The utility, Pacific Gas & Electric, provides natural gas and electric service across 70,000 square miles of Northern and Central California. It has more than 20,00 employees.

"The regulatory and political processes have failed us, and now we are turning to the court," Robert D. Glynn Jr., chairman of corporate parent PG&E Corp., said in a statement announcing the bankruptcy filing. "We expect the court will provide the venue needed to reach a solution, which thus far the state and the state's regulators have been unable to achieve."

The announcement caught many state officials by surprise. Just last night, in a speech televised across California and other parts of the West, Democratic Gov. Gray Davis for the first time publicly retreated from his promise to avoid hiking rates. Instead, he said sharp increases are needed to keep electricity flowing to homes and businesses.

Barely a week ago, the rate-setting California Public Utilities Commission cast aside pleas from many consumer and business groups and instead approved a dramatic increase of up to 46% in the electricity bills paid by 26 million Californians. Officials at PG&E—like those at Southern California's biggest utility, Southern California Edison—indicated at the time that even rate hikes of that magnitude might not be enough for them to solve their financial woes.

The impact of PG&E's bankruptcy filing on its 13 million customers won't be known for days, or possibly even weeks. However, some experts hope it will be minimal: Bankruptcy proceedings allow a company to continue operating while it tries to reorganize its debt.

The utility's bondholders, lenders and other creditors will likely suffer. Trading in PG&E securities was halted on the New York Stock Exchange before the bankruptcy filing was announced. Its stock last traded $11.36, down 2 cents a share.

The first creditors meeting is scheduled for May 8.