SF Officials Object To The Legality Of PG&E’s Proposed Bankruptcy Plan

In its final phase of exiting bankruptcy, utility company PG&E now faces a legal objection from SF's city attorney. Photo courtesy of Meritt Thomas.

SAN FRANCISCO—On Friday, June 12, San Francisco City Attorney Dennis Herrera announced that the city has brought forward a legal objection to the funding plan of Pacific Gas and Electric Company (PG&E), which has been trying to exit bankruptcy since January 2019.

PG&E originally filed for Chapter 11 bankruptcy due to a heap of liability charges resulting from connections between the company’s equipment and a series of wildfires in Northern California.

Since then, it has been trying to raise the funds to come out of bankruptcy. The company is now in its final phase of bankruptcy exit.

One way PG&E intended to come up with the money to finance its bankruptcy exit was to add an extra charge to customer bills and initiate a payback program that would reimburse customers for the surcharge over time.

According to the City Attorney’s Office, these surcharges would impact most of PG&E’s ratepayers, even those who receive utility services from other companies in addition to PG&E.

The company submitted this funding proposal to the California Public Utilities Commission (CPUC), which approved it on May 28.

California law requires that PG&E’s bankruptcy exit plan is ratepayer-neutral—that is, customers should not be financially affected by the company’s reorganization.

By promising to pay ratepayers back for the extra payment on their utility bills, PG&E aimed to achieve ratepayer neutrality with this new plan.

As the utility company stated in its proposal, “In the matter at hand, costs already incurred for customers ideally would be recovered from customers as soon as possible. Understandably, perfect alignment is not possible. Nonetheless, greater alignment is a goal to promote and achieve when practicable.”

The City of San Francisco has taken issue with the legality of this financial model though, despite the approval the plan received from the CPUC.

Herrera said in a public statement, “PG&E’s securitization plan is a financial house of cards.”

The city holds that PG&E’s fiscal projections are too unstable to ensure that ratepayers would be paid back in the long run, which would violate state law.

Supervisor Aaron Peskin stated, “This looks like yet another bait and switch from Pacific Gas & Electric. Once again, they are trying to shoulder the ratepayers with huge increases that they will never return. I hope the CPUC will not be bamboozled by PG&E again.”

The City Attorney’s Office will now work with the CPUC and other stakeholders to review PG&E’s ratepayer cost model and determine whether it is legally permissible.