The U.S. Supreme Court Monday rejected a filing by PG&E Corp., clearing the way for the California attorney general’s lawsuit to proceed in a state Superior Court in San Francisco regarding allegations the holding company for Pacific Gas and Electric Co. illegally confiscated $5 billion from the utility prior to utility’s filing for Chapter 11 bankruptcy in April 2001. The High Court refused to consider the PG&E arguments that the state attorney general could only press the case through the U.S. bankruptcy court process.

PG&E said the ruling doesn’t change anything regarding the lawsuits merits, noting that reviews of the disputed transactions by a California state Senate special investigative committee and an audit by the California Public Utilities Commission (CPUC) both indicated what was done was “perfectly proper and legal,” according to a PG&E Corp. spokesperson.

Attorney General Bill Lockyer is now free to press the full case, but that case is still in the very preliminary stages of the parties trying to work out a final discovery plan for the case, a spokesperson in Lockyer’s office told NGI. “We still have a long way to go.”

The attorney general’s case contends that PG&E violated California’s unfair competition law by accumulating monies from the utility during the state’s 2000-2001 energy crisis while the utility was losing billions of dollars that eventually forced it to file for Chapter 11 protection. The lawsuit seeks to have the money refunded to customers.

Earlier the U.S. 9th Circuit Court of Appeals in San Francisco ruled the case should proceed in Superior Court, based on what it said was an exception in federal bankruptcy law that allows government agencies to press cases under their “police or regulatory powers.” PG&E challenged this with its filing to the U.S. Supreme Court.

PG&E’s utility eventually emerged from Chapter 11 in April 2004 after a settlement with the CPUC was reached in mid-2003, resulting in the utility paying creditors about $10.2 billion with a combination of customer payments and funds raised from bond sales.

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