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How will PG&E’s bankruptcy impact SLO County? Your questions answered

Now that it looks certain PG&E will declare bankruptcy, you might be wondering what that means for San Luis Obispo County.

After all, the utility is the biggest private local employer, and operates Diablo Canyon nuclear power plant, which is currently in the early stages of an intensive, decades-long shutdown.

So here are the answers to key questions that arose soon after PG&E’s announcement Monday.

If you have more questions you’d like answered, send them to Tribune reporter Kaytlyn Leslie at kleslie@thetribunenews.com and they could be featured in a follow-up.

Q: When will PG&E file for bankruptcy?

On or about Jan. 29. The utility was required, under a state law signed in September by former Gov. Jerry Brown, to give 15 days’ notice before filing. That’s what it did Monday. The notice came out about 12 hours after CEO Geisha Williams resigned.

Q: What has PG&E said about this move?

In a press statement, the utility company said it “does not expect any impact to electric or natural gas service for its customers.” It also said it is “committed to continuing to make investments in system safety as it works with regulators, policymakers and other key stakeholders to consider a range of alternatives to provide for the safe delivery of natural gas and electric service for the long-term in an environment that continues to be challenged by climate change.”

It also said its employees are expected to continue to receive their pay and benefits.

Q: What happens to Diablo Canyon decommissioning?

Business as usual, according to PG&E. Normal operations at the nuclear power plant are not expected to be impacted by the bankruptcy, and the decommissioning process is expected to move forward as anticipated, PG&E spokesman Blair Jones told The Tribune on Monday.

No layoffs of workers are anticipated, and the company does not have plans to sell or close Diablo Canyon prematurely.

Q: If PG&E goes bankrupt, will it still pay local property taxes?

PG&E is the largest taxpayer in San Luis Obispo County, representing about 5.88 percent of the county’s total budget, according to documents filed with the California Public Utilities Commission during the Diablo Canyon closure consideration.

When PG&E last went bankrupt in 2001, the company at first paid less than half of its property tax due that year, according to previous Tribune reports. (PG&E paid the rest at a later date.)

That isn’t expected to happen this time. Jones said on Tuesday that the company still intends “to honor and pay franchise taxes as normal, following the Chapter 11 filing.”

This means the county, local school districts, flood control zones and cemetery districts that receive revenue from PG&E’s property taxes will likely still get that money this year.

Q: What about local donations from PG&E?

This is one area that will definitely be impacted by the bankruptcy. According to the company’s “Reorganization Information” FAQ on its website, its charitable giving program for 2019 has been put on hold and will be subject to review under the bankruptcy proceedings.

“We regret we cannot make any financial commitments toward events, programs or partnerships at this time,” reads the website.

The PG&E Corp. Foundation’s charitable giving program — separate from the above program — is also being re-evaluated.

So don’t expect any of those big checks from the company this year.

Q: What will happen to workers’ pensions?

Jones on Tuesday said PG&E doesn’t expect any changes to its tax-qualified pension plan.

“The company currently intends to continue to make regular pension contributions to that plan as normal,” he said.

Tom Danzell, business manager for the International Brotherhood of Electrical Workers, Chapter 1245, said on Tuesday that though he thinks the likelihood of the proceedings impacting local pensions is “extremely low,” it is one of the union’s most pressing concerns.

“It’s a high damage if it were to. It’s something of great concern to employees and retirees,” he said.

The union, which Danzel said represents 500 Diablo Canyon workers and a couple hundred other electrical workers between Buellton and Templeton, is committed to protecting its workers through the proceedings, he added.

Q: Didn’t the Legislature bail out PG&E?

The Legislature, in passing SB 901 last fall, gave PG&E and other utilities limited protection against wildfire claims. Among other things, the law says the Public Utilities Commission could allow utilities to pass some wildfire claim expenses onto ratepayers if the utilities aren’t strong enough financially to shoulder the costs themselves.

The protection, however, only includes the 2017 fires, not the massive Camp Fire last year. Assemblyman Chris Holden, D-Pasadena, earlier vowed to would introduce legislation to extend the protections to include the Camp Fire, but said Monday he won’t.

“The playing field of solutions, quite frankly, has shifted from the Legislature to the courts,” he said.

Fire officials have not determined a cause for that fire, but many residents already have sued PG&E, which had a power-line malfunction near the fire ignition point.

Q: Does bankruptcy mean PG&E would go out of business? Will the lights go out?

