The U.S. bankruptcy judge in Pacific Gas and Electric Co.’s 14-month-old Chapter 11 case has moved lawsuits against the giant utility and its parent, PG&E Corp., out of the federal court, saying they should be dealt with in California’s state Superior Court system. The utility had tried to move suits by the state attorney general into the bankruptcy court, arguing that they impact its plans to get out of bankruptcy.

California Attorney General Bill Lockyer earlier in the year filed a multi-billion-dollar lawsuit against the parent company, alleging it had siphoned off billions of dollars from the utility, forcing it into its April 6, 2001 Chapter 11 filing in a San Francisco federal court. A suit filed in January by the attorney general asks for $4 billion in damages from PG&E Corp., and a second suit by the city of San Francisco asks for $5 billion for repayment to consumers who have had to pay a 40% rate increase since mid-2001 to bail out the utility from the wholesale price/supply crisis from 2000-2001.

Judge Dennis Montali ruled last Monday that the main thrust of the state attorney general’s and the city’s suits belong in state court, although he said some of the claims against the PG&E utility can remain in the bankruptcy court. No schedule for the cases has been set as yet, the state attorney general’s office said.

The lawsuits essentially claim that PG&E Corp. violated its agreement with state regulators to maintain the financial health of the utility. PG&E has strongly denied the allegations, making countercharges that the state and city were attempting to “obstruct” the utility’s proposed reorganization plan to get out of bankruptcy. That plan, along with a competing one from the California Public Utilities Commission, was circulated among the PG&E utility’s thousands of creditors this week to vote on one or both plans.

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