In an initial ruling that has potential wide-ranging impact on San Francisco-based Pacific Gas and Electric Co. and the state’s other major private-sector utilities, a California district appeals court Friday upheld the right of the California Public Utilities Commission to probe into the transfer of funds back and forth between utility holding companies and their utility subsidiaries.

At issue if whether PG&E Corp. and other utility parent companies siphoned off billions of dollars in the months before the state’s 2000-2001 energy crisis.

The appeals court refused to drop PG&E and other utility parent companies from the ongoing CPUC investigation, but it also did not rule on the question of whether PG&E Corp. violated any rules regarding its obligation to give first priority in allocating capital to it utility company, nor whether the state regulatory commission has authority to enforce these rules against the holding companies.

Separately, in a case filed in January 2002, California’s Attorney General Bill Lockyer filed a lawsuit against PG&E seeking at least $500 million in civil penalties for what he alleges is the siphoning off of $5 billion by the holding company from the PG&E utility in 2000 before the full force of the crisis had hit. In April 2001, the PG&E utility filed for Chapter 11 bankruptcy, from which it just emerged last month.

In news reports in the Sacramento Bee over the weekend, the PG&E spokesperson called the state appeals court ruling “procedural,” while reiterating that the parent company maintains that it has complied with all applicable laws and regulations related to its relations with the utility. A spokesperson for the attorney general’s office said the latest court ruling upholding the CPUC right to investigate may has some “indirect beneficial effects” on the outstanding lawsuit by the attorney general.

Meanwhile, a CPUC spokesperson told the Bee that the state regulators’ investigation remains open, and Friday’s court decision should set “an excellent precedent” regarding CPUC authority over nonutility affiliates’ whose activities directly impact state regulatory functions.

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