PG&E Bankruptcy Financing Bill Defeated

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

Capitol Update, Sept. 12, 2003 Share this on FacebookTweet thisEmail this to a friend

Last-minute legislation giving the California Public Utilities Commission the option to finance Pacific Gas & Electric's emergence from bankruptcy through the issuance of bonds backed by a dedicated-rate component (DRC) failed passage in the Assembly Utilities and Commerce Committee on Wednesday, Sept. 10.

Senate Bill 772, authored by Senator Debra Bowen (D-Marina Del Rey), would have authorized the CPUC to issue financing orders to support the issuance of energy recovery bonds by the California Infrastructure and Economic Development Bank, secured by a DRC, to pay off creditor claims and other expenses relating to PG&E's bankruptcy proceeding.

The measure, which was strongly supported by CMTA, would have likely saved ratepayers hundreds of millions of dollars—and perhaps as much as $2 billion—over nine years in the form of reduced financing costs.

The defeat of SB 772 increases the likelihood that the CPUC will eventually approve an alternate method of financing contained in the proposed bankruptcy settlement between PG&E and CPUC staff. The proposed settlement allows PG&E to create a “regulatory asset” of $2.21 billion that would be recovered from ratepayers over nine years. The total cost to ratepayers of the regulatory asset is an estimated $5.2 billion.

The proposed settlement is the subject of an ongoing CPUC proceeding, with a CPUC vote likely to occur in December. The plan must also be approved by the U.S. Bankruptcy Court.

Meanwhile, Senator Bowen may introduce a Senate Resolution, a non-binding measure, that urges the CPUC to resolve the PG&E bankruptcy at the lowest possible cost to PG&E ratepayers and to evaluate whether the use of securitized financing backed by a DRC will reduce the cost to ratepayers of settling PG&E's bankruptcy. The proposed resolution also states that if the CPUC finds that the use of such financing will reduce the cost to ratepayers it should take appropriate steps to implement such financing, including recommending legislation if necessary.
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