PG&E Employees Get Bonuses Just Ahead of Chapter 11

Defending its actions, a spokesman for the utility argued that the incentive and bonus pay for 6,000 managers and other employees was part of employees? overall compensation packages and was lower than usual, due to the financial crisis.

In addition, top management was not eligible for annual bonuses this year, although some did receive merit-based cost-of-living pay increases.

California’s largest utility filed for bankruptcy on Friday, citing debts of $9 billion due to California?s 1996 power deregulation plan, which prevents the utility from passing higher costs through to customers.

In Court

The US Bankruptcy Court for the Northern District of California authorized the utility to use certain bank accounts and cash management systems to compensate employees and to continue to fulfill post-bankruptcy filing obligations to creditors.

Tension between the utility and California Governor Gray Davis rose this weekend with the governor accusing PG&E?s management of “denial and greed”, and the utility arguing that Davis should focus his attention on the state?s energy crisis instead of launching “a campaign-style attack,”

Although a rate hike of almost 40% was awarded to utilities in March, this did not cover some $4.1 billion that PG&E had spent on earlier power purchases, according to the utility.

The governor had outlined a proposal last week that would have provided funds for the utility on condition that it sell its transmission system to the state and provide regulated power for 10 years.

By handing the matter over to the courts, the parent company has the chance to argue for a better deal, analysts say.

Still, the stock fell 37% on Friday and questions about whether a bankruptcy judge has the authority to order rate hikes for PG&E?s13 million customers, remain.

Camilla Klein                           editors@plansponsor.com