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Jefferies Cuts Rating on PG&E Corp After Commission Decision on Power Rate Increases

Jefferies Analyst Paul Fremont lowered his investment rating on beleaguered California utility PG&E Corp. (PCG) after the California Public Utilities Commission's interim order granting an emergency rate increase. The stock tumbled 6-3/16, or 36.4%, to 10-13/16.

Fremont said the interim rate increase of $10 per megawatt-hour granted by the commission is not sufficient for the companies to fund ongoing power purchases.

He said that if the draft order is adopted, the utilities have stated that lenders will refuse to extend additional credit. He also said the companies do not have sufficient cash to fund ongoing purchases based on today's prices.

California utilities are in a crisis because they have not been able to charge retail customers for power as much as they must pay for it wholesale in a wrinkle brought on by deregulation.

Fremont speculated the companies could run out of cash within next several weeks. If PG&E were to file for bankruptcy, shares would likely trade in the $5 range.

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