Attorneys for Pacific Gas & Electric protested a motion by the California Public Utilities Commission ratepayer advocate to consider alternatives to the utility in Northern California, saying in a July 12 filing that the proposal could jeopardize its reorganization process.
The filing came in response to a July 1 motion by the CPUC’s Public Advocates Office that suggested the agency create minimum safety standards for PG&E to meet post-bankruptcy, as well as look into alternatives to the utility to mitigate its “culture of entitlement” (see CEM No. 1546 ).
The motion, according to PG&E’s attorneys, does not provide any evidence of this alleged culture of entitlement, nor any explanation of how launching a competitive bidding process for the utility’s franchise could improve safety. They said the motion, if approved, could scare away investors, jeopardize its bankruptcy process and signal to utility employees that their jobs are at risk.
“Entertaining the motion’s proposals also would be counterproductive, particularly at this critical juncture,” the attorneys said.
The Public Advocates Office said its motion was based on the fear that PG&E’s reorganization process would either lead to no changes at the company, or culminate in a sellout to an acquirer that would act only in the interest of shareholders. It recommended looking for other entities that might be able to serve customers in Northern California instead of PG&E, saying that treating the utility like the “only game in town” would add to its culture of entitlement.
However, PG&E argued that any entity that could replace it would need to continue using its existing infrastructure and workers, meaning only the company’s management would be swapped out—and that such a transfer could lead to further problems.
“The motion ignores that the annals of corporate history are littered with acquisitions that turned out badly because of culture clashes between acquiror and acquiree,” the attorneys said.
The company’s lawyers also pushed back against the perceived notion that its employees are indifferent to safety issues because of a “culture of entitlement.” They noted that safety incidents impact both employees and shareholders financially, both because many of them own company stock and because of performance-based payments built into their compensation.
PG&E received support from the Coalition of California Utility Employees, which said in a July 16 filing that looking for an alternative to PG&E would be a “futile exercise,” since any replacement would need to buy PG&E’s infrastructure—which the utility could not be forced to sell without a prolonged fight. Municipalizing PG&E would involve a long approval process, and the CPUC’s decision on the matter would be open to further review—including by the courts, if disputes arose over how to compensate PG&E for its assets, the group said.
“Picking alternatives to PG&E is a fruitless effort,” the group said.
CUE contended that the motion, if approved, could endanger the implementation of AB 1054, the wildfire bill signed by Gov. Gavin Newsom on July 12 (see CEM No. 1547 ). The legislation requires PG&E to exit bankruptcy by June 2020 in order to access a state wildfire fund. However, looking for entities to replace PG&E could prevent it from attracting the capital it needs to emerge from bankruptcy—thereby also risking payouts for wildfire victims, CUE said.
Instead, the group suggested the commission outline safety-related expectations for PG&E to adhere to after it exits bankruptcy and consider ways to achieve them, including overhauling the company’s management.
The Utility Reform Network supported the Public Advocates Office’s motion in a July 16 filing, saying that if the commission does not outline any standards for PG&E’s exit from bankruptcy, the utility could face restructuring plans proposed by other parties that would not improve service for its customers.