U.S. Bankruptcy Judge Dennis Montali has denied Pacific Gas & Electric Co.’s request for a summary judgment against the alternative reorganization plan proposed by the California Public Utility Commission.

In a ruling on Monday, the judge decided to continue the current hearings on the regulatory proposal, which would keep the utility intact rather than break it up into several mainly federally regulated parts, as PG&E proposes.

PG&E had contended the CPUC plan was not financially sound and violated state law. The judge’s decision means the commission’s plan to get California’s biggest utility back on its feet is still alive, along with PG&E’s own reorganization bid, which calls for breaking off the wholesale power and natural gas operations into three separate federally regulated companies and leaving the utility as a distribution power-gas company.

The CPUC would use a combination of more than $7 billion in restructured debt and more than $1 billion in the sale of new stock in the utility company to pay off creditors and get the resulting utility back to investment-grade credit standing.

In denying the utility motion, Judge Montali emphasized that he was not deciding the “feasibility or confirmability” of the CPUC’s plan at this point in the hearing, which is in the second week of a “confirmation,” or trial, phase that is expected to last through January next year. The judge also indicated the CPUC’s plan does not violate California law because the regulatory commission has the legal standing to do what is necessary to regulate the state’s utilities.

The next step in the hearing is PG&E’s presentation of its own plan. Earnings for next year are projected to drop — in the $1.40-$1.60/share range — from what is still being projected for this year ($1.80-$1.90/share), Bryson said.

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