Federal Judge Ratifies PG&E Bankruptcy Pact; Reasoning to Follow

After being shaken?but not sidetracked?by a 6.5 earthquake in central California, the federal bankruptcy court December 22 confirmed a settlement aimed at moving Pacific Gas & Electric beyond bankruptcy. The last-minute settlement was approved by the California Public Utilities Commission on a 3-2 vote last week. On Monday, federal judge Dennis Montali admitted he did not have time to read through the settlement decision and associated documents but issued a confirmation order anyway, allowing PG&E to go to the financial markets to line up cash to pay back creditors. ?We would like to begin that process as soon as possible,? said PG&E spokesperson Ron Low. Montali took the unusual step of issuing a confirmation order in advance of a decision?and laying out his findings about ?the largest of utility bankruptcy in the universe??because ?this case is worthy of many, many exceptions,? he said. Montali added he would issue findings and conclusions of law next week after digesting the CPUC decision. The judge noted that his ruling will essentially mirror the order he issued earlier this month, which would have confirmed an earlier settlement negotiated between the utility and commission staff. That settlement was usurped by the last-minute version worked out with The Utility Reform Network, the utility and CPUC staff. Montali is required to issue separate findings to support this week?s order although the CPUC?s bankruptcy decision included what were deemed ?non material changes.? The separate, post-CPUC-approval finding will lend credibility to Montali?s order, which otherwise might be viewed by other courts as simply a rubber stamp for the deal reached by the litigating parties. ?It is the beauty of cut and paste, but it is my own work product,? he said. Attorneys representing municipalities, including San Francisco and Palo Alto, objected to Montali issuing a confirmation order without considering evidence to support the settlement that was announced early last week. ?The record is stale,? said Larry Engel, attorney representing Palo Alto. He and others also objected to the order being the controlling document in the event that it conflicts with the CPUC?s decision and the settlement agreement reached between PG&E and TURN. The deal approved by CPUC members Susan Kennedy, Mike Peevey and Geoffrey Brown, with commissioners Loretta Lynch and Carl Wood opposed, allows the creation of a $2.2 billion regulatory asset to be paid off with a dedicated rate component (DRC). The deal, however, requires the Legislature to pass a bill authorizing issuance of rate component. If a bill is passed, future ratepayers will finance the $2.2 billion much as taxpayers would finance a bond issue. This financing, with an revenue stream earmarked from rates, could save ratepayers more than $1 billion compared to going to the lender community for the same funds. Just how the savings?if any?will be allocated among the various customer classes remains to be seen, but the deal frees ratepayers from bearing the litigation costs of PG&E Corp. San Francisco attorney Dave Campos argued against Montali signing off on a confirmation order that regulators had not formally approved. The three commissioners? decision, he said, did not specifically delegate that authority to the CPUC?s outside counsel. Montali said he could not question the authority of the commission?s counsel or that of any other attorney. PG&E is responsible for reimbursing the CPUC for its litigation costs but the reasonableness of those costs will be dealt with a separate proceeding. Engel said after the hearing that he would seek a rehearing at the CPUC.

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Federal Judge Ratifies PG&E Bankruptcy Pact; Reasoning to Follow

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