News & Opinion » News

It's Down to the Wire for PG&E

Bankruptcy settlement pleases few, but faces crucial June 30 deadline



Page 2 of 3

"These plans might be in place," she said, "but PG&E is in charge of implementing the plans. That's a huge oversight issue."

She is skeptical about whether the Public Utilities Commission has the ability or the will to provide effective oversight. That's a central issue running through criticisms of the proposed plan. Critics are not convinced that the restructuring and accountability provisions are strong enough to fulfill the plan's goals.

PG&E has committed to restructuring its management to provide more accountability. Fifty percent of board members will be California residents, with state oversight of board appointments. The board's Safety and Nuclear Oversight Committee will be appointed in consultation with the state and will get new powers. The company will appoint an "executive-level" Chief Risk Officer and Chief Safety Officer, consulting with the state about who is appointed and spelling out plans for them to report to the board and the Public Utilities Commission. The company also will create an Independent Safety Advisor position and a six-step oversight process that would kick in if there's another big problem like a major wildfire.

These plans don't sound strong enough to the plan's critics.

"Generally, we want enhanced oversight," said Mindy Spatt, of The Utility Reform Network.

Her organization is calling for some specific changes. Instead of a PG&E safety advisor, they want an Independent Safety Monitor appointed immediately by the Public Utilities Commission. They're also calling for a more-streamlined process to address safety problems and a mandate for board members to prioritize safety.

A brief filed by three statewide environmental-justice organizations adds that the safety monitor should report to the legislature and the public as well as to the Public Utilities Commission. Spatt commented that her organization has "often had concerns that the CPUC is not hard enough on PG&E. It's not just a question of whether they have the tools, it's whether they have the will to get this company under control"

The environmental-justice brief also calls for at least half the board members to be not just California residents, but specifically residents of PG&E's service area, from communities affected by wildfire, gas pipeline, or other safety issues, or representing utility workers. It calls for more power for PG&E's Disadvantaged Communities Advisory Group, including their say in key appointments, and for special measures to mitigate the effects of wildfires and power shutoffs in vulnerable communities. And it argues that the proposed plan, while commiting PG&E to continuing current efforts to move toward renewable energy, doesn't do enough to advance California's climate and environmental goals. For example, the brief calls for an aggressive plan to close polluting gas-fired power plants in low-income communities.

Critics also charge that the plan, although required by law to be "neutral on average" for ratepayers, will actually result in customers paying for PG&E's misdeeds. Under the plan, PG&E, which went into bankruptcy with a little more than $22 billion in debt, would exit bankruptcy with a debt of almost $44 billion, according to a letter signed last November by 23 mayors. The plan proposes extremely complex financial maneuvers, such as paying off higher-cost debt with lower-cost debt, raising money by issuing more stock and selling debt to investors who also hold PG&E stock.

"It's confusing because it's supposed to be," said John Geesman, a lawyer who represents the Alliance for Nuclear Responsibility, as he tried to explain the intricacies of the plan.

"PG&E is expected to pay over a billion dollars to the attorneys and financial analysts who have worked out the complex details of this latest bankruptcy plan," said Spatt, of The Utility Reform Network. "Those may be hard to follow, but the money isn't. Wall Street is agog over the plan, which was the whole point all along."

Geesman said that, despite PG&E's assurances, customers will end up paying some of the costs of its debts. For example, the PG&E corporate structure has two levels: the utility and a holding company that owns the utility. This structure is a holdover from the 1990s deregulation. The current reorganization plan calls for the holding company to raise money by selling "junk bonds," for which the utility will not be responsible. But the plan allows charges to pay off the bonds to be added to customers' bills.

In addition, Spatt said, customers have to pay insurance premiums that are extra costly because of PG&E's past problems. Environmental organizations worry that some of the cost will also be passed on to community-choice electricity agencies, which pay exit fees to PG&E.

And the state's new Wildfire Fund, the money PG&E is counting on for its bankruptcy plan, will be funded by contributions from PG&E and the state's other electricity companies. Each company's contribution is to come half from shareholders and half from customers.

Taruc, of Reclaim Our Power, said, "This plan is built on such rickety finances that kicking the can down the road will only open everyone up—the state, the fire survivors, the investors—to another possible bankruptcy that we all would end up paying for."

In addition, according to a recent letter signed by five mayors including Oakland's Libby Schaaf, PG&E will need to make "tens of billions of dollars" in safety improvements to prevent future wildfires. Spatt said it's not clear how much of this expense will be passed on to customers. Her organization frequently argues before the Public Utilities Commission about PG&E requests to charge customers for expenditures TURN sees as unjustified or ineffective.


Add a comment

Anonymous and pseudonymous comments will be removed.