With the assumption that the governor will sign the bill into law, California’s state Senate Monday unanimously okayed a final bailout for Pacific Gas and Electric Co.’s emergence from Chapter 11 bankruptcy with a law authorizing the utility to refinance part of its debt backed by a retail utility rate revenue stream. The so-called “dedicated rate component” is estimated to lower the overall cost of the PG&E utility’s financial reorganization by about $1 billion.

Backed by a rare coalition, including the California Public Utilities Commission, The Utility Reform Network (TURN) consumer watchdog group and the utility company, the legislation (SB 772) goes to Gov. Arnold Schwarzenegger, who is expected to sign it.

The utility and CPUC immediately lauded the legislature for its work. The bonds will be sold later this year or early next year, depending on the timing for approvals from the Internal Revenue Service and the CPUC.

“SB 772 will save PG&E utility ratepayers roughly $1 billion. This will not only benefit ratepayers, but will also have a positive impact on California’s economy overall,” said CPUC President Michael Peevey. “TURN was instrumental in developing the dedicated rate concept, and they should be commended for their work on behalf of consumers.”

The CPUC said the bill was passed on a “strong, nonpartisan” 33-0 vote on Monday.

The lower house state Assembly passed the measure on a 66-1 vote earlier in the month. The munis’ Sacramento-based association continued to oppose the bill, claiming it would restrict their ability to expand into new areas within’s the PG&E utility’s service area.

A utility lobbyist and state legislators backing SB 772 said the legislation has been revised to leave it to the California Public Utilities Commission to determine if a surcharge to payoff the utility refinancing bonds would apply to customers being annexed into existing or new municipal utilities.

In a letter to the state lawmakers last week, CPUC Commissioner Susan Kennedy assured them that the state regulatory commission would give the California Municipal Utility Association’s concerns “a fair hearing” and the munis will be able to “fully participate” in the CPUC proceedings later this year that would lead up to refinancing bonds being sold that could cut the overall nine-year bankruptcy recovery costs by about $1 billion.

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