As amended on May 14th, Senate Bill (SB) 350, co-authored by Senators Hill, Dodd and McGuire and Assembly member Holden, would add new Division 1.7 to the Public Utilities Code, to be known as the “Golden State Energy Act.” The stated purpose of this Act is to ensure that if PG&E “fails to emerge from bankruptcy as a transformed utility, then Golden State Energy is duly empowered to serve in that critical role.” Golden State Energy also would be authorized to act in the future if “the transformed utility fails to meet its duty to provide safe, reliable, and affordable energy services,” using the power of eminent domain to acquire PG&E if the CPUC determined that PG&E’s Certificate of Public Convenience and Necessity (CPCN) for the provision of electrical or gas service “should be revoked pursuant to any processes or procedures” adopted by the CPUC in its Investigation (I.) 19-09-016 (the CPUC’s investigation to “Consider the Ratemaking and Other Implications of a Proposed Plan for Resolution of Voluntary Case filed by Pacific Gas and Electric Company.”)
SB 350 would authorize the Governor to incorporate Golden State Energy as a nonprofit public benefit corporation for the purpose of “owning, controlling, operating, or managing electrical and gas services for its ratepayers and for the benefit of all Californians.” Golden State Energy would have an initial board of directors compromised of 9 members, appointed by the Governor and subject to confirmation by the Senate, with nominations subject to a “skills matrix” and designed to “maximize board member diversity and the selection of California residents.”
More specifically, SB 350 provides that no later than 45 days after (A) the earliest “occurrence of a material bankruptcy” (as defined in SB 350, including the “[f]ailure to confirm on or before June 30, 2020, a plan for Pacific Gas and Electric Company to exit bankruptcy”), (B) the CPUC determines that PG&E’s CPCN should be revoked, or (C) the initiation by PG&E of a “sale process for its assets or stock,” the CPUC would be required to initiate a proceeding “to develop and adopt rules and processes to regulate Golden State Energy, including its rates, and implement policies pertaining to electrical and gas safety, wildfire mitigation, climate change mitigation and adaption, public purpose programs,” and other requirements the CPUC finds applicable.
However, Golden State Energy’s acquisition of PG&E would not be subject to CPUC approval if Golden State Energy assumes and is bound by all of PG&E’s collective bargaining agreements, including pension and benefit agreements then in effect, assumes all obligations for funding pension plans then in effect, and, in the event the transfer is part of PG&E’s bankruptcy proceedings, agrees to “adopt and be bound by the terms and provisions set forth on Exhibit B to the Debtors’ and Shareholder Proponents’ Joint Chapter 11 Plan of Reorganization Dated March 16, 2020.”
Golden State Energy, after submitting an application to and getting approval from the CPUC, would be authorized to issue debt to “facilitate the acquisition” of PG&E, which may include a “rate covenant to all of its debt holders, including holders of debt issued to facilitate the acquisition” of PG&E. Golden State Energy would be required to file General Rate Case (GRC) applications at the CPUC to seek recovery of a revenue requirement sufficient to pay for its debt service associated with the acquisition as well as operating and capital expenditures. However, Golden State Energy would be allowed to increase its existing revenue requirement without CPUC approval (after providing the CPUC with 30 days advance notice) in order to satisfy the rate covenant, including, without limitation, “factoring in capital expenses, debt issuances, operation and maintenance of the utility, funding reserves, and working capital needs.”
Finally, Golden State Energy would be allowed to participate in the CA Wildfire Fund (Fund). However, unlike PG&E and the other electric utilities, Golden State Energy would be allowed to recover its Fund contribution from ratepayers.
Contact: Ron Liebert