No, and no. PG&E would file for protection under Chapter 11 of the federal bankruptcy code. Chapter 11 allows the company to stay in business while it sorts out its ever-growing debt load. PG&E kept the lights on during the three years it spent in Chapter 11 between 2001 and 2004, when it was clobbered by rising power costs during the energy crisis. The state suffered several days of rolling blackouts in 2001, but they were spread beyond PG&E’s territory and weren’t caused by the bankruptcy.

Q: Will bankruptcy lead to higher rates?

Rates could go up, but not necessarily because of a bankruptcy filing.

Pacific Gas and Electric Co. has already asked the Public Utilities Commission for authority to raise rates by 6.4 percent in 2020. If the rate hike is granted in full, monthly gas bills would increase $1.84 and electric bills would rise $8.73, on average. The higher rates would generate about $1.1 billion in additional annual revenue. PG&E says about half would be spent on wildfire prevention initiatives, such as installing high-definition cameras in remote areas and trimming trees more aggressively.

But bankruptcies can add enormous legal costs, and PG&E could seek to have ratepayers absorb those expenses. “Bankruptcy is never a clean, easy process, and there’s a lot of costs involved just in terms of lawyers and accountants,” said James Bushnell, a UC Davis energy economist. “Some of that is going to be passed onto ratepayers.”

Mark Toney, executive director of The Utility Reform Network in San Francisco, said ratepayer interests would be neglected. “It puts the decision in the hands of a bankruptcy judge whose first priority is paying creditors off. The ratepayers are the last priority.”

Q: How does bankruptcy benefit PG&E?

Chapter 11 gives companies breathing room of sorts, the chance to sort out their debts while they keep operating. One possible outcome is that PG&E would use a court-supervised auction to sell its natural-gas division to raise money to pay wildfire claims.

Q: What about PG&E executives?

Williams, the former CEO, will get her severance payments, according to a statement filed by PG&E on Monday with the Securities and Exchange Commission. That will total nearly $2.4 million, according to an earlier filing.

Q: Will wildfire survivors get paid in full?

Bankruptcy could reduce the amount of money available for paying survivors who’ve sued PG&E over the Camp Fire and the 2017 fires. Survivors would be declared “unsecured creditors” and would be lumped in with other such creditors — namely the investors who hold roughly $18 billion in long-term debt owed by the utility and its corporate parent, PG&E Corp.

Wildfire victims seeking recovery “could be in deep trouble,” said Jared Ellias, a bankruptcy-law expert at UC Hastings College of Law in San Francisco.

Ellias did say, however, that bankruptcy could speed the processing of damage claims. A bankruptcy trustee could require that survivors get some funds long before the courts could resolve the mountain of lawsuits. “Bankruptcy is often much faster than state court,” he said.

Q: So how much would these creditors receive?

It’s too early to tell. But it’s worth noting that PG&E’s bonds have been trading at about 78 cents on the dollar, said Carol Levenson of Gimme Credit LLC, a debt-analysis firm. That suggests bondholders aren’t counting on getting paid in full, she said. The same could apply to fire survivors.

Survivors’ lawyers say they believe they can recover damages for their clients regardless. “PG&E has a lot of assets,” said Dario de Ghetaldi, a Bay Area lawyer who’s suing PG&E on survivors’ behalf. “I think there will be sufficient assets to protect the victims ultimately.”

Q: What happens if the gas division is sold?

For many California ratepayers, it would mean writing two utility checks each month instead of one. Sacramento residents do that already, paying PG&E for gas and SMUD for electricity.

A sale would be overseen by the PUC. But it brings up another concern for Northern California residents, many of whom haven’t forgotten the San Bruno gas explosion that killed eight people and leveled a neighborhood in 2010: Who would be their new gas company or companies, and would they be any better than PG&E?

“We really have to make sure that who they sell it to is experienced (and) has a good track record in operating gas pipeline systems in a safe manner,” Toney said. “We don’t want to see venture capital firms buying it or parties that don’t have experience and aren’t going to put the public interest first.”

Q: Have PG&E stockholders been affected?

Yes. The company already suspended quarterly dividend payments in late 2017, and its stock price has been crushed since it disclosed that it experienced trouble on a transmission tower near the spot where the Camp Fire ignited Nov. 8. PG&E shares fell to $8.17 on Monday and have lost 80 percent of their value since the Camp Fire started.

