CS First Boston Trims PG&E to Hold

Analyst Paul Patterson says the risk of bankruptcy for the utility may be increased despite California's power rate hike

CS First Boston downgraded PG&E Corp. (PCG ) to hold from buy.

Analyst Paul Patterson says last week the California Public Utilities Commission increased the qualifying facility pricing by $0.03 per kWh. He says the announcement heightens concerns about the effectiveness of a price increase. Patterson notes that according to PG&E, a rate hike may be insufficient to allow recovery of its going-forward procurement costs. In addition, he says the Commission's recent order does not address the recovery of past power undercollections.

He doesn't think there will be much legislative support for efforts to resolve utilities' financial difficulty, and says the risk of bankruptcy for PG&E has not diminished, rather, it may be increased.

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