Nearly 5 million Pacific Gas and Electric Co. ratepayers could lose out on billions in power price refunds if they are not represented as a committee in its bankruptcy case, an attorney with the U.S. Trustee told a federal bankruptcy judge Thursday.
It is the second time in the bankruptcy proceeding that U.S. Trustee Linda Ekstrom Stanley, whose role is to appoint creditor committees in cases, has taken the unusual step of trying to create a separate committee of ratepayers.
“It’s very difficult to get a judge to change his mind, but I think we have sufficient grounds,” Stanley said.
PG&E and the official creditors committee disagreed with appointing a ratepayers committee, saying there’s simply no legal authority for it.
Such a committee would give ratepayers legal standing and the ability to voice opinions on how the billions PG&E owes more than 50,000 creditors should be doled out. It would also be able to vote on the final reorganization of the company, which could affect power service and rates in the future.
At issue is whether ratepayers are in fact creditors. Patricia Cutler, an attorney with the office of the U.S. Trustee argued they are because they possibly stand to lose money refunded from power bought before PG&E filed for bankruptcy April 6.
When state power regulators hiked rates in May, they said ratepayers would receive refunds if state and federal investigations could prove that out-of-state power companies overcharged California utilities for electricity.
Not having residential customers represented could also prompt creditors who do have a voice to look at ratepayers as a source of cash to help the utility pay its debts, Cutler said.
“Unlike other creditors, ratepayers will not look first at ratepayers as a source of payment,” Cutler told U.S. Bankruptcy Judge Dennis Montali.
Jim Lopes, an attorney for PG&E, said the creditors committee could not raise electric rates even if they wanted to, citing Montali’s recent decision to not challenge the rate-setting authority of the state Public Utilities Commission.
Lopes said several companies serving on the creditors committee are also ratepayers, naming several small alternative power plants known as qualifying facilities.
“You could have 40 committees in this case ... and I don’t think that would be appropriate,” he said, adding that if more groups are involved, it would take longer for the utility to pay them.
In May, Montali agreed with PG&E and ruled that the ratepayer groups did not have a legal right to join other creditor committees in participating in the Chapter 11 case.
Ongoing negotiations in Washington between power companies and the state could result in as much as $8.9 billion in refunds for power sold into California that has been deemed overpriced by Gov. Gray Davis.
Without a committee to represent all ratepayers, Stanley is concerned they could be barred from filing claims for that money or for other grievances against PG&E after a September cutoff.
Montali has not decided whether to allow the ratepayers committee, but should rule July 10. Stanley said she will consider appealing the case in U.S. district court if Montali rules against the committee.
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