PG&E Tells CPUC to Reject Challenges to $7.5B Bond Approval

4 May 2021

Pacific Gas & Electric is defending the California Public Utilities Commission’s finding that it may proceed with its $7.5 billion mortgage-like ratepayer-backed bond issuance against objections from ratepayer advocates and others. Regulators unanimously approved April 23 Administrative Law Judge Robert Haga’s proposed decision finding the utility met the legal requirements for securitization.

PG&E says it will fully reimburse ratepayers for the 30-year bond, largely with tax savings, thus avoiding ratepayer impacts as legally required.

In a May 3 filing, PG&E asks regulators to again reject ratepayer advocates’ arguments that it’s ineligible for securitization because the total $11 billion tab will impact residential and business customers and it won’t improve its credit rating. The utility also urges dismissing calls to provide detailed reporting of any shortfalls in the ratepayer reimbursement account over the bond’s life. Finally, the utility wants to ward off any prohibition against splitting the $7.5 billion bond into two or more tranches.

The Utility Reform Network and other intevernors argue that the securitization is a no-go because it will not improve PG&E’s credit rating as required. PG&E contends the issue was “fully explored and rejected.”

Moody’s told Current last week that a securitization to replace $6 billion in short-term bankruptcy debt will not improve its rating of the utility.

The Wild Tree Foundation and TURN also claim that PG&E is disqualified from securitization because the issuance won’t be rate neutral or reduce rates to the maximum extent possible as required by law. They argue that the projected savings from a bond issuance should be compared to zero costs because the bankruptcy debt is not transferable to ratepayers.

No “real world evaluation”

The company said the savings benchmark should be compared to the cost of traditional utility finance. PG&E’s interpretation of Haga’s decision is that it “does not call for a real-world evaluation of all the facts and circumstances,” and refinancing with ratepayer backed bonds creates customer savings.

The company also argues that TURN’s proposal to require PG&E to detail reasons for any repayment shortfalls in Customer Credit Trust in the Advice Letter process is “vague and unnecessary.” But, according to the utility, it “has no objection in principle.”

The utility also insists the Commission ignore the call of the Energy Producers and Users Coalition that wants the agency to ensure customers don’t pay for any shortfall. PG&E says EPUC is relitigating the issue. Judge Haga backed PG&E only promising, but not guaranteeing, full customer repayment.

TURN’s argument that the CPUC decision creates a conflict of interest for regulators because it pits customer costs against utility financial health also should be dismissed, PG&E argues. The CPUC “routinely has to weigh the affordability of customer rates alongside factors such as safety, policy goals, fostering the financial health of investor-owned utilities (to the long-term benefit of ratepayers and the public generally) and allowing for a rate of return that will not increase the cost of equity.”

Wild Tree also warns that PG&E must not be allowed to issue more than one bond tranche because it will cost customers more. PG&E said that argument is flawed because the decision “appropriately maintains flexibility to ensure best execution of the transaction.”

PG&E has said it will fund the trust with $1 billion this year but Haga allows the funding to be proportional to the amount of the bond issuance, so the smaller the bond, the smaller the contribution.

TURN, Wild Tree and the City and County of San Francisco asked the Commission May 3 to reconsider its April 23 decision approving the bond issuance.

This Thursday, the financing order setting bond terms, including oversight of the multi-billion-dollar bond issuance, is expected to be approved.

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