Attorneys for Pacific Gas & Electric strongly criticized a competing bankruptcy reorganization plan for the company pitched last month by its bondholders and a committee of wildfire victims, saying in an Oct. 11 filing to the California Public Utilities Commission that the proposal is "basically a hostile takeover of PG&E."
The plan, filed in the separate bankruptcy court proceeding by the ad hoc committee of senior unsecured noteholders and the tort claimants committee, would invest $29.2 billion into bankrupt PG&E and reserve $25.5 billion to settle wildfire claims against the utility. PG&E on Sept. 9 filed its own reorganization plan, which would pay out $11 billion to settle wildfire-related subrogation claims, $1 billion to a group of public entities affected by the wildfires, and up to $8.4 billion to resolve claims from victims and other parties.
PG&E attorneys said the bondholder plan would pay out excessive interest to the bondholders, giving them control over PG&E at a "substantial discount" and replacing the company's management.
The bondholder plan is "seeking to extract profits for that investor group at the expense of California ratepayers and California's climate and other policy goals," the utility attorneys said.
Before PG&E can exit bankruptcy, the CPUC needs to review and approve any plan proposal made in the bankruptcy court to ensure it complies with California law and AB 1054, a wildfire bill passed this year (see CEM No. 1558). Among other things, AB 1054 created a new going-forward wildfire insurance fund that PG&E will be allowed to access provided it exits bankruptcy by June 30, 2020, with a plan that is cost-neutral to ratepayers. In September, the agency approved an order instituting rulemaking to begin that formal review.
On Oct. 9, the judge overseeing PG&E's bankruptcy terminated the company's "exclusivity period," during which it retained the sole right to file a reorganization plan, effectively opening the door for the bondholders to move forward with their own strategy (see CEM No 1560). The CPUC now has the task of evaluating two reorganization plans by May next year, in order to meet the AB 1054 deadline.
But the bondholders' plan is "severely flawed" and goes against public interest, PG&E said in its filing. According to the utility, the proposed rates of interest to current bondholders could cost ratepayers billions in extra interest payments over the next decade and a half. PG&E contends that the bondholders' plan does not specify any economic benefits to ratepayers or demonstrate ratepayer neutrality as required by AB 1054. The utility also claims the plan does not comply with requirements that executive compensation be tied to safety.
In addition, PG&E made a case for its own plan in the filing, saying it would fairly compensate wildfire victims and other stakeholders in its bankruptcy without increasing customer bills. According to the utility, its plan would also retain all its power-purchase agreements and comply with AB 1054, allowing PG&E to participate in California's wildfire fund.
PG&E Rejects San Francisco's $2.5-Billion Offer
PG&E Corp. President and CEO Bill Johnson rejected the City of San Francisco's bid to purchase the utility's electrical assets for $2.5 billion.
The offer came from San Francisco Mayor London Breed and City Attorney Dennis Herrera in a September letter, in which they argued that the sale could help PG&E's ongoing bankruptcy proceeding with a large infusion of cash. But in an Oct. 7 response, Johnson declined the bid, noting that it would pass a large chunk of costs to PG&E customers who do not live in San Francisco.
"As I indicated when we met, our San Francisco-based facilities are not for sale and to do so would not be consistent with our charter to operate or our mission to serve Northern and Central California communities," Johnson said.
He added that the city's offer was significantly below the market value of PG&E's assets and seemed to underestimate the costs that would fall on the city as a result.
"Finally, our financing strategy to emerge from bankruptcy does not envision selling off company assets. We believe we can fairly resolve and fund all claims and other items through conventional financial markets," Johnson said.
PG&E Seeks to Amend Contracts
On Oct. 15, PG&E attorneys filed a motion with the bankruptcy court requesting to retain some of the utility's contracts, including a 300-MW, 20-year battery storage procurement contract it signed with Dynegy Marketing and Trade LLC in 2018.
The contract is part of a 567-MW storage project being developed by PG&E at the behest of the CPUC to address deficiencies identified by the California Independent System Operator. Dynegy's battery storage project is still under development.
PG&E and Dynegy have agreed to amend the contract, discounting the dollar-per-kilowatt price by 5 percent and delaying the project by six months, according to the motion. The modifications are subject to approval by the bankruptcy court as well as the CPUC. PG&E in August also renegotiated agreements for two lithium-ion battery projects with mNOC AERS LLC and Hummingbird Energy Storage LLC, also part of the same 567-MW storage package (see CEM No. 1550).
In the same motion, PG&E sought to amend a December 2015 power-purchase agreement for a generation facility that is currently under development by Java Solar LLC. The revisions include a 10-percent discount to the contract's purchase price and a two-year delay in the project's completion schedule.