Unprecedented PG&E Ratepayer Bond Gets Final Okay

By Published On: May 6, 2021

The California Public Utilities Commission unanimously approved the financing order setting parameters for Pacific Gas & Electric’s unprecedented 30-year, $7.5 billion ratepayer financed securitization. It is the largest and lengthiest utility bond securitization in U.S. history, according to Joseph Fichera, Saber Partners CEO.

On May 6, the CPUC approved the order detailing the financial terms of the total $11 billion ratepayer-backed bond. The bond’s interest is estimated at about $4 billion.

The securitization parameters set forth in the financing order require the establishment of a Finance Team to oversee the “structure, marketing and pricing” of the bonds to protect ratepayers.

“The financing order uses best practices,” according to Fichera.

This week’s approval follows the Commission’s earlier 5-0 vote finding the securitization was legally proper. That opened the door to the utility refinancing $6 billion in short-term bankruptcy debt stemming from the utility’s 2017 wildfire victim liability.

“The wildfire costs are eligible to be financed with the issuance of securitization bonds,” CPUC President Marybel Batjer said Thursday. PG&E satisfied the legal “stress test pursuant to SB 901,” as noted in the Commission’s April 22 decision, she added.

During this week’s meeting, no other commissioner commented on the financing order.

PG&E spokesperson Ari Vanrenen said the approval proves the issuance “will not increase energy bills and will strengthen PG&E’s going-forward business, while supporting our ability to provide safe, reliable, affordable and clean energy to our customers.” The utility says ratepayers will be repaid but it’s not required to guarantee that.

“Today’s decision was a foregone conclusion after the Commission issued its illegal decision approving this deal on April 22,” countered The Utility Reform Network Legal Director Tom Long.

TURN, the Wild Tree Foundation and City and County of San Francisco are challenging the CPUC’s and PG&E’s statutory interpretation, seeking a rehearing of the earlier ruling on grounds it will increase rates. TURN and Wild Tree also will request a rehearing of the May 6 approval.

“Already suffering some of the highest utility rates in the country, ratepayers should not be further burdened by costs incurred as a direct result of PG&E’s neglect and mismanagement,” April Rose Maurath Sommer, Wild Tree executive director, said.

PG&E reiterated in a May 3 filing that its ratepayer-backed bonds will save customers money. The CPUC agrees.

Securitization ground rules

Although TURN rejects the legal underpinning of the securitization decision, it supports the CPUC Finance Team that is called for in the order. That is, “as long as its work is transparent and not conducted in secrecy,” Long said.

The finance team is supposed to oversee all material details of the bond pre-issuance, including interest and administrative costs. The order also mandates that the underwriter certify that the bonds come with the lowest possible cost on a net present value basis as required by AB 1054. It also gives the financing team—made up of the CPUC General Counsel, the Deputy Executive Director for Energy and Climate Policy, other staff, and outside bond counsel, the authority to hire additional outside experts to ensure ratepayers are protected. The financing oversight group also has the right to be included in all communications regarding the bond issuance.

Under the order, PG&E can issue up to three series. But the issuances must be done by the end of 2022.

The finance team is to approve each tranche and verify each time that the underwriters certification that the bond comes with the greatest savings to ratepayers. 

Elizabeth McCarthy

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