California power company files for bankruptcy

The Pacific Gas and Electric Company, California's largest investor-owned utility, has filed for bankruptcy protection.

It also criticised politicians and regulators for not acting quickly enough to resolve the energy crisis that has caused periodic blackouts and is costing the state billions of dollars.

The utility hopes to have more success in court in trying to win relief from £6.2bn in wholesale energy debt it says it has incurred since prices began soaring last May.

The step shifts decision-making about crucial aspects of the situation from officials in Sacramento, the state capital, to a federal bankruptcy court in San Francisco, where Pacific Gas and Electric is based.

Politicians and regulators have been loath to bail out Pacific Gas and Electric or Southern California Edison. The New York Times reports flawed state deregulation meant they could not pass on rising costs of their debt on to consumers.

For months, the two utilities had complained they were running out of cash and had demanded rates be increased to cover their costs.

Only this week, Governor Gray Davis reversed his stand against electricity rate increases, acknowledging that consumers would have to pay more.

Robert D. Glynn Jr, chairman of Pacific Gas and Electricty, said the bankruptcy filing would not affect customer service.

Governor Davis said: "This action was unnecessary. They've caused undue alarm. PG&E was not pushed into bankruptcy, but plunged themselves into bankruptcy for their own strategic advantage - not the best interests of the people of California."