Pacific Gas and Electric Co., San Francisco, got permission last Wednesday from a federal district court to appeal an earlier decision by the judge in its 15-month-old Chapter 11 bankruptcy proceedings. The decision says the utility’s proposed reorganization plan may not preempt 36 California state laws applying to its business as a regulated utility.

U.S. District Judge Vaughn Walker ruled that the PG&E utility could challenge Bankruptcy Judge Dennis Montali’s earlier ruling on the federal preemption issue. Walker set a hearing on the PG&E appeal for Aug. 14.

In the meantime, creditors in the $13 billion bankruptcy proceeding are voting on competing reorganization plans for the utility — one from PG&E that would split up the utility into a state regulated distribution company and three federally regulated new companies consisting of the utility’s current in-state power generation, power transmission, and natural gas storage/transmission pipeline assets; and an alternative plan from state regulators that would keep the current utility assets as one entity.

A number of California laws specifically prohibit the utility from being broken up, but PG&E has argued that in this case federal bankruptcy law automatically overrides the state laws. Montali earlier in the Chapter 11 proceedings had ruled that the federal preemption was not automatic and encouraged the utility to appeal the ruling, which it did.

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