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Community choice electricity providers say time has come for PG&E to move out of retail energy business—and be restructured as “wires-only” company

Concord, Calif.– In a new filing with the California Public Utilities Commission, community choice aggregators (CCAs) from Northern California urged state regulators to take action to restructure PG&E as a “wires-only” company—moving the utility out of the retail energy business so PG&E management can focus on safely managing the company’s transmission and distribution system, which has been the source of billions of dollars in damage to communities across the state, while empowering CCAs to continue doing their part to meet California’s clean energy goals by serving all members of their communities.

“PG&E’s first bankruptcy in 2001 resulted in the creation of community choice aggregation to serve as a tool to maintain the stability, affordability, and sustainability of California’s electricity system, and with the utility poised to enter yet another bankruptcy, the time has come to expand this approach,” said Beth Vaughan, executive director of the California Community Choice Association (CalCCA). “The joint CCAs strongly endorse a restructuring that allows PG&E to focus where safety improvements are needed most—delivering electricity across the energy grid—while allowing locally-controlled public agencies to safely, reliably, and cost-effectively purchase the energy Californians rely on.”

The CCAs’ recommendations come on the heels of an announcement by Governor Newsom on January 12 that he has created a team to develop a “comprehensive strategy” for updating California’s utility system to better adapt to the rapidly evolving energy market that includes community choice providers. “More and more of our electricity now is procured outside of investor-owned utilities,” the governor said in his State of the State address. “Regulations and insurance practices created decades ago didn’t anticipate these changes. We must map out a longer-term framework, not just for the utilities’ future, but for California’s energy future, to ensure that the cost of climate change doesn’t fall on those least able to afford it.”

The group of CCAs provided a set of detailed recommendations for how the State can build a stronger, greener, and more reliable electric system in their proposals to the California Public Utilities Commission, which has been leading an investigation since 2015 into whether PG&E’s organizational culture and governance adequately prioritize safety. The Commission’s investigation recently expanded to include consideration of the future of PG&E, in light of PG&E’s bankruptcy and the need to improve the safety of its operations after State investigators found PG&E to be responsible for some of California’s worst wildfires.

In comments submitted on behalf of the East Bay Community Energy, Peninsula Clean Energy Authority, Pioneer Community Energy, the City of San José (for San José Clean Energy), Silicon Valley Clean Energy, Sonoma Clean Power, and Valley Clean Energy Alliance, the CCAs highlight four goals for the Commission as it considers opportunities for restructuring PG&E:

  • Improve PG&E’s electric infrastructure safety outcomes by removing PG&E from the retail generation business and concentrating PG&E’s attention and investments on its electric transmission and distribution businesses.
  • Put financial stewardship, responsibility, and control over programs such as demand response, energy efficiency and transportation electrification under local control.
  • Provide communities the opportunity and authority to take affordable clean energy action by ensuring communities have the unhindered ability to proactively pursue full community control of retail generation services through a variety of local governance models. The Commission should work collaboratively with local governments to remove barriers to pursuing full municipalization of the electric system in communities where there is interest.
  • Transform California’s regulatory and legislative framework to concentrate on safety while utilizing existing locally governed, state, or non-profit platforms whenever possible, or new state or non-profit entities, if necessary, to enhance transparency, accountability, and reliability.

“CalCCA and the joint CCAs look forward to working with the Commission and other parties to identify the best path forward for providing Northern California with safe and reliable electric and gas service—at just and reasonable rates,” Vaughan said.

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About CalCCA
Launched in 2016, the California Community Choice Association represents California’s community choice electricity providers before the state Legislature and at regulatory agencies, advocating for a level playing field and opposing policies that unfairly discriminate against CCAs and their customers. There are currently 19 operational CCA programs in California serving an estimated 10 million customers.

For more information about CalCCA, visit www.cal-cca.org.

