SAN FRANCISCO, Jan. 10 (UPI) -- California's attorney general filed suit on Thursday against PG&E Corp., alleging the San Francisco-based company engaged in illegal, unfair and fraudulent business practices that drove its utility subsidiary Pacific Gas and Electric Co. into bankruptcy.
The civil suit, filed in San Francisco Superior Court, seeks damages of between $600 million to $4 billion.
State Attorney General Bill Lockyer charged that PG&E "drained the assets of its California utility and put billions of dollars into unregulated affiliates in order to achieve its ultimate objective of becoming one of the largest unregulated power generating companies in the nation."
PG&E called the lawsuit "unwarranted, discriminatory and harmful to California."
In November 1996, the California Public Utilities Commission allowed the state-regulated utility to restructure into a holding company with utility and non-utility activities subject to 22 conditions aimed at protecting ratepayers from the potential risks and abuses of a holding company structure.
The conditions included: protections against non-utility activities being subsidized by PG&E ratepayers; requiring the PG&E board of directors to handle dividends as though PG&E were a stand-alone utility company; and giving "first priority" to the capital needs of the PG&E utility by infusing necessary operating funds if the utility experienced financial distress.
"PG&E Corp. has been engaging in unfair and deceptive practices," Lockyer said. "The corporation deliberately failed to disclose its true intentions and misled the California Public Utilities Commission to gain approval of its holding company structure."
Lockyer said from 1997 through the summer of 2000, PG&E provided over $4.6 billion in cash to its parent corporations Even as the California utility sank into financial difficulties, PG&E Corp. continued to collect payments from the utility without infusing needed capital, he said.
Pacific Gas and Electric, the state's largest utility, sought federal bankruptcy protection in April 2001. The company serves about 13 million people in Northern and Central California.
In a statement released Thursday, the company said: "These transactions cited by the Attorney General; have been thoroughly reviewed and audited multiple times, with no findings that the transactions were anything but entirely appropriate and legal. In fact, PG&E Corp.'s holding company structure was developed under the close supervision of the CPUC and in strict accordance with its rules and regulations."
PG&E Corp. said it would "defend this action in court and expects to prevail on the merits."
Shares of PG&E closed down 4 cents, or 0.20 percent, Thursday to $19.48 on moderate volume of 1.5 million shares traded on the New York Stock Exchange.