CPUC Opens Proceeding to Consider PG&E Reorganization

October 2019 edition Produced by the CPUC’s News & Outreach Office

As Pacific Gas and Electric Company (PG&E) continues to work its way through U.S. Bankruptcy Court, the California Public Utilities Commission (CPUC) opened a formal proceeding at its Sept. 26 Voting Meeting in San Francisco to consider the ratemaking and other implications of the utility’s eventual reorganization.

PG&E and its holding company, PG&E Corp., filed voluntary bankruptcy petitions on Jan. 29, following back-to-back wildfire seasons that were the most destructive and
deadly in California history. Several of the worst blazes, including the November 2018 Camp Fire that claimed more than 80 lives in and around the Butte County town
of Paradise, were determined by CalFire to have been caused by PG&E’s electric transmission lines.

Because the CPUC is the primary state regulator of PG&E, the bankruptcy case cannot be resolved until the CPUC has reviewed and approved any proposed reorganization plan and related transactions to make sure they comply with California law. That includes the omnibus wildfire safety legislation signed in July by Gov. Gavin Newsom, Assembly Bill 1054.

Among its other provisions, that legislation calls for establishment of a Wildfire Insurance Fund to pay eligible claims to fire victims. For PG&E to participate in the fund, it must meet by no later than June 30, 2020 a number of Bankruptcy Court and regulatory determinations spelled out by the legislation.

“As we move through this reorganization, we must have a public process that informs and that allows us to consider the public’s input, as we, along with the Bankruptcy Court, work towards confirming a safe, sustainable, affordable plan of reorganization,” Commissioner Martha Guzman Aceves said of the Commission’s action Sept. 26. “Our actions today provide a critical venue for the CPUC to work with stakeholders in analyzing and appropriately responding to the PG&E plan for reorganization,” added Commissioner Genevieve Shiroma.

The proceeding that will be used to evaluate the company’s reorganization is formally known as an OII, which stands for “Order Instituting Investigation.” In voting 5-0 to approve the OII, the Commission established the scope of what it will be considering once a proposed reorganization has been put forward by the Bankruptcy Court. As spelled out in the OII, preliminary issues to be addressed will include:

1. Whether it is reasonable to approve a proposed plan of reorganization submitted by  PG&E and PG&E Corp., and any related plan amendments, or any other relevant plan of reorganization that may be submitted for the Commission’s approval, and any related
proposed settlement agreement or other documents, taking into consideration:

  • The ratemaking implications of such proposed plan and settlement agreement;
  • Whether the proposed plan and settlement agreement provide satisfactory resolution of claims for monetary fines or penalties for PG&E’s pre-petition conduct;
  • Whether to approve a governance structure for the utility, and the appropriate disposition of potential changes to PG&E’s corporate structure and authorizations to operate;
  • Whether it is reasonable and appropriate for the Commission to make any other approvals related to the confirmation and implementation of the proposed plan; and
  • Any other findings relevant for the Commission to approve a proposed settlement agreement, including whether such settlement is in the public interest.

2. Whether the Commission should make the following determinations for a Commission-approved reorganization plan and other documents resolving the insolvency proceeding:

  • PG&E’s governance structure resulting from the plan is acceptable in light of PG&E’s safety history, criminal probation, recent financial condition, and other factors deemed relevant by the Commission;
  • The plan is consistent with the state’s climate goals pursuant to the California Renewables Portfolio Standard Program and related procurement requirements of the state;
  • The plan is neutral, on average, to PG&E’s ratepayers; and
  • The plan recognizes the contributions of PG&E’s ratepayers, if any, to resolving the insolvency proceeding and compensates them accordingly through mechanisms approved by the Commission.

By launching the OII, the CPUC is not indicating whether it will approve or disapprove any proposed Plan of Reorganization that has been proposed or suggested to date. The CPUC is an active participant in PG&E’s Chapter 11 case and will continue to represent the interests of California in the Bankruptcy Court. The CPUC’s focus remains on ensuring that wildfire victims are compensated, and Northern California receives safe and reliable service at reasonable rates consistent with achieving California’s climate goals.

The OII launched by the Commission on Sept. 26 gives PG&E until Oct. 7 to respond to the OII, with a pre-hearing conference on the proceeding now scheduled for Oct. 23 in the Commission Courtroom at the agency’s headquarters at 505 Van Ness Ave. in San Francisco.

The Order voted on is available at: http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M313/K942/313942079.PDF

| outreach@cpuc.ca.go

About Kevin

Councilmember - City of Oakley, Manager of Mainframe Operations and Optimization – USS-POSCO INDUSTRIES, Co-Founder and Board Member - Friends of Oakley A Community Foundation, Commissioner - Contra Costa Transportation Authority, Board Member - Tri Delta Transit, Transplan, San Joaquin Joint Powers Authority and RD 2137, Advisory Board – Opportunity Junction
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