 

Make PG&E a Public Utility, Protesters Tell PUC

SACRAMENTO, Calif. — Protesters at the Public Utilities Commission meeting on Thursday urged the commissioners to try to turn Pacific Gas and Electric into a publicly owned utility as part of its Chapter 11 reorganization that began when the company filed for bankruptcy protection Tuesday.

“We have the opportunity to radically restructure what our energy system looks like — safe, public and one that ensures everyone the right to access,” said Morganne Blais-McPherson, a University of California Davis, student and co-chair of the university’s Young Democratic Socialists of America chapter.

Unlike recent protests at PUC meetings in San Francisco, the Sacramento gathering was relatively tame. Demonstrators didn’t disrupt the meeting or shout. They spoke only during public comment, mostly without going over the two-minute time limit set by PUC President Michael Picker.

The calm meeting capped off a tumultuous week of hearings and court filings involving PG&E and the PUC.

On Monday, the PUC called a hasty and controversial meeting to allow PG&E to obtain billions of dollars in debtor-in-possession (DIP) financing to see it through bankruptcy.

On Tuesday, just after midnight, the utility filed for bankruptcy in federal court in San Francisco. The first hearing in the bankruptcy case, which was mainly procedural, was held that afternoon. (See PG&E Wants to Undo Contracts, Revamp Biz in Bankruptcy.)

On Wednesday, a judge considered whether to impose stringent new conditions on PG&E for violating criminal probation in the 2010 San Bruno gas line explosion case, and the State Assembly held an oversight hearing of the PUC in which some lawmakers demanded that regulators do more to keep PG&E and other utilities from sparking deadly wildfires. (See related story, Lawmakers Grill CPUC President on PG&E, Fires.)

Another bankruptcy hearing started Thursday morning in San Francisco, about the same time the PUC was meeting in Sacramento. (See related story, Judge Postpones Strict Probation Conditions for PG&E.)

Seth Sanders, a member of the Democratic Socialists of America, said that as a parent and ratepayer, he was upset to see PG&E seek bankruptcy protection when it is suspected of starting November’s Camp Fire, which killed 86 people and destroyed the town of Paradise.

“I have been sick to my stomach,” Sanders told commissioners. “This is a terrible insult to the memories of the dead.”

Sanders and other protesters called for a restructuring of PG&E into municipal systems, citing the Sacramento Municipal Utility District as a good model. Their statements were met with quiet finger snapping from other demonstrators, some of whom stood holding signs.

(San Francisco officials have said publicly they might be interested in taking over PG&E’s assets in the city and forming a municipal utility.)

At one point, protesters read aloud the names of about 40 fire victims, as they have done at other PUC meetings.

“Unless you do something, you’re going to get us all killed,” Robert Henderson told the commissioners during the public comment period.

Mary Kay Benson said she was from Chico, the neighboring town to Paradise in largely rural Butte County. Many of the dead were senior citizens, like her, Benson said.

“Are we all just corporate collateral?” she asked the commissioners.

Pete Woiwode, of Oakland, said he was at Monday’s raucous meeting in San Francisco, when the PUC approved PG&E’s DIP financing with little public notice and over the objections of demonstrators.

“That should not have happened,” Woiwode said.

 

Make PG&E a Public Utility, Protesters Tell PUC, by Hudson Sangree, RTO Insider, January 31, 2019.

Marin energy aggregator could benefit from PG&E bankruptcy

MCE and the other eight community choice aggregators in Northern California will be watching closely if Pacific Gas and Electric Co. files for bankruptcy as expected on Tuesday.

Assembly Bill 117, which made it possible for local governments in California to buy electricity directly from suppliers and sell it to their residents, was passed by the Legislature in 2002 on the heels of the state’s failed experiment with deregulation of the electricity market and PG&E’s related bankruptcy in April 2001.

Community choice aggregators in Northern California focus exclusively on securing electricity for their customers. Transmission and distribution of the electricity as well as meter reading, billing and revenue collection are left up to the investor-owned utility, PG&E.

