Thursday February 1, 2:45 pm Eastern Time

Calif. Utility Pacific G&E Defaults

By Jonathan Stempel

NEW YORK (Reuters) - Cash-strapped California utility Pacific
Gas & Electric Co. said on Thursday it plans to pay its suppliers
only about 15 percent of what it owes them, and that it and its
parent, PG&E Corp. (NYSE:PCG - news), have defaulted on $726 million of short-term debt.

California, the nation's most populous state, has suffered from blackouts in the last two weeks. Pacific G&E and No. 2 utility Southern California Edison, a unit of Rosemead, Calif.-based Edison International (NYSE:EIX - news), cannot pass onto consumers their soaring wholesale power costs because of a rate freeze and the state's 1996 deregulation law.

The utilities owe about $12 billion.

Pacific G&E, California's biggest utility, and its San Francisco-based parent, which together have less than $1.2 billion of cash left, made their disclosures in mirror filings with the Securities and Exchange Commission. The defaults on the short-term debt, or commercial paper, were expected.

The filings came after California's Assembly on Thursday rejected emergency legislation to fund state-backed power purchases because some legislators thought it would trigger rate hikes.
California's Senate had earlier approved the measure. Another Assembly vote is expected Thursday.

Pacific G&E said its ``intent is to pay its ongoing costs of doing business'' until the power crisis is resolved. PG&E, meanwhile, said it is ``examining'' a restructuring of its bank loans and commercial paper, and that it may take six months for holders of defaulted debt to get back their principal.

PG&E shares traded Thursday afternoon on the New York Stock Exchange at $13.75, down 50 cents, or 3.5 percent. Their 52-week high is $31.81. Edison International shares traded on the Big Board at $13.02, down 32 cents, or 2.4 percent. Their 52-week high is $30.

Pacific G&E serves about 13 million Californians. SoCal Edison serves about 11 million.

PARTIAL PAYMENTS

Pacific G&E said it plans to will pay on a pro-rata basis just $161 million, or 15.4 percent, of the $1.048 billion it owes to various power generators, the California Power Exchange (CalPX), a clearinghouse for electricity buyers and sellers, and the California Independent System Operator (ISO), which operates most of the state's power grid.

It said it owes the generators $437 million, and CalPX and the ISO $611 million. It had earlier said it expected to owe CalPX and the ISO $583 million. It said it will make partial payments ``based on the electric commodity portion of revenues collected through frozen rates.

Peter Darbee, PG&E's chief financial officer, told investors in a Thursday conference call his company should be able to raise ``substantial amounts'' of cash to pay off holders of defaulted
short-term debt three to six months after the state enacts a rescue plan.

Pacific G&E said its cash reserves total $828 million, while PG&E said its reserves total $347 million.

DEFAULTS

Pacific G&E said it has defaulted on $437 million of commercial paper through Jan. 31, and expects to default on $294 million due February 28 and $142 million due March 31 unless its situation
improves.

PG&E, meanwhile, has defaulted on $289 million of commercial paper, and expects to default on $164 million more by February 28 and $48 million by March 31.

Peter Darbee, PG&E's chief financial officer, told investors in a Thursday conference call his company may raise ``substantial amounts'' of cash to pay holders of defaulted commercial paper
three to six months after the state adopts a rescue plan

The utility, though, said it plans to keep making regular interest payments on $8.13 billion of other debt, including $938 million of bank debt, $1.24 billion of floating-rate notes, $287 million of medium-term notes, $3.37 billion of mortgage bonds, $1.61 billion of pollution control bonds and $680 million of senior notes.

Pacific G&E also said its banks cut off two credit lines totaling $1.85 billion, following its downgrade by top credit rating agencies to junk status from investment-grade.

PG&E said its banks have terminated two credit lines totaling $936 million.

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