CPUC proposes approving PG&E’s bankruptcy plan, with a vote scheduled for May

Dive Brief:

  • A California Public Utilities Commission (CPUC) administrative law judge issued a proposed decision Monday that would approve Pacific Gas & Electric’s (PG&E) bankruptcy reorganization plan, paving the way for the utility to exit Chapter 11 bankruptcy by June 30.
  • A separate proposal from CPUC Commissioner Clifford Rechtschaffen, issued the same day, would also require PG&E to pay penalties of more than $1.9 billion related to Northern California wildfires that were sparked by the utility’s power lines. The penalty includes a $200 million fine to the state’s general fund, but PG&E’s obligation to pay that fine is “permanently suspended” to avoid reducing payouts for victims of the wildfires as per the filing.
  • The commission is set to vote on approving PG&E’s bankruptcy plan on May 21. The utility is aiming to exit bankruptcy by June 30 in order to access California’s wildfire insurance fund, created by the state legislature last year.

    Dive Insight:

    In 2019, California lawmakers passed Assembly Bill 1054, which created a $21 billion wildfire fund for catastrophic wildfires. However, PG&E has to meet certain conditions to access that fund: It needs to exit bankruptcy by June 30 and get CPUC approval of various aspects of its reorganization plan. That plan, which is also under review at Northern California bankruptcy court, includes a $25.5 billion payout to resolve PG&E’s wildfire liabilities.

    The proposed decision released Monday from CPUC Administrative Law Judge Peter Allen would approve the utility’s reorganization plan with certain modifications.

    Under the proposal, PG&E would not be allowed to recover costs from its customers​ for wildfires that took place before 2019, and would have to “demonstrate efforts to pay down the wildfire-associated debt and return to a normal utility capital structure over time,” according to a commission press release.

    PG&E would also need to add language to its plan indicating that its approval would not prevent the CPUC from investigating and fining the utility for other reasons — for instance, the Kincade Fire. Additionally, the utility will have to file an application by June 30 outlining a plan to restructure the company into local operating regions, each of which would be headed by an officer reporting to the CEO.

    The proposal also includes an oversight process that was first outlined by CPUC President Marybel Batjer in February. The process comprises six steps, triggered by specific safety and operational events, and could eventually culminate in the agency reviewing and potentially revoking PG&E’s certificate of public convenience and necessity.

    A separate proposal released by Commissioner Rechtschaffen would require PG&E to pay fines of nearly $2 billion for a series of violations connected to the 2017 and 2018 wildfires —​ a $262 million increase over the initial settlement that PG&E signed with multiple stakeholders, due to “the strong evidence of pervasive violations and unprecedented harm, including loss of life, that resulted from the wildfires,” the CPUC said in a press release. PG&E would also need to pass on potentially hundreds of millions of dollars in tax benefits to its customers.

    The penalty includes a $200 million fine to California’s general fund —​ but PG&E’s obligation to pay the fine would be permanently suspended, so that it would not chip into the pot dedicated to settling claims filed by victims of the wildfires and “the unique circumstances of PG&E’s bankruptcy.” PG&E has previously stated that the fine could jeopardize its exit from bankruptcy.

    PG&E is reviewing the decision and will respond within 10 days as directed, utility spokesperson Paul Doherty said in an emailed statement. He added that the proposal to approve it’s reorganization plan is seen as “another positive step as we continue to work diligently to emerge from Chapter 11 and get wildfire victims paid fairly and quickly.”

    “While we will need time to fully review all the modifications and changes in the proposed decision, this approval, along with that of the Governor’s Office, keeps PG&E on track to have our [plan] confirmed before June 30, 2020, so the company can participate in the state’s go-forward wildfire fund,” he said.

    Will Abrams, a survivor of the 2017 Tubbs Fire, told Utility Dive that it’s unfortunate victims are being presented with a false choice between payouts today or safety and security going forward.

    “We should be able to do both at the same time. We should be able to provide fair and just compensation to victims like me and make sure PG&E is situated so that it’s better addressing risks, and it is situated as a safe and reliable provider of energy,” he said.

    The good news for consumers is the CPUC’s proposed requirement that PG&E not increase customer rates to pay for wildfire claims, according to Mindy Spatt, communications chief for ratepayer advocacy group The Utility Reform Network (TURN). On the other hand, the commission has ignored the group’s demands that PG&E’s board members sign a written oath to put safety over profits, she told Utility Dive in an email.

    “TURN is still reviewing the enhanced oversight provisions; at first glance these don’t appear as strong or as immediate as what TURN advocated for. PG&E’s track record of murder and destruction is unparalleled. The Commission should step in immediately to strengthen its oversight and prevent recidivism by appointing a third-party independent monitor,” Spatt said.