By Strider Kachelein

On February 18, 2020, the California Public Utilities Commission (CPUC) issued I.19-09-016, a ruling setting forth assigned Commissioner proposals “relating to the application of state law to the proposed plan of reorganization for Pacific Gas and Electric Company (PG&E).” Five months after the CPUC opened an investigation into the regulatory approvals PG&E needs to successfully exit Chapter 11 Bankruptcy, assigned commissioner Marybel Batjer issued a series of proposals, including a new oversight and enforcement process for PG&E.

In order for PG&E to comply with AB 1054 (Holden) (Chapter 79, Statutes of 2019) and access its statutorily-created $20 billion Wildfire Fund, it must exit bankruptcy by June 30, 2020, with a commission-approved reorganization plan. After considering PG&E’s plan, the CPUC’s proposals focus on enhancing the utility’s following goals: establishing Risk and Safety Officers, instituting an Independent Safety Advisor, expanding the Safety and Nuclear Oversight Committee, maintaining its Board of Directors, altering approval of senior management, restructuring on a regional level, adhering to more stringent safety and operational metrics, and linking its earning and compensation structure, including that for executives, to safety performance. Of greatest difference, however, is the CPUC’s proposal for oversight and enforcement.

This new method would enumerate different violations or failures, ranging from Step 1 through Step 6, each at varying levels of seriousness. PG&E would trigger a step by violating a requirement or failing to implement CPUC’s remedies prescribed under the previous step.

For example, PG&E triggers Step 1 if it fails “to comply with its regulatory reporting requirements.” The Commission then lists corrective plans for these failures. PG&E triggers Step 2 if it fails to take Step 1’s corrective measures or, for example, PG&E fails to follow rules or prudent management practices that result in the destruction of over 1,000 buildings. Steps 3 through 6 are “enhanced enforcement” measures because they require more onerous triggers and provide for more stringent corrective measures. PG&E can trigger Step 4 by causing an incident resulting in the destruction of over 1,000 buildings due to willful misconduct or repeated violations, instead of simply not following management practices. If PG&E eventually triggers and fails Step 6, then the CPUC can revoke PG&E’s Certificate of Public Convenience and Necessity (CPCN), or license to operate in California. This could subsequently allow for a state takeover of the utility. Before this occurs, the CPUC would require that PG&E’s interim management post-bankruptcy concludes either that “Receiver Oversight will not result in restoration of safe and reliable service,” or that PG&E failed to correct Step 5 (and any subsequent chain events that brought PG&E to that step).

The CPUC held evidentiary hearings (Vol. 1, Vol. 2, Vol. 3, Vol. 4, Vol. 5, Vol. 6, Vol. 7) on February 25, 2020, through March 4, 2020. The CPUC will additionally serve concurrent briefing on the proposals on March 26, while reply briefs are due this same day.