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Friday, 6 April, 2001, 19:42 GMT 20:42 UK
US power giant files for bankruptcy
Power lines
California's power industry has been brought to its knees
California's crisis-hit power industry received a fresh blow on Friday when the state's largest utility Pacific Gas & Electricity (PG & E) filed for bankruptcy.

The debt-crippled power giant said it had been forced to act when it became 'obvious' that negotiations with California state officials over a potential bail-out were going nowhere.

The regulatory and political processes have failed us

Robert D Glynn Jr, PG & E chairman
The bankruptcy filing comes just one day after California governor Gray Davis went on statewide television to propose a new debt-relief package for the troubled utilities.

PG & E and the state's other large power companies, Southern California Edison and San Diego Gas & Electric, say they have lost more than $14bn since June because of soaring wholesale costs.

PG & E said it had built up debts of $8.9bn since the start of the crisis.

'Lack of action'

In his speech, Mr Davis said he wanted to give the utilities a share of record electricity bill hikes announced last week.

And he wants to push ahead with negotiations for the state purchase of transmission lines.

But PG & E chairman Robert D Glynn Jr said Mr Davis' words had yet to be met by actions.

"The regulatory and political processes have failed us, and now we are turning to the court.

"We expect the court will provide the venue needed to reach a solution, which thus far the state and the state's regulators have been unable to achieve."

Pursuing relief

Mr Glynn Jr added: "Our action is taken in this context.

"Since last summer we have been regularly, continuously and without cessation notifying the state at all levels of the significance of this crisis.

We alerted the governor's advisors last summer and have been in negotiations with them since November. "Under both federal and state law, Pacific Gas & Electric is entitled to recover its wholesale power costs, if [it] has prevented from doing so.

"We are continuing to aggressively pursue relief... "It is our belief that all valid claims by creditors... will be paid in full at the end of this process."

Shares suspended

PG & E provides natural gas and electric service to approximately 13 million people in Northern and Central California. It has 21,500 employees.

The company has filed for Chapter 11 bankruptcy protection with the Securities and Exchange Commission.

Trading in its shares on the New York Stock Exchange was suspended before the filing.

They last traded at $11.36, down 2 cents.

The company says it will continue to operate as a business "while being subject to the jurisdiction of the Bankruptcy Court."

The utilities' problems can be traced back to 1996, when California's deregulation laws barred them from passing on higher prices for wholesale electricity to consumers.

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