California sues parent company of state's largest utility, charging unfair business practices
Thursday, January 10th 2002, 12:00 am
By: News On 6
SAN FRANCISCO (AP) _ The state sued the parent company of California's largest utility Thursday, alleging the corporation drained off its subsidiary's assets and drove it into bankruptcy during the state's energy crisis last year.
Pacific Gas & Electric Corp. pushed PG&E Co. into Chapter 11 bankruptcy through fraudulent and deceptive business practices, Attorney General Bill Lockyer said in filing the lawsuit.
The lawsuit seeks between $600 million and $4 billion in penalties.
PG&E Co., which owes billions of dollars to creditors, filed for Chapter 11 bankruptcy last April, as the state was roiled by blackouts and soaring wholesale electricity prices.
Officials at PG&E Co. and the parent company did not immediately return calls for comment on the lawsuit. PG&E Co. has blamed its woes on a deregulation law that left it unable to collect the full price of electricity from its customers for months.
The state-regulated utility was allowed to restructure into a holding company with both utility and non-utility activities in 1996. There were several conditions to that approved restructuring, including one that it give priority to the financial needs of the utility and keep it afloat with the necessary operating funds.
Lockyer said money was funneled from the utility into the parent corporation after that restructuring, thus violating the legal agreement meant to protect ratepayers.
``Instead of keeping its promise, (the corporation) drained the assets of its California utility and put billions of dollars into unregulated affiliates in order to achieve its ultimate objective of becoming one of the largest unregulated power companies in the nation,'' Lockyer said.