EDITORS: Please do not use
"Pacific Gas and Electric" or "PG&E" when
referring to PG&E Corporation or its National Energy Group.
The PG&E National Energy Group is not the same company as Pacific
Gas and Electric Company, the utility, and is not regulated by the
California Public Utilities Commission. Customers of Pacific Gas
and Electric Company do not have to buy products or services from
the National Energy Group in order to continue to receive quality
regulated services from Pacific Gas and Electric Company.
AND UTILITY SUBSIDIARY WILL NOT MAKE CERTAIN PAYMENTS IN ORDER TO
(San Francisco, CA) - PG&E
Corporation (NYSE: PCG) today reported that the Corporation and
its utility subsidiary, Pacific Gas and Electric Company, will not
make payments of commercial paper obligations due this week nor
will upcoming scheduled payments be made to power generators in
excess of the revenues received from customers. These circumstances
were precipitated by the downgrade of both entities' credit ratings
by Standard & Poor's and Moody's and the resulting defaults that
the downgrades caused under the entities' financing arrangements.
PG&E stated that it is focused
on conserving the nearly depleted cash reserves at both the holding
company and the utility in an effort to continue meeting critical
operational expenses, including employee payroll, payments to trade
vendors, and normal payments to natural gas suppliers.
Standard & Poor's provided
the following reasons, among others, for its downgrade:
"Some of the Pacific
Gas and Electric's principal trade creditors are demanding that
sizeable cash payments be made as a precondition to the purchase
of commodities necessary for ongoing business operations;
nor negotiated solutions to the state's utilities' financial
meltdown appear to be forthcoming in a timely manner, which
continues to impede access to financial markets for the working
capital needed to avoided insolvency; and
Edison Co.'s decision to default on its obligation to pay principal
and interest due on January 16, 2001 diminishes the prospects
for the Pacific Gas and Electric's access to capital markets."
Among other things,
the downgrades constitute a default under the utility's $850 million
revolving credit facility and entitle the banks to refuse a loan
request under this facility. The default also precludes PG&E Corporation
from making further draws under its facilities, including further
draws to repay maturing commercial paper. PG&E Corporation has $501
million of commercial paper outstanding, of which $263 million will
mature by January 31, 2001.
"We are taking these steps
reluctantly," said PG&E Corporation Chairman, CEO and President
Robert D. Glynn, Jr. "But it is critical that we extend our existing
cash reserves in order to meet the basic expenses that are essential
to providing safe and reliable services to customers."
Upcoming payments to power
generators include $583 million due to the California Independent
System Operator on February 1 for real-time energy purchases, and
an estimated payment of more than $100 million to the California
Power Exchange due February 15. Another payment to the ISO, of approximately
$1.2 billion, will come due on March 2. The utility also has payments
of $420 million due to qualifying generators (QF's) in early February
2001 and estimated payments of $410 million due to these QF's in
early March 2001. These amounts far exceed the utility's current
cash reserves of $700 million. PG&E Corporation currently has cash
reserves of approximately $347 million.