“CCAs will want to make sure there is no interruption in that revenue collection and billing process, and the transfer of revenue that keep the CCAs operating,” said Shawn Marshall of Mill Valley, executive director of LEAN Energy U.S., a nonprofit organization that supports the formation of CCAs nationwide.

She said CCAs will also want to make sure they and their customers are not asked to pick up the tab from contract restructuring due to the bankruptcy that may result in some PG&E power vendors “being forced to take a haircut.”

Longer term, however, a PG&E bankruptcy could benefit CCAs, Marshall said.

For example, she said some of PG&E’s transmission and distribution could be municipalized, allowing CCAs to get involved in that end of the business.

In a release issued on Dec. 21, the California Public Utilities Commission, which regulates PG&E and the CCAs, said it is considering a range of possibilities in response to PG&E’s tarnished safety record and threatened financial state due to related lawsuits. Those possibilities include reconstituting the company as a publicly owned utility.

The San Francisco Public Utilities Commission, which operates CleanPowerSF, San Francisco’s Community CCA program, has said it is exploring the possibility of acquiring or building electrical infrastructure assets.

Marshall said longer-term CCAs could also benefit if the bankruptcy proceeding results in the restructuring of some of PG&E’s older, more expensive contracts. That might result in customers leaving PG&E to join a CCA having to pay lower exit fees.

When a PG&E customer switches to MCE or another community choice supplier, PG&E is permitted to charge that customer an exit fee to compensate it for the power contracts it previously entered into to supply that customer electricity. The fee was imposed by the California Public Utilities Commission to ensure that customers remaining with the utilities do not end up footing the entire cost of the contracts.

Dawn Weisz, MCE’s chief executive, said the main thing CCA customers need to know is, “There won’t be any impacts to community choice aggregation customers due to this potential bankruptcy filing.”

“PG&E has stated publicly that they will continue in a business as usual fashion,” Weisz said. “The lights will stay on. This was the case when PG&E filed for bankruptcy protection in 2001, and we don’t expect anything different to happen here.”

Severin Borenstein, a business professor at the University of California, Berkeley, and faculty director of the Energy Institute there, said, “The bankruptcy itself is not going to change PG&E’s function as a transmission and distribution provider so it’s not going to hurt CCAs in an actual delivery sense.”

He doubts that many CCAs will want to get into the transmission and distribution business.

“They are not in a physical energy business, and I’m pretty sure they don’t want to be,” he said.

Borenstein, however, sees PG&E’s bankruptcy as an opportunity for CCAs to woo new customers. He said the filing will be a blow to PG&E’s reputation.

“Part of what has made the CCAs so attractive is they are viewed more positively by people in the towns which have joined,” Borenstein said. “So I think the bankruptcy will accelerate interest in CCAs.”

In addition, Borenstein said, “There is a real question regarding the investment of PG&E in renewables if they’re in bankruptcy.”

He said if PG&E has to cut back on investments in renewables that could serve to further differentiate the CCAs’ product.

“They already make a big deal of being much greener that PG&E, and the reality is the difference isn’t that large,” Borenstein said. “It could potentially become larger.”

MCE says 61 percent of its energy comes from renewable sources, while PG&E says 33 percent of its energy comes from renewable sources.

Weisz said MCE signed three new contracts with renewable energy producers at the end of the year. The producers — solar farms in Fresno County and Lancaster and a wind farm in Mohave – will deliver 728,000 megawatt hours of electricity annually.

If the PUC gives PG&E permission to pass along costs to ratepayers both PG&E and CCA customers will feel the pain equally. PG&E and CCAs charge different rates for their electricity, but all customers pay the same amount to maintain the electrical grid.

In December 2003, the PUC approved a bankruptcy plan that required PG&E’s customers to pay the company $7 billion to $8 billion over nine years. PG&E’s shareholders were required to contribute $2 billion in lost dividends.

