PG&E Bankruptcy Decision Heads to Appeals Courts

Two California Public Utilities Commission members will appeal Pacific Gas & Electric?s bankruptcy reorganization plan despite efforts by the utility January 5 to block the commissioners? legal standing. However, PG&E was able to keep the reorganization plan moving ahead while the appeals go forward. There is no precedent for allowing individual commissioners to appeal a CPUC decision. In addition, some question the viability of the appeals being brought by commissioners Carl Wood and Loretta Lynch. Wood rejected the idea that the appeals didn?t stand a chance. ?There is a real serious conflict between federal bankruptcy law and state law,? he said. Wood does not challenge the whole PG&E-CPUC deal, only its provisions that undermine commissioners? ability to carry out their constitutional and statutory duties. ?I think the commission decision went farther than necessary or permissible under state law,? he said. Lynch defended her and Wood?s challenge. ?PG&E?s power grab is unprecedented,? she noted. Approving a decision that binds current and future commissioners was also unprecedented, she added. Federal bankruptcy judge Dennis Montali rejected the arguments by outside counsel for PG&E and the CPUC that the two dissenting commissioners lacked standing to appeal under federal bankruptcy law. ?I don?t think I have the authority to say commissioners Wood and Lynch can?t appeal my decision,? the judge said in a Monday hearing. The CPUC?s own counsel took PG&E?s side because the majority of CPUC commissioners agreed to the bankruptcy reorganization plan. Wood and Lynch sharply dissented from the decision. Lynch and Wood, along with city of Palo Alto attorney Larry Engle, will appeal the decisions by the CPUC and the bankruptcy judge in federal district court by the end of the month. In addition, Engle promised to challenge the matter in state court, asserting the deal approved by commissioners Michael Peevey, Jeff Brown, and Susan Kennedy violated procedural and substantive laws because many of their findings and conclusions were not supported by evidence in the record. The denial of the request by Palo Alto and the commissioners for a stay of reorganization implementation was expected. Montali found that Engle?s argument fell short of what was needed. ?Where are all these monsters coming from, and how are they terrorizing you?? Montali asked. Engle went through the exercise of seeking a stay to preserve the matter for appeal, noting that the holidays interfered with his ability to write up a full-bodied brief. Even in the unlikely event that his motion had been granted, Palo Alto could not have afforded the $500 million bond PG&E proposed it be required to post. The bankruptcy reorganization deal approved by the CPUC on December 18 adopted an agreement that PG&E and The Utility Reform Network reached three days before the vote. The complex deal prohibits the commission from challenging the reasonableness of PG&E rates over the next decade. It also includes a $2.2 billion regulatory asset that will be added to PG&E?s rate base, which will reap a sizable return over its nine-year life. The cost of the decision for ratepayers is estimated at between $7 billion and $8 billion. A $1 billion savings will be achieved if state lawmakers agree to pass a bill authorizing the creation of a dedicated rate component to finance the regulatory asset. Lynch said last month?s bankruptcy decision makes individual commissioners liable for contempt if they fail to defend it over its nine-year life. She said it seriously infringed on the commissioners? First Amendment rights. The two CPUC members filed a notice of appeal last week and must file their appeal before the decision is finalized. Lynch and Wood hoped the federal court would defer to the state court on questions of California law, as it did in the suit over the secret Southern California Edison?CPUC deal brought by The Utility Reform Network. The lawyer for the two commissioners—Joe Cotchett of the Burlingame-based firm Cotchett Pitre Simon—added that the decision?s prohibition on ratemaking for PG&E over the next nine years also violates commissioners? duties to ensure that rates are just and reasonable. Cotchett said his fees will not be paid by the commission. Lynch said if the appeal is successful, she will seek reimbursement from the CPUC. During the energy crisis, Cotchett worked for former Assembly speaker Bob Hertzberg and Senate president pro tem John Burton (D-San Francisco) and filed suits against generators as well as accountants involved in the Enron debacle. The city and county of San Francisco is considering whether to appeal the PG&E-CPUC bankruptcy decision.

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PG&E Bankruptcy Decision Heads to Appeals Courts

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