Q: What happens next?

Aside from bankruptcy, plenty. A federal judge has told PG&E to appear in court Jan. 30 to respond to his plan to require the company to fix transmission lines and take other safety steps. In February, PG&E will release its latest financial results, which will provide more detailed analysis on the potential liabilities from the Camp Fire.

For more information on the reorganization efforts, visit PG&E’s “Reorganization Information”page on its website, www.pge.com.

 

How will PG&E’s bankruptcy impact SLO County? Your questions answered, by Kaytlyn Leslie And Dale Kasler, The Tribune, January 15, 2019.

Views wanted on plan for offshore wind farms along San Luis Obispo County’s coast

The Bureau of Ocean Energy Management—also known as BOEM—is an agency within the U.S. Department of the Interior, and is in charge of leasing America’s federal coastal waters, whether it’s for petroleum oil and gas exploration, or renewable energy projects.

After consulting with the military and various industry stakeholders, BOEM and the California Energy Commission have released draft maps of potential lease areas off California’s coast that possess the necessary conditions to support large-scale wind farms.

Offshore of the state’s roughly 840 miles of coastline, there are just three areas where the wind blows with enough consistency and speed for such farms. Two are off San Luis Obispo County’s coast, one near the soon-to-be-decommissioned Diablo Canyon Power Plant and the other off the coast of Morro Bay. The third is Humboldt County near Eureka.

“There’s limited places offshore California where you can actually do offshore wind energy,” said Jean Thurston, a BOEM renewable energy specialist focused on the Pacific region. “You need greater than seven meters per second wind speed for it to be economically viable, for a developer to even want to put a project in. So looking at the cost-benefit analysis, that’s the kind of the cut-off point.”

Thurston said other considerations in figuring out locations for offshore wind farm are water depth, and finding areas that aren’t already located in a marine sanctuary. In the end, just six percent of California’s offshore areas has the right conditions. And besides the technical needs, there’s other users and uses of those marine areas to factor in.

“We want to pick areas that minimize conflicts,” Thurston said. “Now we know—looking at all the areas offshore that are viable—there’s no area that’s going to be conflict free. So we’re trying to look at areas that have the least amount of conflict,”

Groups wary of setting up offshore wind farms are the fishing and shipping industries, and those who say wind farms will harm marine mammals like migrating whales, due to dangers of entanglement and undersea noise.

For the area off Morro Bay, local fishermen have made an agreement with one of the wind energy developers, said Eric Endersby, Morro Bay’s harbor director.

“The fishing community has supported, the fishing community has signed onto an agreement with Castle Winds, the proponent that’s pushing one of the projects right now,” Endersby said. “But it will impact the fishing community because it’s basically taking some fishing grounds off limits, where they won’t be able to fish, and so they’ve mitigated that, and the fishermen are happy with what they’ve agreed with.”

The search for possible offshore wind energy development areas started with a proposal from the company Trident Winds, now known as Castle Winds. That application kicked off a whole planning process with the state and federal government to look at offshore wind energy in California.

“Instead of just responding to requests site-specifically, why don’t we as a state look at where the wind resources are and where the need is and where the most environmentally-sensitive areas are to avoid, and really think about where we would want offshore wind if we were to approve a project,” said Kristen Hislop, marine conservation program director with the Environmental Defense Center.

The EDC has been active in the process of figuring out where offshore leases should go, from an environmental stance. Staff have submitted ideas on the types of research, studies and monitoring efforts necessary to protect the marine environment.

“We haven’t taken a stance on whether or not we’re for or against offshore wind [development], but we but we are very interested in being part of the process and figuring out if we can help influence in a positive way where these things might be sited,” Hislop said. “And also determine if it’s the best way to get renewable energy for the state.”

In mid-December, BOEM held an open house in San Luis Obispo to answer questions from the public. A few dozen people showed up to speak to staff from various agencies involved in the decision making process, and to submit public comment. Frank Pendleton does mapping for BOEM.

“Someone knows a lot about the birds in the area, someone knows a lot about the whales, we want to hear from them,” Pendleton said. “[If someone knows] a lot about who fishes where in the area…we’ve opened the comment period now, and that’s what we want to hear from folks—how this could affect them.”

Public comments can be submitted here until January 28, 2019.

 

Views wanted on plan for offshore wind farms along San Luis Obispo County’s coast, Greta Mart, KCBX Central Coast, January 9, 2019.