“The collection of fees is bifurcated so customers are billed directly by PG&E for the transmission and distribution activity separate from the generation activity,” Weisz said.

Marshall said that also means that PG&E can’t blame increased competition from CCAs for its maintenance issues.

“The reason that PG&E is in the spot that it is in has nothing to do with emergence of community choice,” Marshall said. “It has everything to do with their maintenance of infrastructure, or lack thereof.”

 

Marin energy aggregator could benefit from PG&E bankruptcy, by Richard Halstead, Marin Independent Journal, January 27, 2019.

Private power lines, not PG&E’s, caused deadly wine country fire, state says

The 2017 fire that destroyed thousands of homes in Santa Rosa, Calif., and killed 22 people was caused by private power lines, not ones owned by utility giant Pacific Gas & Electric Co., a long-awaited state investigation released Thursday concluded.

The finding by Cal Fire marks a bit of good news for the struggling utility as it prepares to file for bankruptcy due to huge potential liabilities related to last year’s Camp fire, which destroyed more than 90% of the town of Paradise and killed at least 86 people.

PG&E’s electrical systems were found responsible for numerous destructive Northern California fires in recent years. In many cases, heavy winds downed power lines that sparked the blazes.

The California Department of Forestry and Fire Protection released few details about the source of the Tubbs fire, saying only that it was caused by “a private electrical system adjacent to a residential structure.” The fire agency also said it found no violations of state law related to the blaze. Whoever owns the lines faces billions of dollars in claims from people who lost their homes.

Despite the investigation’s findings, PG&E said it still is moving forward with Chapter 11 protection. The company was found to be the cause of several other fires that hit wine country in October 2017, including the Atlas fire, which killed six people and destroyed more than 780 structures, and the Redwood Valley fire, which killed nine and razed more than 540 structures.

“PG&E still faces extensive litigation, significant potential liabilities and a deteriorating financial situation, which was further impaired by the recent credit agency downgrades to below investment grade,” the company said in a statement. “Resolving the legal liabilities and financial challenges stemming from the 2017 and 2018 wildfires will be enormously complex and will require us to address multiple stakeholder interests, including thousands of wildfire victims and others who have already made claims and likely thousands of others we expect to make claims.”

At a news conference outside his Capitol office Thursday, Gov. Gavin Newsom said his team believes the Tubbs fire accounted for $17 billion of an estimated $30 billion in liabilities that PG&E said it was potentially facing when it announced plans to file for bankruptcy.

The governor said he’s focusing on what is going to happen to Californians, including how a bankruptcy will affect customers and fire victims seeking compensation for their losses.

“My focus is on safe, reliable and affordable service,” he said. “It’s about making sure that we have the backs of those victims, people who have lost the lives of their family members, people who have lost all that they hold dear and close, as it relates to personal possessions, and that they are made whole.”

The Tubbs fire broke out in the northern foothills of Calistoga in Napa Valley, fueled by 70 mph gusts that quickly pushed it into Santa Rosa, where 5,000 structures were destroyed.

In the early stages of the Tubbs probe, investigators focused on electrical equipment seized at 1128 Bennett Lane in Calistoga. There was speculation that the equipment had ignited the fire and that it belonged to PG&E. Some plaintiffs’ attorneys alleged that PG&E failed to properly trim trees near power lines and that the winds might have sent branches falling onto equipment, sparking the blaze.

But a court filing from PG&E last year indicated the equipment was owned by an unidentified private party, not the utility. Moreover, the filing claimed, it did not appear that PG&E equipment in that area had burned.

State Sen. Bill Dodd (D-Napa) said the fact the fire was started by a private citizen’s equipment underscores that “we all have a role to play in wildfire prevention.”

