Settlement Agreement Results in Significant
Rate Reductions for Customers and Environmental Benefits
SAN FRANCISCO - 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
- 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
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.