New Bill Introduced in California Legislature Proposes Public Ownership of PG&E

On February 3 Senator Wiener introduced Senate Bill 917, which, if signed into law, would allow an existing state financing authority, to be renamed the “California Consumer Energy and Conservation Financing Authority” (the “Authority”), to exercise the power of eminent domain for the purpose of acquiring the assets or ownership of electric and/or gas corporations “if that corporation has been convicted of one or more felony criminal violations of laws enacted to protect the public safety within 10 years of the date the eminent domain action is commenced.” For now, SB 917 appears to apply only to PG&E.

To implement this change, SB 917 would do the following:

• Authorize the Authority to issue bonds for an “acquisition by eminent domain,” with no limit on the size of the bonds.
• Allow “local publicly owned energy utilities” (i.e., eligible municipal corporations and irrigation districts, municipal and public utility districts, and federally recognized California Indian tribes) to join an eminent domain action brought by the Authority.
• Authorize the Authority to transfer assets or ownership interests acquired through eminent domain to a new “Northern California Energy Utility District” (the “District”), which would have powers and duties similar to a municipal utility district, and/or to local publicly owned energy utilities. A local publicly owned energy utility would be entitled to have the electrical or gas system, or both, “necessary to provide service within its borders” transferred to it, provided it contributed its “proportionate share of the compensation paid for the assets or ownership of the public utility” acquired by the Authority. Any transfer must include provisions “preserving a dedicated rate component as security for any bonds” issued by the Authority.
• SB 917 states that it is the Legislature’s intent that the acquisition and subsequent transfer of acquired assets or ownership interests be completed within five years of the initiation of the eminent domain action.
• Until the transfer is complete, the Authority would perform all management duties for the utility and operate the utility “in trust.” However, once “fully operational,” a new “Northern California Energy Utility Services” (“Services”) would assume from the Authority “the responsibilities of a successor employer for all non-management employees of the acquired public utility.” A local publicly owned energy utility to which the Authority transfers electric and/or gas systems would be required to “assume the contracts of the public utility’s employees that provide service within its borders” or to contract with Services for the continued provision of services by those employees.
• The acquisition and change of ownership of a utility would not require approval by the California Public Utilities Commission ("CPUC") and, after the Authority’s acquisition of a utility, the CPUC would have no authority to regulate the utility’s rates, charges or borrowing, but would retain authority “relative to the safe and reliable performance of utility services” until the utility’s operations are fully transferred to the District and/or local publicly owned energy utilities. Following the transfer to the District, the CPUC’s authority over the District would be limited to the authority the CPUC currently has over other publicly owned electric and gas utilities. However, the CPUC would have no authority over the rates and charges paid to Services by the Authority, the District or any local publicly owned energy utility.

Consideration of SB 917 in the California Legislature is coinciding with review of PG&E’s current Plan of Reorganization in the bankruptcy court and CPUC.

Contact: Ron Liebert