“Regardless, it doesn’t negate the systemwide issues plaguing PG&E and the need for change in its leadership and culture,” Dodd’s statement continued. “After all, Cal Fire previously found PG&E responsible for over a dozen Northern California wildfires and the cause of others remains under investigation.”

Attorneys representing people who lost property in the Tubbs fire have blamed deep-pocketed PG&E. On Thursday, they said they will continue to press those claims.

Jim Frantz, an attorney representing more than 1,100 victims of the October 2017 firestorm, said his firm will continue to go after the utility for damages tied to the fires, including the Tubbs.

“They’re absolutely incorrect,” Frantz said of Cal Fire’s conclusion. “We haven’t taken all the depositions there are to take. We haven’t seen all the evidence. It’s interesting, but it’s clearly not determinative of any final findings in this case about liability.”

The investigation’s conclusions also sparked questions about whether the utility’s plan to go into bankruptcy was necessary.

“The news from Cal Fire that PG&E did not cause the devastating 2017 Tubbs fire is yet another example of why the company shouldn’t be rushing to file for bankruptcy, which would be totally unnecessary and bad for all stakeholders,” said a spokesperson for BlueMountain Capital Management, which owns more than 11 million shares of PG&E stock that could be wiped out.

Investigators used drones and aerial photography to help put together a comprehensive picture of the fire and gathered evidence on the ground to figure out how it started.

Serna reported from Los Angeles and Luna from Sacramento. Times staff writer Sammy Roth in Los Angeles contributed to this report.

 

Private utility lines, not PG&E, caused massive wine country fire that killed 22 people, by Joseph Serna and Taryn Luna, The Los Angeles Times, January 24, 2019.

Carrizo Plains solar farm’s credit rating drops to ‘junk’ as PG&E bankruptcy looms

Representatives for the massive Topaz Solar Farm in the Carrizo Plains are keeping an eye on PG&E, now that the farm’s only source of revenue seems poised to declare bankruptcy.

The 550-megawatt photovoltaic solar farm in eastern San Luis Obispo County relies on the cash-strapped public utility. By contract, PG&E purchases 100 percent of the electricity produced at the farm.

“Topaz is monitoring the dynamic situation surrounding PG&E’s financial situation,” Jessi Strawn, director of corporate communications for Berkshire Hathaway Energy, wrote in an email to The Tribune on Tuesday. “Topaz continues to perform obligations under its power purchase agreement.”

“Maintaining financially healthy utilities in California is good for current and future renewable energy investments in the state,” Strawn added, “and is important for meeting the state’s renewable energy goals.”

Berkshire Hathaway Energy, also known as BHE Renewables, owns the farm.

PG&E’s potential bankruptcy is already taking a toll on the solar farm’s credit rating.

S&P Global Ratings downgraded Topaz Solar Farm’s credit rating from “BBB” to “B” on Jan. 10— a downgrade that pushed the farm’s rating into “junk” status.

Corporations whose credit rating is below a “BBB” are typically more susceptible to defaulting on payments, and for those with a “B” rating, “adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitments on the obligation,” according to S&P’s ratings guide.

In its decision to downgrade Topaz, S&P noted the solar farm “receives all of its revenue from PG&E under a long-term power purchase and sale agreement (PPSA). Our rating on the solar project is currently capped by our view of the credit quality of PG&E, its utility offtaker.”

S&P also downgraded PG&E’s credit rating to “B” last week.

S&P kept Topaz Solar Farm on its Creditwatch negative listing — meaning its rating could still go down — to reflect “the increasing risk that we will downgrade PG&E by one or more notches over the next few months.”

If S&P lowers its PG&E ratings again, it could do the same to Topaz Farms, it said.

PG&E’s potential bankruptcy filing could trigger a cross default for Topaz’s financing, S&P warned, unless the power contract with PG&E is replaced within 90 days of the filing.

Strawn declined to comment further on the farm’s relationship with PG&E, or whether it was seeking other purchasers of its electricity. She also declined to disclose how many people work at the farm.

