PG&E Corp. CEO Robert Glynn told financial analysts Wednesday that he sees “much more certainty” for his company today than there was a year earlier. He envisions 2002 as a year in which PG&E’s major utility subsidiary clears bankruptcy, some assets are sold and the regulatory climate stabilizes even if market volatility does not.

Speaking at the Morgan Stanley Global Electricity and Energy Conference in San Francisco, Glynn noted that there still are major unknowns this year and the company is conservatively forecasting about the same level of earnings overall. He said the ongoing Chapter 11 bankruptcy proceedings of Pacific Gas and Electric Co. are not being used as a long-planned attempt by the holding company to “flee state regulation” as it is being accused of doing by California Public Utilities Commission, which is promoting an alternative reorganization plan in the federal bankruptcy court.

“Disaggregation” of the utility — breaking off its electric generation/transmission and natural gas pipeline transmission/storage assets into three wholesale, nonutility companies — is not “the starting point for our plans, it is the result,” said Glynn. The starting point was three-pronged: (1) a need to pay off all valid creditor claims; (2) regain investment-grade financial ratings; and (3) avoid having to increase utility customers’ retail rates, he said. Only the utility’s plan will do that, he reiterated.

“Our plan has continued to move forward and gather momentum” and is expected to be approved by the bankruptcy court by the end of this year, said Glynn, despite the fact that the court earlier this year refused to agree with the utility that federal law automatically preempted any state laws counter to the proposed bankruptcy reorganization plan.

In addition to moving all of the nondistribution utility assets to three separate new wholesale companies under the PG&E Corp. structure, Glynn said the plan anticipates some $250 million in asset sales as part of proceeds — along with substantial refinancing — used to pay off creditors.

In the meantime, the company’s utility will be involved in court-directed mediation sessions this month, with the CPUC and creditors’ committee, but Glynn said he is not optimistic that any settlements can be reached because the “same people will be talking about the same issues.” Nevertheless, he said the company is approaching the talks in “good faith.”

Despite the heavy focus and time commitments to the utility bankruptcy proceedings, Glynn said the vast bulk of the 20,000 employees are focused on operating the company’s businesses and they have been operating them quite well with 19% increases in overall and utility net income for last year, compared to 2000. “The results are very solid and have out-performed the forecasts by a wide margin,” Glynn said.

The PG&E National Energy Group (NEG), its power plant building/operations, interstate natural gas pipelines, and energy trading units, has regained its investment grade ratings (for the group overall, the pipelines and the trading unit) after being severely limited last year because of the spill over from the utility bankruptcy. All of its power plants now under construction will be continued on schedule, Glynn said, but others will be delayed.

About 7,700 MW will come on line in the next two years, joining an existing 7,100 MW in operation to give PG&E’s nonutility power plant operations about 15,000 MW in service by the end of 2003. However, without the credit squeeze and the downturn in energy prices, Glynn said PG&E would have been looking to have about 25,000 MW a few years from now.

In response to a question about the future “regulatory environment” from one of the analysts in attendance, Glynn said there is going to be more comprehensive federal-level wholesale regulation, and increased emphasis on “regional energy flows.” Given that California is “extremely dependent” on surrounding states, Glynn sees more “federalizing” in the regulatory process, particularly given the U.S. Supreme Court decision earlier this week.

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