Settlement Agreement Results in Significant Rate Reductions for Customers and
Environmental Benefits for California
SAN FRANCISCO, April 12 /PRNewswire-FirstCall/ -- Pacific Gas and Electric
Company today emerged from the Chapter 11 process it initiated to resolve the
financial challenges resulting from the California energy crisis. The
resolution -- supported by the company, its creditors, the California Public
Utilities Commission (CPUC), labor, and environmental and consumer groups --
restored the utility's investment grade credit ratings, satisfied all valid
creditor claims, and provided the basis for a substantial reduction in
electric rates, with the potential for additional savings to customers in the
future.
"Regaining our investment grade credit ratings, paying creditors in full,
and doing so without raising customer rates achieves our objectives, and puts
the energy crisis behind us," said Robert D. Glynn, Jr., Chairman, CEO and
President of PG&E Corporation.
The settlement agreement approved by the CPUC resolves Pacific Gas and
Electric Company's Chapter 11 case and provides many benefits for customers
and the State of California, including:
-- A significant $800 million electric rate reduction for customers that
was implemented in March. The company will continue to work with state
and federal officials to pursue refunds from energy suppliers who
charged excessive prices for gas and electricity during the energy
crisis; and any refunds will go to further reduce customer rates.
-- Environmental benefits, such as the protection of 140,000 acres of
sensitive watershed lands surrounding the company's hydroelectric
facilities, and the creation of a non-profit corporation to support
research and investment in clean energy technology.
-- Restoration of the utility's investment grade credit rating to allow
the company to access the capital markets in order to finance the
infrastructure improvements and long-term procurement of natural gas
and electricity to meet customers' growing demand. In 2004, the
company will invest approximately $1.4 billion in its electric and
natural gas systems.
In addition, through an agreement reached with The Utility Reform Network,
the company is working to obtain legislative approval to refinance a portion
of its costs with a securitized dedicated rate component. If the refinancing
is successful, customers could potentially save up to $1 billion in lower
financing and tax costs over the term of the agreement.
"By emerging as a financially healthy company, we are on a solid
foundation to continue investing in the infrastructure that delivers energy to
our customers, and serves as the backbone of our state's economy," said Gordon
R. Smith, Pacific Gas and Electric Company's President and CEO. "We will also
be able to re-engage with the communities we serve, and return to the
traditional roles we played with them, which were temporarily interrupted by
the challenges of the energy crisis."
"By resolving these financial challenges in a collaborative manner, we are
able to move forward on a sound financial basis in a more stable regulatory
environment," Glynn added.
As it emerged from Chapter 11, Pacific Gas and Electric Company made
approximately 2,100 payments resolving $8.4 billion in allowed creditor
claims, and deposited $1.8 billion in escrow accounts for disputed claims.
The company used the proceeds from the approximately $6.7 billion bond
offering, $2.4 billion in cash on hand, $0.8 billion funded by term loans, and
$0.3 billion from a credit facility to pay creditors. In addition,
approximately $814 million in pollution control bonds was reinstated, and the
company paid about $93 million in preferred stock dividends and sinking fund
payments that were in arrears.
Pacific Gas and Electric Company voluntarily filed for reorganization
under Chapter 11 of the U.S. Bankruptcy Code on April 6, 2001. On June 19,
2003, federal Judge Randall Newsome announced the settlement agreement between
PG&E and the CPUC's staff. In December 2003, the CPUC approved the settlement
agreement and the Bankruptcy Court confirmed the plan of reorganization.
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