According to its website, Topaz Solar Farm has added $417 million into the local economy — including $192 million for the roughly 400 construction jobs required to build the plant between 2012 and 2014. That total also included “$52 million in economic output for local suppliers, $14 million in sales taxes during construction and up to $400,000 per year in new property tax revenues,” according to the website.

The farm spans about 4,700 acres and provides enough electricity to power more than 180,000 average California households, according to the website.

 

Carrizo Plains solar farm’s credit rating drops to ‘junk’ as PG&E bankruptcy looms, by Kaytlyn Leslie, The Tribune, January 16, 2019.

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.

What happens to a bankrupt PG&E’s solar contracts?

As soon as this morning’s news hit the wires, one of the first questions asked around energy twitter was what was going to happen to the gigawatts of wind and solar projects that hold contracts with Pacific Gas & Electric Company (PG&E), now that it has announced plans to file for bankruptcy.

As usual there were a variety of views, with Tyler Norris of Cypress Creek Renewables and Jigar Shah expressing the opinion that these contracts were unlikely to be vacated.

However, Ben Serrurier of Cypress Creek warned that there could be “haircuts” to older power purchase agreements (PPAs).

 

Any perception that these contracts are safe was further undermined by both Fitch and S&P downgrading the credit rating of the Topaz Solar project before the bankruptcy.

So what is it? Are these contracts safe, or not? The truth is that no one we talked to was willing to make too strong a statement one way or the other, but we did get some insights into what might happen.

 

Unprecedented

PG&E has announced that it will file a voluntary petition for Chapter 11, which is a financial move that allows it to reorganize its debts, and does not involve liquidation. Along with this, the utility is expected to continue normal operations including supplying power to its customers.

And while we have had utility bankruptcies – PG&E has even gone bankrupt before – what we have not had is a utility bankruptcy in the era of strong renewable energy mandates. This was noted by Elias Hinckley, an energy lawyer at firm K&L Gates.

“California consumers are still going to need power,” Hinckley told pv magazine USA. “That power is still going to have to provided under the regulatory framework that California has created, which sets a high bar for renewable energy inclusion.”

Solar Energy Industries Association (SEIA) has also expressed that the California government may play a role. “We are confident that California’s leaders will work to ensure that existing contractual obligations for solar projects are honored and that the state lives up to its climate commitments,” stated SEIA CEO Abigail Ross Hopper. “SEIA is monitoring this issue closely and engaging with the Governor’s office, legislators, and the PUC to protect the state’s investments in current and future renewable energy.”

And while exactly what happens from here is unclear, legal precedent suggests that it will be the bankruptcy court that is the final arbiter. In fact, in September a bankruptcy court in Ohio asserted that even though wholesale power contracts are governed by the Federal Energy Regulatory Commission, it had primacy in deciding the fate of power contracts signed by Ohio utility FirstEnergy.

In terms of how the court could decide, another factor could be how contracts are structured.

 

Uncertainty

In the meantime, another impact of this development is that it is likely to throw any pending contracts with PG&E into chaos. This is less of a concern for solar. PG&E, like California’s other two large investor-owned utilities, over-procured renewable energy in advance of state’s 2020 renewable energy mandate, leading to a lull in large-scale procurement.

However for batteries this could be a bigger deal, and Hinckley of K&L Gates says this uncertainty is actually the biggest issue for California’s large-scale energy storage market.One factor is that the bankruptcy process may last years, and until it is concluded solar and storage projects seeking to sell power to PG&E may be prohibitively difficult to finance.

 

The future of utilities

But by far the biggest question is what will happen after the Chapter 11 process. California regulators have already suggested that they may break up PG&E or make it public, and there is no guarantee that the post-bankruptcy utility will look anything like it does today.

But it is not only PG&E that is in danger.

