Counting Votes While CPUC-PG&E Bankruptcy Hearings Proceed

Gamblers try to count cards. Political junkies try to count votes. In the quest to approve a deal between the California Public Utilities Commission staff and Pacific Gas & Electric aimed at pulling the utility out of bankruptcy, backroom vote counters have yet to find a commission majority for the deal as negotiated. While hearings continued on the bankruptcy deal this week at the CPUC and witnesses continued to vet the details around the secret negotiations, there was concern among commissioners that ratepayers need to have something better coming out of any deal. However, there seems to be no hint of behind-the-scenes negotiations with commissioners and the utility. Commission insiders say the hearing process reigns and commissioners will make up their minds only after the administrative law judge's ruling. An unofficial tally based on background-only interviews found commissioners Loretta Lynch and Susan Kennedy leaning against the proposed settlement. Commission president Mike Peevey?who was involved in negotiations?appears to support his staff's deal. Statements by commissioner Carl Wood have shown an active interest in the outcome for ratepayers?but the secrecy of the deal leaves him cold and unpredictable. Commissioner Geoffrey Brown's poker face shows nothing to date. While on one hand, the unpredictable CPUC ballot fuels political junkies' speculations, the predictable, stolid process of CPUC hearings is an anchor among the many precedents in this case floating in uncharted waters. "Part of it is the process," said Pete Arth, commissioner Peevey's chief of staff, referring to the two traditional parameters of the commission hearing system?one allowing information to develop for policy makers and the other offering latitude that allows for administrative law judges' discretion and commission alternative proposals. "It's not the take-it-or-leave-it Edison deal," Arth commented. In that Southern California Edison-CPUC agreement, the traditional commission hearing process was circumvented and regulators didn't have the option of referring to any case history. The CPUC/PG&E process isn't different from any other hearing?so far. The framework at the CPUC calls for the administrative law judge to issue a decision. The judge could approve, deny, or suggest changes in the deal. That proposed decision goes to the full commission, and then each commissioner has the option of creating an alternate decision. Here is where this case will be unconventional. In other CPUC cases, a majority vote on either the judge's decision or an alternate binds a utility. But in this instance, PG&E has an out unavailable in any other case. PG&E could agree with a CPUC final decision, but it could also refuse to go along and instead take up its original reorganization plan in federal bankruptcy court. If PG&E reuses to be bound by a CPUC decision different from the negotiated deal, the state would go back to the nearly impossible position of trying to get some jurisdiction over the utility for continued regulation in the federal arena. This case is also extraordinary because of the huge financial stakes involved. PG&E owes its creditors $12 billion, according to PG&E spokesperson Ron Low. In the CPUC deal now in hearings, the state retains jurisdiction, and the "regulatory asset" for which ratepayers will give the utility a rate of return is valued at $2.2 billion. It's a fictitious asset, as if it were an actual power plant, where ratepayers are obligated to pay it off, plus interest. A mirror regulatory asset that is in play, but on hold, is in the federal bankruptcy court's parallel proceeding as the CPUC-official creditors' committee alternative to the PG&E reorganization. That asset is $1.75 billion, according to CPUC spokesperson Terrie Prosper. However, PG&E's Low said it was updated to $2.2 billion to reflect the same number as is in the CPUC hearings. A third number, proposed by The Utility Reform Network but now in limbo, is the $2.2 billion in funds with backing not as a phantom asset but financed with ratepayer-backed bonds. Apparently, some legislators who voted against TURN's plan and at least one commissioner do not believe the bond-backed option would save ratepayers enough to make it a credible alternative. Meanwhile, the urgency of time is closing in on the CPUC, the utility, and the court. Creditors are pressuring all involved in charge to resolve their payback as quickly as possible.

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Counting Votes While CPUC-PG&E Bankruptcy Hearings Proceed

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