Because of sharply higher prices it must pay for electricity, PG&E claims its debts have increased by $300 million a month. Both PG&E and Southern California Edison have been demanding over the last three months that electricity rates in the state be increased so it can return to profitability. Because of public pressure state politicians have been stalling on plans to bail out the utilities, especially after more information has come to light about "ring-fencing."

Ring-fencing legally separates the utility division from its highly profitable parent company. PG&E's bankruptcy filing, for instance, does not affect its parent company, PG&E Corp., or any other PG&E division. According to a report in the New York Times, "The utility hopes to have more success in court in trying to win relief from $9 billion in wholesale energy debt it claims to have incurred since prices began soaring last May."

Governor Davis had been trying to negotiate a deal where the state of California would buy out transmission lines in an effort to keep PG&E solvent. But Robert Glynn Jr., chairman of PG&E Corp., told reporters, "We've heard a lot of the words that have been involved, but we have not seen a lot of actions. The regulatory and political processes have failed us, and now we are turning to the court."

The bankruptcy proceedings, which could last for years, may also lead to higher rates for working people if the bankruptcy judge puts the PG&E debt of $9 billion on ratepayers. The filing led to a sharp exchange of statements between PG&E and the governor's office over who was to blame for the bankruptcy. Susan Abbott of Moody's Investors Service in New York observed, "The governor endorsed the rate increase the utilities had been asking for." These increases have ranged between 10 percent and 37 percent, in additional to a 9 percent surcharge already in place. In fact, only one day before the filing, Davis stated in a televised speech that despite his earlier promises of no more rate hikes, consumers would have to pay more.

The San Francisco Chronicle later obtained an eight-page confidential proposal from PG&E to Davis's office sent during the course of the talks. According to the newspaper's report, "The utility demanded unprecedented freedom from regulatory oversight and the ability to pass along huge rate increase to consumers." PG&E also demanded "that it be cleared of any wrongdoing when it transferred millions of dollars to its parent company," according to the Chronicle.

Only hours before PG&E filed for bankruptcy protection, some 6,000 senior managers and some other employees were awarded $50 million in bonuses. Most PG&E union workers were unaffected by this move. "It's not unusual for corporations anticipating bankruptcy to sweeten the pot and encourage management to stay," said Los Angeles bankruptcy lawyer David Huard.  
 
Who gets paid first?
In the bankruptcy hearings, which began in Los Angeles April 9, Judge Dennis Montali will decide how to restructure the utility to make sure that gas suppliers and bondholders get paid first. The first day of the hearing began with a presentation by phone from an attorney speaking on behalf of the Bank of New York, which represents PG&E bondholders who are owed more than $2.2 billion. Further down on the list of debts would be property taxes.

PG&E's bankruptcy filing came just four days before $80 million in tax payments to 49 California counties became due. Smaller counties depend on the revenue from corporate property tax to fund schools and other services.

Meanwhile, the manager of the state's power grid testified at a congressional hearing in Sacramento that rolling blackouts this summer might be more prevalent than previous reports had indicated. Terry Winter forecast 34 days of power outages over the California summer, or one out of every three days. "I'm very concerned there's no end in sight," said State Controller Kathleen Connell.

Bill Kalman is a member of United Food and Commercial Workers Local 120.  
 
 
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