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$4 Billion Sought in PG&E Claim

Energy: The utility blames state for losses, citing a law passed during last year's crisis.


SAN FRANCISCO — Pacific Gas & Electric Co. filed a $4-billion damage claim Thursday against the state of California, alleging that a law passed during the energy crisis prevented the utility from selling power generated by its hydroelectric and nuclear facilities at federally established market rates.

In drawing its latest battle line with the state, PG&E said the state failed to meet its obligations under AB 1890, the California deregulation law passed in 1996. Part of the law required that output from generation facilities retained by utilities would become federally regulated.

The state changed the rules, PG&E said in a filing with the state claims board, when it adopted AB 6X a year ago and blocked the utility from selling its power at rates determined by the Federal Energy Regulatory Commission.

"The state breached its obligations and prevented the company from recovering billions of dollars in value from the generating facilities," Roger Peters, PG&E general counsel and senior vice president, said in a statement.

PG&E said it held up its end of the bargain struck by utilities and the state under the deregulation law by, among other things, selling most of its generation assets.

The remaining assets--mainly a network of hydroelectric facilities and the Diablo Canyon Nuclear Plant--were valued at $4.1 billion by the company in December 2000.

Under the deregulation law, the company said, that valuation should have triggered a shift from regulation by the state Public Utilities Commission to FERC, where it could have received a higher price.

Instead, AB 6X was passed by the Legislature and signed by the governor last January. The company took no position on the bill. At the time, PG&E was purchasing much of the power for more than it could charge its customers and was falling into debt.

The claim came just a week after the state attorney general sued PG&E's parent, PG&E Corp., alleging that it siphoned off billions of dollars from the utility. The state and PG&E also are fighting in federal Bankruptcy Court, where PG&E has proposed a reorganization plan that would preempt many state laws.

The state PUC called the claim a "frivolous act of desperation" and an attorney general's office spokeswoman said, "This looks like another PG&E ploy to escape state regulatory oversight."

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