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BANKRUPTCY JUDGE GRANTS MOTION ON "PRE-PETITION OBLIGATIONS TO EMPLOYEES"

U.S. Bankruptcy Judge Dennis Montali on April 6 granted a motion by PG&E that it be allowed to pay regular "pre-petition" employee wages and benefits. The judge's action authorized PG&E to meet its payroll obligations incurred prior to the filing of bankruptcy. It is not yet clear what action may be needed on the judge's part to authorize PG&E to meet its payroll obligations in the future. Based on the language in this motion, however, it appears to be PG&E's intent to retain its workforce and continue providing service.

The special motion was needed because when bankruptcy is filed, there is an automatic stay on payments for expenses incurred prior to the filing of the petition. The judge ruled that it was OK for PG&E to pay employees for wages and benefits earned in the period immediately preceding the Chapter 11 filing.

PG&E is considered a "debtor in possession," meaning a debtor in possession of its assets. Because of this status, employees are to be paid in the future just as in the past, in the ordinary manner. Obviously there may be new twists and turns on this issue of compensation as the bankruptcy process unfolds, but for now it appears that the status quo will be maintained in terms of wages and benefits.

PG&E's motion on the first day of the bankruptcy proceeding stated, in part:

"The Debtor [PG&E] does not seek to liquidate its operations. Rather, [PG&E] seeks to avail itself of the protection and flexibility provided by the bankruptcy laws to weather the current regulatory impasse. In order to keep the lights on, however, [PG&E] must retain its current work force. [PG&E] therefore seeks this Court's permission to honor its pre-petition obligations to its employees in order to prevent employee defection and to implement a seamless transition.

"This Court should allow [PG&E] to pay pre-petition employee compensation and benefits because: (1) the bulk of the payments are entitled to priority...and will be paid eventually under any plan of reorganization; and (2) public health and safety depend upon a steady supply of electricity and gas, requiring that this Court exercise its equitable powers to authorize immediate payment to the employees needed to provide uninterrupted power."

In its introduction to this motion, PG&E strongly indicated its intent to continue current operations. An excerpt:

"A Chapter 11 reorganization will allow [PG&E] the flexibility it needs to deal with this extraordinary liquidity crisis. [PG&E] anticipates that it will be able to emerge from this reorganization with largely the same organizational structure. It is crucially important, therefore, that [PG&E] retain its current trained, qualified and experienced work force. Absent authorization from this Court to pay regular pre-petition employee wages and benefits, the Debtor may lose personnel necessary to a seamless transition and the continued provision of essential utility services to its residential and business customers."

Local 1245 members were represented at this "first day" hearing in PG&E's bankruptcy case on April 6 by Gray, Cary, Ware, and Freidenrich, a leading bankruptcy law firm. Also attending was Marc Joseph of Adams, Broadwell & Joseph, the law firm representing Local 1245 in regulatory affairs.

PG&E IS LARGEST UTILITY BANKRUPTCY FILING

PG&E's bankruptcy filing is the third largest bankruptcy case in the United States since the Bankruptcy Reform Act of 1978. Among utilities, it is the largest bankruptcy filing. Two other major utilities have filed for bankruptcy in recent decades: Public Service Co. of New Hampshire and El Paso Electric Co.

BURTON CALLS FOR PLANT SEIZURES

John Burton, president pro tem of the California Senate, called on Gov. Davis Saturday to combat unregulated power generators by seizing some of their power plants. Seizing plants, he said, would send a message that the state is tired of being "ripped off" by private generators. "They've got us by the throat and they're showing no ... mercy," Burton said. "They're making more money than God."

SACRAMENTO BEE Q&A ON BANKRUPTCY

You may want to check out a Q & A piece on bankruptcy that appeared in the Sacramento Bee on April 8.

Electric Sales and Revenue 1999 Executive Summary

Media Coverage of California's Restructuring Woes

Read what we told the Department of Energy last year.

Status of Deregulation. Department of Energy's Web site.

AFL-CIO Executive Council Statement February 17, 1999

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