CPUC Allows PG&E to Raise More Money

Pacific Gas & Electric was given flexibility in issuing its long-term debt and preferred stock by the California Public Utilities Commission. Without discussion, commissioners voted April 7 to grant the utility the ability to raise more debt and provide it more leeway in how that may be done. According to CPUC president Mike Peevey, his approved decision will produce ?maximum savings to ratepayers.? After the vote, commissioner Geoffrey Brown mumbled that he wants to make sure Wall Street ?knows the security of the bonds was not the only consideration.? The decision keeps PG&E?s $1.54 billion in long-term debt and stock from being voided in the event the utility fails to comply with the commission?s capital structure requirements. PG&E successfully argued that the rule could end up raising its costs if the debt-to-equity ratio gets out of sync because of ?unexpected events.? PG&E was also given the green light to expand how its debt and preferred stock are used. They can be used not only to replace short-term debt but to retire stock, buy property, or improve facilities, as well as to readjust indebtedness because of a merger. An alternate decision would have required PG&E to have a ?reasonable need to issue debt and equity.? The alternate by administrative law judge Tim Kenney added, ?We also believe it is bad public policy to grant PG&E blanket authority to issue debt for unknown purposes,? including a merger. ?One of the key lessons from PG&E?s recent bankruptcy is that amounts paid by PG&E customers should always be available to pay for vital services by the utility,? the unsuccessful alternate declared. Peevey?s decision, unlike the alternate, also agreed to grant PG&E general authority to issue debt secured by its accounts receivable. Other proceedings, including general rate and cost-of-capital proceedings as well as the bankruptcy deal, set debt-to-equity parameters, noted David Gamson, Brown?s adviser. He said Peevey?s decision gives PG&E needed flexibility to respond to an array of market opportunities. The decision also raised PG&E?s debt limit to about $2.5 billion.

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CPUC Allows PG&E to Raise More Money

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