Do Everything Possible To Avoid Utility Bankruptcies? Maybe Not
So far in the energy crisis, all of the talk has been about avoiding a scenario that would force one or more of the state’s big utilities into bankruptcy. But there are some suggestions that a Chapter 11 reorganization might be the best way to deal with the billions of dollars in energy bills that have already been incurred by the utilities. Indeed, bankruptcy lawyer Jeffrey Reisner in the Newport Beach office of Irell & Manella said he thinks “there’s a good chance” the crisis will land before a judge. He said several parties have already contacted his firm about possibly representing their interests: “We’ve heard from governmental entities, from bondholders both secured and unsecured and from (power) producers.” Reisner said a bankruptcy court might be able to free the parties from strictures of the Public Utilities Commission in hammering out a compromise. Mitch Wilk, a Bay area energy consultant and a former PUC commissioner (1986 to 1991), described Chapter 11as a dreadful option but, said it could occur if parties get desperate,if utilities, for example, conclude the state’s terms are as confiscatory as a Chapter 7 (liquidation), or if producers decide it’s their best chance to get paid. Others suggest only a court is insulated enough from political pressures to divine a settlement that spreads the pain,a hit to the utilities’ balance sheets, a state subsidy, discounted payments to producers and, perhaps most significantly, rate hikes over Gray Davis’ protestations. The Insider notes that the power producers have already signaled that they’re aware the sky-high revenue they’ve been booking might not all materialize: In their earnings statements last week, they said they have begun reserving against possible shortfalls from California Cal State Fullerton econ prof and power-producer consultant Robert Michaels on what went wrong with California’s “deregulated” electrical system: “The monopolists (utilities) and the regulators designed how a competitive market should work” Il Fornaio in Irvine is still under Frank Licata’s fine management, but ownership is changing. The local restaurant and the rest of Larry Mindel’s Bay Area-based chain will soon be part of Bruckmann, Rosser, Sherrill & Co., a New York investment firm that has been lapping up California eateries in recent months (California Pizza Kitchen, El Torito, Acapulco and Laguna Beach’s Las Brisas). Bruckmann is paying $81 million cash for the publicly held Il Fornaio.
