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Power Company Credit Rating “Damaging”

A report by Standard-and-Poor´s questions state regulators´ plan for Pacific Gas and Electric Co.´s bankruptcy reorganization – saying it would leave the utility with a junk-level credit rating.

P G and E officials say the credit assessment is highly damaging to the state Public Utilities Commission´s proposal, a rival to PG and E´s own reorganization plan.

A federal bankruptcy judge began hearing arguments for the competing plans this week. The report found that a majority of the commission´s proposed financing — $7.8 billion in senior secured debt — would be marginal investment grade. But the analysts say about $1 billion in senior unsecured debt and more than $900-million in preferred stock would not reach that level.

Standard-and-Poor´s examined P G and E´s plan last year and found that its major components would have investment-grade ratings if certain conditions were met.

The P G and E plan is more likely to lead to higher rates for consumers. It would transfer the utility´s power plants and transmission systems to new companies under federal oversight and borrow against the assets to pay creditors.