Federal Court Plays Whack-a-Mole with CPUC Bankruptcy Decision

The federal bankruptcy court recognizes it is little more than a guessing game trying to predict the outcome of the current race between the California Public Utilities Commission?s decision on Pacific Gas & Electric?s bankruptcy agreement with the state and the fallback position of the utility?s reorganization plan pending in federal court. In a November 17 hearing, bankruptcy court judge Dennis Montali asked participants to help flesh out the possibilities of outcomes in the two venues as both proceed toward a conclusion. The timing of the parallel tracked bankruptcy proceedings in the court and at the commission begs several questions that Judge Montali left open to debate at a November 24 hearing. He said if he approves or disapproves the reorganization deal currently pending in his court, he doesn?t know whether he should wait to make it public until the CPUC makes its decision or do nothing until after the CPUC decides. A decision is planned by the CPUC December 18, but that may be delayed. Montali asked the parties to debate various scenarios, including the possibility that the Federal Energy Regulatory Commission, the CPUC, or the legislature should decide that cost-of-service ratemaking is no longer viable during the nine-year term of the agreement pending at the CPUC. If that were to be the case, what would happen to the agreement? he asked. The judge also questioned whether there should be further hearings as some issues remain unresolved. For instance, a hearing may be needed to address the issue that the state attorney general and San Francisco have raised: the legality of PG&E upstreaming $5 billion to its parent corporation before declaring bankruptcy. Whether the parent company can be held responsible for that money is a part of the agreement pending at the commission. While questions floated in federal court, PG&E?s top brass briefly took the witness stand to speak to the settlement pending at the CPUC. Getting the chief executive officers of PG&E and PG&E Corp. into court was a big deal for creditors, but their testimony revealed little. Bob Glynn, chair of both PG&E and PG&E Corp. and chief executive officer and president of PG&E Corp., said that under the agreement, the CPUC has to ensure a creditworthy utility. ?The obligation I see is the obligation to comply with the proposed settlement agreement, for the commission to act to facilitate and maintain investment-grade ratings.? In return for upholding that obligation, the utility would give up its reorganization plan pending in Montali?s court that would allow the utility to escape most state regulation. Gordon Smith, president and chief executive officer of the utility, echoed previous testimony and public statements. He said the CPUC agreement portends ?a cost-of service, rate-of-return, rate-base business in California.?

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Federal Court Plays Whack-a-Mole with CPUC Bankruptcy Decision

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