10,000 creditors seek PG&E billions

Confidential list reveals each vendor's claim

David Lazarus, Chronicle Staff Writer Thursday, April 26, 2001 ©2001 San Francisco Chronicle

URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/26/MN229624.DTL

The plight of PG&E's vast array of business partners, many of which are owed millions of dollars, is made painfully clear in a confidential list of creditors now being compiled for the utility's bankruptcy proceedings.

A copy of the list, obtained by The Chronicle, illustrates the impact of the third largest bankruptcy in U.S. history on PG&E's thousands of vendors.

This also is the first time the monetary value is being revealed for each Pacific Gas and Electric Co. contract.

"It's going to be a cat fight," said Cathy Moran, a Mountain View bankruptcy attorney. "They'll be fighting over a limited pot of money, and each party will be seeking preferential treatment."

The $9 billion owed by the utility to its more than 10,000 creditors constitutes the largest-ever bankruptcy involving a utility. The need to keep California's lights on adds a virtually unprecedented level of complexity to the proceedings.

Companies on the creditor list run the gamut from huge to tiny. IBM Corp. and Pacific Bell are joined by the likes of Pete's Auto Body Shop in Merced and Sponges Car Wash in San Ramon.

"We provide gas and electricity to 13 million people," said Ron Low, a PG&E spokesman. "Behind all the poles and wires are thousands of employees and the thousands of vendors who support them."

He said every department at the utility had spent weeks pulling together information for the creditor list, to be submitted to Bankruptcy Judge Dennis Montali by mid-May.

'REPAY ALL OUR CREDITORS'

"We've had to look at all the contracts we have with companies and individuals," Low said. "It is our intention to repay all our creditors."

Whether the various creditors receive all, some or none of the cash owed them will be determined once a reorganization plan is worked out, perhaps years down the road.

The Bankruptcy Court will contact all PG&E creditors and invite them to submit what is known as a "proof of claim" -- evidence that the creditor indeed is owed money.

This is a matter taken very seriously by San Martin's Allwaste Transportation, a chemical disposal firm, which relies on PG&E for about a quarter of its total revenues.

As it happened, an Allwaste technician was pumping hazardous waste out of PG&E's Humboldt Bay power plant near Eureka at the exact same time that the utility was filing for bankruptcy protection on April 6.

Payment for that service, as with hundreds of thousands of dollars worth of other jobs, is now in limbo as a result of PG&E's bankruptcy.

'THEY STUCK WITH US'

"PG&E is very important to us," said Lee Soares, Allwaste's operations manager. "This is definitely a hit."

He added, however, that his company would stand behind the utility. "They stuck with us when we went bankrupt," Soares acknowledged.

Many of PG&E's creditors reflect the utility's core operations. For example,

the list contains numerous affiliates involved with power poles, trimming trees around electricity lines or laying pipes for natural gas transmission.

Meanwhile, other creditors speak to the nuts and bolts of running a business with 21,500 workers and far-reaching activities.

If a PG&E truck is involved in a fender-bender in the East Bay, it might be taken to The Masters body shop in Hayward, which has a contract with the utility valued at $28,800.

"We do a lot of work for them," said co-owner Jan Masters. "We'd miss the account if they stopped coming."

That hasn't happened yet. Masters said PG&E had continued bringing its vehicles to her two-person shop since the bankruptcy filing. So far, the utility has paid its bills promptly.

"They don't get the vehicle back if we don't get paid," Masters noted.

One of the most prominent creditors on PG&E's list is Hertz Equipment Rental Corp. The utility's $13 million contract makes it Hertz's single biggest corporate client in the Bay Area and one of its largest in the nation.

500 PAYMENTS DUE HERTZ

According to the creditor list, PG&E has nearly 500 payments for various equipment and vehicle rentals outstanding with Hertz. The individual transactions range in value from as much as $97,539 to as little as $1.

"We provide a lot of equipment for them, heavy construction equipment to build things," said Diana Kirby, who handles the PG&E account at Hertz's Rohnert Park headquarters. "Basically, they couldn't afford to purchase all the items they rent from us.

"Their filing for bankruptcy will have a large impact on us," she added. "But we'll weather the storm. What else can we do?"

That's the dilemma facing all PG&E creditors, large and small. A select committee of the utility's largest creditors will seek to represent other vendors during the bankruptcy proceedings.

In typical Chapter 11 cases, this arrangement tends to work smoothly for all concerned. But in a case as sprawling and complicated as PG&E's reorganization, there is a possibility that the interests of smaller creditors can get lost in the shuffle.

The bankruptcy judge could seek to simplify things by addressing the claims of PG&E's smaller creditors first, thus reducing the size of the playing field when the big guys begin duking it out.

"This case is going to write its own rules," predicted Moran, the bankruptcy lawyer. "You've got a very large number of dollars and the public interest involved."

STRANGE BEDFELLOWS You also have a situation in which PG&E's financial demise has made bedfellows of companies and individuals that might otherwise have never crossed paths.

Xerox Corp. now stands arm-in-arm with Hayward's A-1 Septic Tank Service. Enterprise Rent-A-Car is a comrade of Modesto's Jack Frost Ice Service.

Hewlett-Packard Co. in Palo Alto has more than 40 claims outstanding for computer services ranging in value from $22 to $72,583. But the company already is looking ahead to new deals.

"PG&E has been a good customer," said Randy Lane, an H P spokesman. "We would expect that, after the proceedings are done, they'll continue to be a good customer."

On the other hand, freelance photographer Steve Castillo in Menlo Park has a contract with PG&E valued at $25,000 to shoot pictures for the utility's in- house newsletter. That was when times were good.

"I assume I'm not going to get any more calls from them," Castillo said.

-------------------------------------------------------------------------------- Top 10 PG&E creditors Bank of New York ($2.2 billion)

California Power

Exchange ($1.9 billion)

Bankers Trust Co. ($1.3 billion)

California Independent System Operator ($1.1 billion)

Bank of America ($938 million)

U.S. Bank ($310 million)

Calpine Gilroy Cogeneration ($57 million)

Calpine Greenleaf ($49 million)

Crocket Cogeneration ($48 million)

Calpine King City ($45 million)

E-mail David Lazarus at dlazarus@sfchronicle.com.

-- Martin Thompson (mthom1927@aol.com), April 26, 2001