The landmark bankruptcy of California’s biggest utility company reverberated here and hit Wall Street financiers – but isn’t likely to affect our utilities.
Pacific Gas & Electric’s utility unit became the first big financial victim of the West Coast’s energy crisis when it filed for bankruptcy protection late yesterday after skyrocketing losses from delivering electricity without being able to collect higher prices for it.
The financial collapse of the big utility left major banks and financial services firms scrambling to assess their chances of losses in the bankruptcy case.
PG&E said it owes $18.4 billion – about $14 billion of it for soaring wholesale gas and oil – and has assets of $24.18 billion.
More than 500 major investors hold the utility’s debt securities, including Bank of America, which fell $2.72 to $49.13, or 5.3 percent, after recently arranging $2.15 billion in loans for PG&E. PG&E’s stock sank to a new low of $7.20, down $4.18. It’s lost two-thirds of its value since last autumn.
Experts say California’s energy crisis isn’t expected to spread to New York because our regulation model is much different. Here, utilities are allowed to pass on the soaring costs for wholesale gas and electricity to consumers. Politicians in California have taken much of the blame for the crisis after they de-regulated the energy industry without setting up a way for utilities to pass along cost hikes to consumers.
“I don’t see this kind of thing happening here,” said Bob Mahoney, a spokesman for Keyspan Energy. “New York is completely different from California and we’re regulated differently.”
He did say that the New York metropolitan area could face some possible brownouts this summer if the New York Power Authority isn’t able to finish building 11 new, gas-fueled generators in the area by then – five in New York’s boroughs.