California regulators launch investigation into PG&E's reorganization plan

Dive Brief:

The California Public Utilities Commission on Thursday launched a formal proceeding to consider the "ratemaking and other implications" of Pacific Gas & Electric's proposed plan of reorganization.
The utility filed for bankruptcy in January, facing billions in liabilities related to 2017 and 2018 wildfires and the CPUC is an active participant in PG&E's Chapter 11 case in the Northern California district of the U.S. Bankruptcy Court. The commission noted that opening the proceeding is "not an indication that the CPUC approves or disapproves" of PG&E's plan or any other plan.
By law, the commission must review and approve any proposed plan and related transactions, before PG&E's bankruptcy can be resolved. The utility is up against a deadline set by state lawmakers in order to access California's new wildfire mitigation fund.

Dive Insight:

Multiple proceedings will need to resolve in order for PG&E to exit bankruptcy, but they all focus on one date: the June 30, 2020, statutory deadline set in AB 1054 for PG&E to participate in the California wildfire fund, which aims to help utilities address fire costs.

The Commission "expects to render its decision sufficiently in advance of the [deadline] ... to allow the Bankruptcy Court to address and approve any modifications made to the plan," it said in its order.

The commission's investigation will consider whether the settlement resolves monetary fines or penalties for PG&E's pre-bankruptcy conduct, whether to approve changes to PG&E's governance structure, whether PG&E's plan is consistent with the state's climate goals and whether the plan is rate neutral.

The investigation will "provide a critical venue for the CPUC to work with stakeholders in analyzing and appropriately responding to the PG&E plan for reorganization," Commissioner Genevieve Shiroma said in a statement.

"The various elements under the jurisdiction of the CPUC we seek to resolve are key to emerging from bankruptcy" by the deadline, PG&E told Utility Dive. The utility says its plan is focused on "fairly compensating all impacted wildfire victims, protecting customer rates, and putting PG&E on a path to be the energy company our customers need and deserve."

PG&E's proposal to exit bankruptcy includes $17.9 billion to pay wildfire claims, but other parties are preparing to put forth their own proposals. A group of noteholders last week proposed injecting $29.2 billion in new money into the bankrupt utility, and included $14.5 billion to pay fire victims and $11 billion for insurance subrogation claims.

PG&E told Utility Dive that the competing proposal "would only enrich bondholders by paying them interest well in excess of what is required by law, resulting in billions in unnecessary costs" borne by the utility's customers.

The utility requested a federal bankruptcy judge extend its period of exclusivity, during which only it can propose a reorganization plan, until Nov 29.