SAN FRANCISCO - PG&E Corporation
(NYSE: PCG) and Pacific Gas and Electric Company today filed objections
to the California Public Utilities Commission's (CPUC) disclosure
statement with the U.S. Bankruptcy Court.
After reviewing the CPUC's
alternative plan, PG&E continues to believe its plan of reorganization
is the only feasible solution that restores the company to investment
grade credit levels and gets the State of California out of the
power buying business.
As it promised to the Bankruptcy
Court, PG&E will not raise objections that the CPUC's alternative
plan is unconfirmable during this phase of the case and will reserve
those objections for the confirmation hearing. However, PG&E believes
the CPUC's disclosure statement, as currently drafted, omits critical
facts and may be misleading. As a result, the disclosure statement
needs to be amended to include additional information in several
areas, including:
-
That the CPUC is
maintaining sovereign immunity and the Bankruptcy Court might
not have the authority to require the Commission to implement
its plan or to enforce the commitments made by the Commission
in its plan. The CPUC cannot continue to claim sovereign
immunity when it is submitting an alternative plan. The CPUC's
disclosure statement needs to reveal explicitly the risk that
the CPUC may decide not to implement its plan or take actions
inconsistent with the plan, and that as long as it asserts sovereign
immunity there would be a dispute over whether the Bankruptcy
Court could force the Commission to comply with the plan.
-
That the CPUC may
take the position that it is not bound by the plan it filed
and may change its plan at any time. The CPUC has previously
taken the position that it is not bound by its decisions, and
therefore may take the position that its plan is not binding
on future Commissions and may be amended, altered or rescinded
at any time. However, before the Bankruptcy Court, the CPUC
said that it is legally authorized to submit and be bound by
its plan. This assertion appears to be inconsistent with California
law as interpreted by the CPUC, which says the CPUC may not
bind itself or future Commissions on matters within its regulatory
jurisdiction, and in fact may, at any time, rescind, alter or
amend any order or decision it previously has made.
-
That there are two
pending proceedings that could force the CPUC to change or possibly
withdraw its alternative plan. The CPUC is currently involved
in proceedings that may require that its plan be modified, altered
or rescinded, and require that the CPUC hold public hearings
and issue further decisions before it may proceed with or be
bound by its plan. The proceedings, which relate to the CPUC's
authority to propose and implement its alternative plan of reorganization,
include a lawsuit by the Foundation for Taxpayer and Consumer
Rights in the California Supreme Court and a CPUC Bankruptcy
Investigation, which the Commission has initiated itself.
-
That the CPUC's plan
does not require the utility to be an investment grade company.
The CPUC's alternative plan states the requirement that the
utility's investment grade credit rating be restored can be
waived at any time. Receiving an investment grade credit rating
is an essential requirement in PG&E's plan of reorganization,
which may not be waived. Without an investment grade credit
rating, the likelihood of success for the CPUC's plan is highly
uncertain, which would likely force the State of California
to remain in the power buying business for several more years.
-
That the CPUC's alternative
plan requires preemption of existing state law in order to confiscate
assets and cash, which belong to PG&E. The CPUC has not
disclosed that it needs to preempt state law to confiscate the
utility's return on investment and other assets, such as the
Filed Rate Doctrine claim and other claims. The CPUC's alternative
plan would require the Bankruptcy Court to preempt the Commission's
own decisions, state law and the California Constitution to
expropriate the $1.6 billion Pacific Gas and Electric Company
would earn as a return on the investment it makes to build and
maintain the transmission and distribution infrastructure to
serve customers, as well as other assets of the utility.
-
The CPUC needs to
detail the approvals necessary to implement its plan. The
CPUC fails to identify the numerous regulatory approvals required
for implementing its alternative plan, the anticipated time
frame associated with the approvals and whether the CPUC is
reserving the right to deny the approvals that it would need
to provide.
In the filing, PG&E also
noted the CPUC's plan contains provisions that are materially different
from those presented in the CPUC's Term Sheet, which raise fundamental
legal issues concerning the confirmability of the CPUC's alternative
plan. In particular, the CPUC's plan attempts to close the cash
shortfall in its Term Sheet by requiring the utility to take on
$3.8 billion of new debt, selling $1.75 billion in new common stock
and obtaining from lenders a new $1.9 billion secured credit facility
to fund working capital and other collateral obligations. Each of
these new sources of revenue improperly burdens the utility and
the rights of thousands of PG&E Corporation shareholders and investors.