“I don’t think people have fully realized how big of a thing this is, and it isn’t just PG&E that has exposure here,” notes Hinckley. He observes that with climate change intensifying wildfires, utilities in fire-prone regions could see an increase in their basic cost to operate.

Someone is going to have to foot the bill for this, and if this involves a big increase in the price of retail electricity, this could drive greater adoption of rooftop solar and storage.

There are many unanswered questions here, and we at pv magazine USA will be exploring these in the coming weeks and months as this story plays out.

 

What happens to a bankrupt PG&E’s solar contracts?, by Christian Roselund, PV Magazine, January 14, 2019.

Who Could Get Hurt by PG&E’s Fire-Driven Bankruptcy

PG&E Corp., owner of California’s largest electric utility, warned Monday that it plans to file for bankruptcy protection on Jan. 29, pushed to the brink by wildfire lawsuits that could cost the company $30 billion. It’s the latest fallout from two years of massive blazes that have killed more than 130 Californians and destroyed tens of thousands of properties. The move could trigger big changes for PG&E, its 20,000 employees and the roughly 16 million people it serves. It raises the question of whether people who blame PG&E for burning down their homes will receive the compensation they want. And could bankruptcy derail California’s fight against global warming?

1. Will the lights stay on?

Yes. When utilities file for bankruptcy, they don’t cease operations. PG&E’s utility unit — Pacific Gas and Electric Co. — filed for bankruptcy in 2001 during the California electricity crisis without interrupting service. PG&E said Monday it expects to have $5.5 billion in “debtor in possession” financing lined up to carry it through the bankruptcy process.

2. Will customer bills go up?

Probably, but it’s impossible to say until the bankruptcy process is well underway. And for once, the decision to raise rates won’t rest solely with regulators at the California Public Utilities Commission. Rate increases will be tied to whatever reorganization plan the bankruptcy court judge overseeing the proceeding approves. California passed a law last year allowing PG&E to pass on to ratepayers some of the costs of wildfires for which it had been blamed in 2017, but it’s not clear how the law’s provisions will apply to a company that’s already in bankruptcy. Indeed, some of those provisions were designed to prevent utilities from going bankrupt.

3. What about the employees?

They will continue to work, responding to outages and maintaining the company’s vast web of wires and natural gas pipelines. They will still get paid, and the company will continue to fund their health care, a senior executive with the company’s Pacific Gas and Electric utility said Monday.

4. What happens to all the wildfire victims suing PG&E?

Filing for bankruptcy puts those lawsuits — total estimated liability: $30 billion — on hold and wraps them into the bankruptcy proceedings. That’s part of bankruptcy’s appeal to PG&E. The company would be able to bring all those cases into a single forum for resolving its financial problems, including wildfire suits. Bankruptcy filings also can force litigants to accept smaller settlements than they would have been able to negotiate otherwise.

5. How about the shareholders?

Don’t expect to see your dividends again anytime soon. PG&E stopped issuing dividends after the 2017 fires, and a bankruptcy proceeding would likely put off the resumption of issuing dividends by several years. But analysts don’t expect shareholders to be wiped out.

6. What role is the state taking?

The legislature last year gave PG&E the ability to issue bonds to pay off its 2017 wildfire lawsuit costs. A key state politician has drafted — but not yet introduced — a bill that would do the same for 2018. But PG&E argues the bond process set up by the legislature will take too long to help. Meanwhile, California politicians seem to be losing patience with PG&E. Governor Gavin Newsom’s response Monday morning didn’t indicate he would try to prevent the bankruptcy.

7. Could this interfere with California’s climate change goals?

California is requiring all its utilities to increase their use of renewable power, and PG&E has already lined up enough power purchase contracts to meet the state’s targets for the next few years. But the state’s climate fight very much relies on healthy electric utilities in multiple ways, such as deploying electric vehicle charging stations and making homes more efficient. Newsom is expected to make climate one of his signature issues and has already said that he wants California’s utilities to be strong enough to invest in the state’s energy transition. Meanwhile, analysts are waiting to see if PG&E will use bankruptcy proceedings to get out of some of the most expensive renewable contracts it signed years ago, before the costs of wind and solar power plunged.

