Bid for PG&E restitution on track
for Superior Court

By Julia Cheever, Bay City News Service

October 3, 2006

SAN FRANCISCO (BCN) - A lawyer for the city of San Francisco said today the last roadblock to a Superior Court trial on a city and state bid to win more than $4 billion in restitution from PG&E Corp. appears to have been lifted by a U.S. Supreme Court action on Monday.

The high court declined to take up the corporation's appeal of a federal appeals court ruling that said the case could be heard in San Francisco Superior Court rather than federal bankruptcy court.

Deputy City Attorney Theresa Mueller said, "This removes any question that restitution is appropriate as an outcome of the case."

California Attorney General Bill Lockyer and City Attorney Dennis Herrera filed parallel lawsuits in early 2002, claiming that PG&E Corp., the parent corporation of the PG&E Co. utility, illegally transferred more than $4 billion from the utility to itself.

The transfers allegedly took place in the four years before PG&E Co. filed for Chapter 11 bankruptcy in April 2001, citing $9 billion in debt from wholesale energy costs during the state's energy crisis in 2000 and 2001. The utility emerged from the bankruptcy in 2004.

Mueller, who heads the city attorney's energy and telecommunications team, said pretrial evidence gathering will continue in the court of San Francisco Superior Court Judge Richard Kramer. She said she did not know how soon the two lawsuits would come to trial.

Brian Herzog, a spokesman for PG&E Corp., said the legal dispute concerned only the venue where the claims will be heard and not the merits of the claims.

He said the corporation maintains the revenue transfers were legal and were investigated and found to be within the rules by both the state Public Utilities Commission and the Legislature in late 2000 and early 2001.

"We think there is absolutely no basis for the claims," Herzog said.

Mueller said that restitution, if awarded by the court, "could happen in a number of ways," such as consumer rate reductions channeled through the utility or possibly direct payments to customers.

In the ruling unsuccessfully appealed by PG&E Corp., the 9th U.S. Circuit Court of Appeals in San Francisco said in January that the city and state lawsuits fell into an exception to the rule that most lawsuits against a bankrupt company must be transferred to federal bankruptcy court.

The exception is for lawsuits related to government police or regulatory powers.

The federal appeals court said, "Restitution will benefit the public welfare by penalizing past unlawful conduct and deterring future wrongdoing."

The court continued, "In these circumstances, the restitution claim fits comfortably within (the state's) police or regulatory power."

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