Calling it a “major victory,” California Attorney General Bill Lockyer Tuesday lauded a decision by the U.S. Ninth Circuit Court of Appeals that revives the attorney general’s claim for restitution of up to $5 billion from PG&E Corp., the holding company for Pacific Gas and Electric Co., which emerged in April 2004 from three years of Chapter 11 bankruptcy court proceedings.

“Today’s ruling reversed a ruling by U.S. District Court Judge Vaughn Walker, who determined that the civil penalty and injunctive relief parts of the AG’s lawsuit could proceed in state court but the restitution of the claim could not because of PG&E utility’s status at the time under Chapter 11 protection,” a spokesperson for Lockyer said.

The 9th Circuit did not agree, ruling that the legal action by the AG constituted the state exercising its “police and regulatory powers,” which cannot be removed and supplanted by bankruptcy court.

“It is absolutely important to recognize that the court’s ruling doesn’t change any facts and does not rule on the merits of the case,” said a PG&E spokesperson. “Our position, which has been verified by several subsequent state legislative and regulatory investigations, is that we were in complete compliance governing relations between a parent company and utility. We feel very strongly there is absolutely no merit to the state attorney general’s claims.”

In the aftermath of the 2000-2001 wholesale energy crisis, one of the first legal actions by the AG and the local government in San Francisco was to challenge the legality of the PG&E utility holding company allegedly moving up to $5 billion of cash from the utility to the holding company prior to the utility’s Chapter 11 filing in April 2001. The company has long maintained it did nothing wrong, but the AG argued it violated the terms of an order by California Public Utilities Commission that granted PG&E holding company status.

“The restitution claim now will be decided by San Francisco Superior Court Judge Richard Kramer, who is presiding over the civil penalty and injunctive relief proceedings,” said Tom Dresslar, the AG’s spokesperson, who was not aware where the case stood currently. “Once he proves PG&E Corp. is liable for restitution, Lockyer will argue that the $4 billion to $5 billion should accrue to the benefit of the utility’s ratepayers.”

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