 

Who Could Get Hurt by PG&E’s Fire-Driven Bankruptcy: QuickTake, by David R. Baker, Bloomberg, January 14, 2019.

Governor Newsom Statement on PG&E Announcing Intention to File Bankruptcy

SACRAMENTO — California Governor Gavin Newsom issued the following statement after the Pacific Gas and Electric Company (PG&E) announced its intention to file for bankruptcy:

“PG&E provides gas and electric service to 16 million Californians. From the moment I was elected, I have been closely monitoring the impact of PG&E’s existing and potential future liability for the deadly wildfires on the victims of the fires and the consumers who rely on PG&E for their electric and gas service.

“When I took office one week ago today, I immediately instructed my team to meet with the California Public Utilities Commission, CAISO, PG&E, and labor unions representing the workers who work for PG&E. My staff and I have been in constant contact throughout the week and over the weekend with these stakeholders and regulators. Everyone’s immediate focus is, rightfully, on ensuring Californians have continuous, reliable and safe electric and gas service.

“While PG&E announced its intent to file bankruptcy today, the company should continue to honor promises made to energy suppliers and to our community. Throughout the months ahead, I will be working with the Legislature and all stakeholders on a solution that ensures consumers have access to safe, affordable and reliable service, fire victims are treated fairly, and California can continue to make progress toward our climate goals.”

 

Governor Newsom Statement on PG&E Announcing Intention to File Bankruptcy, Office of Governor Gavin Newsom, January 14, 2019.

PG&E tells local officials bankruptcy filing won’t affect energy rates

Pacific Gas & Electric Corp., the country’s largest utility, announced Monday it will file for Chapter 11 bankruptcy — a move that creates uncertainty as to whether Humboldt County energy ratepayers will be affected.

PG&E currently faces $30 billion in potential damages from litigation over a series of wildfires in California during 2017 and 2018. Many were killed and thousands of structures were destroyed.

“The number one priority must be to protect ratepayers and fire survivors,” state Sen. Mike McGuire said in a statement. “We must ensure PG&E doesn’t miss a beat with their electric and gas contracts and we must have survivors at the top of mind to make sure they are taken care of every step of the way.”

The Redwood Coast Energy Authority Board of Directors will receive an update Jan. 28 as to how the filing will impact local energy rates. The board has already heard from PG&E, which said the utility’s bankruptcy won’t change rates “in any way,” RCEA board member and 2nd District Supervisor Estelle Fennell told the Times-Standard.

“We’re working with PG&E and (Community Choice Aggregators) to find out in the long term how they’re going to resolve PG&E’s role in the provision of power,” Fennell said.

The California Public Utilities Commission, which oversees all state utilities, could possibly look at a restructuring, Fennell suggested.

Locally, PG&E owns multiple Eel River dams and over 5,000 acres of land in the area, which the utility was using for the Potter Valley energy project. In September, the utility began seeking to auction off the parcels associated with the project.

Rep. Jared Huffman said the utility’s status will be a state issue and out of his purview, but he added that it’s “hard to imagine” that the bankruptcy won’t affect ratepayers at some level, given the scale of liability.

“As we work through this issue — and I have no idea how it ends relative to PG&E solvency — we have to confront this bigger issue of climate change and disaster preparedness,” Huffman said. “Whatever happens in the PG&E bankruptcy, I think we’re going to need to look at creative reforms so we don’t have mass firestorms caused by failed power supplies and dry conditions.”

Shomik Mukherjee can be reached at 707-441-0504. The Associated Press contributed to this report.

 

PG&E tells local officials bankruptcy filing won’t affect energy rates, by Shomik Mukherjee, Times Standard, January 14, 2019.