PG&E gets initial approval to securitize $7.5B of wildfire costs, despite ratepayer impact concerns

According to PG&E, securitizing the costs would allow it to retire $6 billion of debt and accelerate compensation promised to fire victims as part of its bankruptcy reorganization plan. The CPUC decision directs the utility to establish a “customer credit trust” to reimburse ratepayers, which shareholders would fund with $1 billion in 2021, $1 billion before March 31, 2024, and nearly $7.6 billion down the line.

That last requirement, however, has drawn concerns from ratepayer advocates. PG&E intends to get the money from certain shareholder-owned tax deductions or net operating losses. But consumer advocate The Utility Reform Network (TURN) has pointed out that the utility’s most recent 10-K filing with the Securities and Exchange Commission states its ability to tap into those net operating loss carryforwards could be limited — although PG&E does not think it will face that issue.

CPUC President Marybel Batjer pointed to the shareholder contributions to the customer credit trust, as well as the possibility of requiring PG&E to contribute up to $775 million more in 2040, as offsetting the ratepayer charge.

“Based on these requirements, I believe the decision before us today meets the requirements of the stress test, maintains ratepayer neutrality, and will help further put PG&E on a path to enhance financial stability, which can provide lower costs to the customers than without the securitization,” Batjer said.

TURN isn’t opposed to securitizing the wildfire costs, since that strategy allows for lower interest rates than going to the private market for financing, the group’s Executive Director Mark Toney said. But the only way this proposal will be “rate neutral” is if there is an iron-clad guarantee that shareholders will compensate ratepayers, he said.

“The only guarantee [here] is the ratepayers have to pay regardless. That’s the problem there in a nutshell,” Toney said.

TURN has conducted modeling that indicates there is a 40% chance that the shareholder-funded trust will face a shortfall, compared to PG&E’s estimate of 16%, in which case ratepayers will be saddled with an average of nearly $2 billion, per the group’s estimates.

“No matter who you believe, it’s not a zero chance,” Toney said. “We want that to be brought to zero by a guarantee.”

PG&E appreciates the approval of the securitization, which is intended to save customers money by improving its creditworthiness, utility spokesperson James Noonan said in an emailed statement.