Update On San Francisco’s Opposition to PG&E’s Plan
PG&E’s latest plan to emerge from bankruptcy made several minor adjustments, though it’s telling that none were substantial enough to require re-circulating their disclosure statement. Among the changes – and lack of changes – in their new proposal:
Sale is Theoretically Possible: PG&E is now agreeing to a provision allowing the company to be sold if it doesn’t meet the June 30 deadline. This seems unlikely and the process is not clear, and PG&E still does not explain why it is so resistant to cities like San Francisco taking on more responsibility for local power distribution, even though the company claims to want to localize and decentralize.
Delayed Dividends: PG&E will delay payment of dividends for an additional year. This is arguably good for wildfire victims getting paid from a trust holding significant PG&E stock, yet it’s notable that major representatives of the victims still oppose the proposal as fundamentally inadequate.
Minor Regulatory Shifts: PG&E agreed to some minor regulatory and governance provisions proposed by the CPUC president, although they come far short of addressing the many years of harm PG&E has inflicted on its customers in terms of safety, service, and rates. PG&E’s plans do little to spell out the safety improvements it would make. The plan does not have specific safety metrics, only PG&E’s promises that the metrics would be determined later.
Massive Debt Remains: The company’s huge debt continues to be ignored. The main feature of PG&E’s plan to get out of bankruptcy is to pile on new debt, at least $13.9 billion, which will bring PG&E’s total debt to a staggering $35.4 billion. Taking on this mountain of debt and stretching it out into the future allows PG&E to avoid real structural changes and shifts risks to ratepayers and our state.
Rates Could Rise: PG&E has insisted that it will not be raising rates as part of its path out of bankruptcy—or shifting costs from shareholders to its ratepayers—but in reality it is proposing a securitization plan that relies on adding a charge to every ratepayer’s bill so they can borrow money against it to stay solvent. In addition to this plan to add costs to ratepayers, PG&E appears to be relying on faulty assumptions that it can get a lower interest rate than it usually uses in its forecasts, even though it will be in a worse financial position. When PG&E claims its plan is neutral to ratepayers, it means only that the bankruptcy plan does not include a rate increase. Analysis shows that PG&E’s weakened financial condition makes it highly likely rates will go up following the bankruptcy as PG&E attempts to invest in improving safety and service.
These minor adjustments are inadequate and insufficient. San Francisco has continued to shine a light on this plan with the California PUC, explaining that “San Francisco does not believe that the motion materially impacts significant issues raised in this proceeding regarding PG&E’s financial health upon emergence from bankruptcy and over the longer term.”
We also made the case that IF the plan is approved, it must adopt measures including:
Requiring PG&E to:
implement alternatives to its current management and operational structures.
undertake asset sales that could improve PG&E’s financial condition.
Permanently barring PG&E from recovering from ratepayers costs associated with its bankruptcy and Plan.
Approving any securitization only if it is: (i) neutral, on average, to ratepayers in light of PG&E’s bankruptcy and Plan overall, and (ii) recognizes the contributions of ratepayers and compensates them accordingly.
The best path forward is public power.
The City of San Francisco continues to believe that the best path forward — for PG&E, for fire victims, and for all of the company’s ratepayers — is for San Francisco to assume full control over electric power distribution within the city. This would allow PG&E to reduce its wall of debt and give San Francisco residents more responsive, focused service, and greater protection from PG&E’s future financial risk. Meanwhile, state leaders and residents should push for real reform and restructuring of PG&E.
Local control of the entire San Francisco electric system will provide increased affordability, safety, reliability and accountability. Public power is aligned with the City’s aggressive clean energy and resiliency goals. Our offer benefits all parties involved and is consistent with San Franciscans’ desire to move our city in a new direction through public power.
- San Francisco Mayor London Breed
Creates New Funding for Victims, Protects Ratepayers From PG&E’s Unsustainable New Debt Load
At a time when PG&E’s bankruptcy plan weakens the company financially and harms ratepayers by adding $13.9 billion in new debt to exit bankruptcy, the City and County of San Francisco has offered $2.5 billion to acquire PG&E’s local power grid infrastructure in San Francisco.
This is a good offer for equipment serving just 5 percent of PG&E’s service area.
These funds, and funds offered by other local entities seeking to provide their own service, could be used by PG&E to compensate fire victims and other creditors and achieve a more sustainable financial position.
The acquisition can also relieve PG&E of the costs and responsibility of maintaining San Francisco’s aging local electric system.
Benefits All Ratepayers and Strengthens the State’s Power System
By reducing PG&E’s massive debt load, the acquisition can benefit PG&E’s remaining customers. Without additional funding, the utility will have to raise rates to support its operations, according to a recent City analysis of PG&E’s plan.
San Francisco public power would continue to pay PG&E for transmission costs from Hetch Hetchy and any other power sources to reach San Francisco’s local power grid.
San Francisco is committed to paying its fair share to ensure other PG&E ratepayers are not harmed. The California Public Utilities Commission (CPUC) will serve as an important backstop — reviewing the acquisition price and ensuring there are no adverse impacts on ratepayers outside of San Francisco.
Advances and Accelerates Statewide PG&E Reforms
San Francisco is part of a growing chorus demanding real reform of PG&E — to ensure communities across California have safe and reliable electricity service.
San Francisco’s acquisition of local infrastructure can complement all of the major reform ideas being considered in the Capitol — whether it is restructuring PG&E, shifting to public ownership of the utility, or other approaches.
With San Francisco focused on its own local power grid, PG&E could focus on the rest of Northern California, especially on providing long distance electricity transmission.
Consideration and engagement with San Francisco’s offer is a key test of the company’s willingness to engage with local partners, focus on safety, and accept that real change is needed.
The City’s offer is good for San Francisco, good for wildfire victims, good for the state’s power system, and good for PG&E’s customers throughout Northern California