for rate increases of between 40 and 50 percent for PG&E and Southern California Edison customers. Just last night, Governor Davis held his first public statement -- He asked for five minutes on the local news throughout the state last night -- saying that he now for the first time supports rate increases.

Rate increases for most observers of this story all along have been inevitable. They will happen, and it -- it will now be up to a judge to determine whether more in -- rate increases for PG&E's customers at least will be needed. And I should point out that we've calls into Southern California Edison, which is a unit of Edison International, to see if they've got comment on PG&E's filing. So far, they say they have no comment. There's no indication that they will follow their northern neighbor into bankruptcy at least at this point -- Lou.

WATERS: And, Casey, this is more than a California story. Are there not grave national implications here?

WIAN: Absolutely. There are energy-supply concerns throughout the Western United States and even throughout the rest of the country. Bush administration officials have warned of blackouts this summer when electricity use is high in places like New York. That's going to be a big topic of conversation.

Next week, there is a meeting of federal energy regulatory commissioners in Idaho, I believe, on Tuesday. It is a -- it is a regional and a national crisis, if you will.

WATERS: All right, Casey Wian in Los Angeles today on the declared bankruptcy procedure for PG&E. Big story.

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