Monterey County Farm Bureau

PG&E Bankruptcy

Farmers Have Unique Stake in PG&E Bankruptcy

Written by: Karen Norene Mills, CFBF Senior Attorney for Energy Policy

Unlike any other group of Pacific Gas and Electric Co. ratepayers, farmers, ranchers and agricultural businesses are intertwined with the utility's operations and services. For that reason, the California Farm Bureau Federation will remain closely involved in proceedings related to PG&E's bankruptcy filing, and will continue to advocate for our ratepayers' interests.

Ratepayers across PG&E service territory will likely see rate increases, and Farm Bureau will be there to minimize these impacts to our members. Additionally, many members have unique relationships with PG&E, due to the service lines that cross farms and ranches.

Anyone with PG&E lines on orchard ground knows firsthand the challenges with that relationship. Similar challenges attach to natural gas pipelines that cross farm property. With a service territory of 72,000 square miles, the miles of infrastructure crossing agricultural land raise the stakes in discussions about PG&E's future structure.

In addition, PG&E owns hydroelectric facilities that connect with water delivery systems in Northern California. Prior to its previous bankruptcy, PG&E took steps to sell its hydroelectric assets. The constant connection of farms and ranches with PG&E assets and services mean it is often a necessary partner in farmers' daily lives.

There is extensive speculation and advocacy about whether PG&E will continue providing services in all elements of its current business, or whether other entities will step in. The California Public Utilities Commission has invited comments on whether PG&E's structure should be reorganized by function or possibly through revising its service territory. In addition, the events that led to the PG&E bankruptcy have brought pressure from financial markets on the state's other investor-owned utilities.

With that background in mind, I have been reviewing the bankruptcy code to make sure CFBF can interject the unique concerns of farmers and ranchers into the process, as any opportunities arise.

Under Chapter 11 bankruptcy proceedings, most legal actions are halted. The utility's business proceeds in accordance with very specific processes laid out by the bankruptcy and enforced by a judge. The same judge who oversaw the previous PG&E bankruptcy case in 2001 will be administering this case, which should translate into relatively expeditious decisions.

From the day it filed, PG&E set the stage to operate in a business-as-usual mode. For Farm Bureau members, that means electric and natural gas service continues. So do credits for energy generated through net metering. Rate increases will be implemented when authorized; trees continue to be trimmed and sometimes removed; service extensions continue to be authorized and energy-efficiency rebates awarded.

As the company continues to operate, numerous stakeholders are affected and will seek to be heard in court.

A committee of unsecured creditors has been appointed by the U.S. Trustee, which is standard. In addition, the trustee has indicated a willingness to appoint a committee representing parties with lawsuits against PG&E, likely to include wildfire victims.

There may be an opportunity for CFBF to participate in a ratepayer committee. CFBF has joined with TURN, a residential ratepayer group, in requesting the appointment of a committee of ratepayers, with standing similar to that of the creditors committee.

Such a committee is warranted more than ever. In the previous PG&E bankruptcy, ratepayers shouldered the costs needed to repay creditors—about $7.2 billion. This time around, if ratepayers must help pay, the price tag will be much higher; estimates run up to $30 billion.

We don't yet know whether a ratepayer committee will be appointed and, if so, who will be selected for it, but CFBF has made clear we are willing to engage in that forum.

The bankruptcy raises the specter of what changes should be made to PG&E's operational structure to ensure sustainable electric and gas service to Californians—a topic being addressed from several angles. The CPUC oversees multiple proceedings that address the question. Gov. Newsom stated earlier this month that he was pulling together a team of lawyers and financial experts to develop a comprehensive strategy, to be presented within 60 days. In addition, the federal judge overseeing PG&E's criminal case, arising from the 2010 San Bruno gas explosion, continues to place requirements on PG&E for wildfire preparedness.

At some point, all the ideas, input and posturing must coalesce into a Plan of Reorganization that lays out a workable path forward for the utility to continue providing reliable service at just and reasonable rates. PG&E has the exclusive right to submit a plan within the first 120 days, by the beginning of June.

Although there are methods to have a reorganization plan approved over the objections of some creditors, a case as large and complex as this one will need the buy-in of most stakeholders. Any plan will also have to be approved by the PUC and most likely the Federal Energy Regulatory Commission.

The previous PG&E reorganization plan stalled until the judge sent parties into intense negotiations. That case was resolved three years after its filing. It's difficult to envision a scenario where PG&E emerges from this case more quickly.

Whatever plan results, PG&E must embrace the solution and exercise leadership to implement it. Entities with authority over the utility's future owe it to PG&E customers to collaborate and speak with a uniform voice to find a resolution. You can be assured that CFBF will continue to advocate for farmers and ranchers in forums that provide an opportunity to reach solutions.

PG&E provides updates about the bankruptcy at pge.com/reorganization.