11. Assignment of Proceeding
Mark J. Ferron is the assigned Commissioner and Seaneen M. Wilson is the assigned ALJ in this proceeding.
1. The requested financing authority of $4.75 billion of new debt securities and new preferred or preference stock appears necessary to provide the external funding required to meet PG&E's projected cash requirements through 2014.
2. The proposed new financing requested by PG&E and the associated money, property, or labor to be procured or paid for with the proceeds of this proposed new financing, are, pursuant to Pub. Util. Code §§ 817 and 818, reasonably required for proper purposes, which purposes are not, in whole or in part, reasonably chargeable to operating expenses or to income.
3. Pursuant to Pub. Util. Code § 583 and GO 66-C, PG&E filed a motion for leave to file and maintain confidential materials under seal, including Attachment A, Schedule DR1-Q1 and Attachment C, DR3-Schedules I and II, to PG&E's response to the assigned ALJ's ruling.
4. Affiliate Transaction Rule IX in Appendix A-3 of D.06-12-029 requires large California energy utilities and their holding companies to provide a
non-consolidation opinion that demonstrates that the "ring-fencing" around the utility is sufficient to prevent it from being pulled into the bankruptcy of its parent/affiliate/subsidiary.
5. Resolution F-616 requires utilities to issue debt using competitive bids.
6. Resolution F-616 also provides for exemptions from the CBR for debt issues in excess of $200 million and debt that must be obtained on a negotiated basis.
7. PG&E represents that since 2007, it has employed eleven DBE's as underwriters and co-managers on 22 issuances, totaling $7.7 billion.
8. The necessity or reasonableness for ratemaking purposes of PG&E's construction budget, cash requirements forecast, and capital structure, are normally reviewed and authorized in general rate cases or cost of capital proceedings.
9. GO 24-B requires utilities to submit a monthly report to the Commission that contains, among other things: (a) the amount of debt issued by the utility during the previous month; (b) the total amount of debt outstanding at the end of the prior month; (c) the purposes for which the utility expended the proceeds realized from the issuance of debt during the prior month; and (d) a monthly statement of the separate bank account that the utility is required to maintain for all receipts and disbursements of money obtained from the issuance of debt.
10. The Commission has frequently authorized utilities to report on a quarterly basis the information required by GO 24-B in order to reduce the utilities' administrative and compliance costs.
11. Notice of A.11-10-001 appeared in the Commission's Daily Calendar on November 3, 2011 and no protests were filed.
12. Resolution ALJ 176-3284 preliminarily categorized A.11-11-001 as ratesetting and determined that a hearing would not be necessary.
1. PG&E should be authorized to issue new debt securities and new par or stated-value preferred or preference stock of up to $4.75 billion, all of which are for proper purposes (including construction expenditures, acquisition of property, reimbursement of PG&E treasury, or retirement, refund, or reissuance of previously issued securities) and consistent with the requirement of Pub. Util. Code §§ 817 and 818.
2. PG&E should be authorized to issue new debt securities including: first and refunding mortgage bonds; medium-term notes; debentures; direct with banks, insurance companies or other financial lenders; accounts receivable financing; tax-exempt debt issued through one or more governmental entities; variable rate debt; subordinated debt; overseas indebtedness; hybrid securities; and foreign currently denominated securities. Such securities may be issued with: a fixed, floating or deferrable rate of interest; secured or unsecured; at par or with a discount or premium; or, to both domestic or foreign investors.
3. PG&E should be authorized to issue hybrid securities with the following terms: (i) restrictive redemption provisions, including, but not limited to, capital replacement provisions, (ii) interest rates which may be fixed, floating, adjustable, deferrable or which may be set by a market auction procedure, (iii) mandatory sinking funds, and (iv) such other provisions as PG&E may deem appropriate in connection with its issuance and sale of hybrid securities.
4. PG&E should be authorized to offer, issue, and sell preferred or preference stock in one or more offerings with the method of sale, price, dividend rate, liquidation preferences, and other rights, preferences, privileges, and restrictions to be determined prior to each offering in consideration of then prevailing market conditions.
5. PG&E should be authorized to issue preferred or preference stock with the following terms: (i) restrictive redemption provisions; (ii) dividend rates which may be fixed, floating, adjustable, or which may be set by a market auction procedure; (iii) mandatory sinking funds; and (iv) such other provisions as PG&E may deem appropriate in connection with its issuance and sale of the preferred stock.
6. PG&E's motion for leave to file and maintain confidential materials under seal, including Attachment A, Schedule DR1-Q1 and Attachment C, DR3-Schedules I and II, to PG&E's response to the assigned ALJ's ruling, should be granted for two years.
7. Pursuant to Pub. Util. Code § 851, PG&E should be authorized to encumber (sell, lease, assign, mortgage, pledge) its utility property, including but not limited to accounts receivable and utility property, to secure debt securities, authorized herein.
8. PG&E should be authorized to guarantee the securities and interest rate hedges of its regulated subsidiaries or regulated affiliates, pursuant to Pub. Util. Code § 701.5.
9. PG&E should be authorized to issue debt securities through one or more governmental entities to obtain tax-exempt status for the securities, authorized herein, whenever PG&E's facilities qualify for tax-exempt financing under federal or state law. In this structured financing, PG&E may be authorized to unconditionally guarantee or otherwise secure the obligations of the governmental entities. As a means of securing the governmental entities obligations, PG&E should be authorized to issue and pledge or deliver bonds in an equal principal amount to the governmental entities.
10. PG&E should comply with the Affiliate Transaction Rules set out in Appendix A-3 of D.06-12-029, in particular, Rule IX, which requires large California energy utilities and their holding companies, to provide a non-consolidation opinion that demonstrates that the "ring-fencing" around the utility is sufficient to prevent it from being pulled into the bankruptcy of its parent/affiliate/subsidiary.
11. PG&E should be authorized to use the following kinds of debt enhancements to manage interest rate risks of its debt securities authorized herein: put options; sinking funds; swaptions; interest rate caps, collars, swaps, hedges, and floors; credit enhancements; treasury lock caps and collars; redemption provisions; tax-exempt financing; warrants; and forward starting swaps.
12. PG&E should be authorized to not consider securities enhancements authorized herein as separate debt for purposes of calculating its remaining financing authorization hereunder, since the use of such interest rate management contracts would not affect the amount of the underlying securities issued.
13. PG&E should be required to comply with the following restrictions regarding swap and hedging transactions entered into pursuant to this decision:
a. PG&E will separately report all interest income and expense (as recorded for ratemaking purposes) arising from all swap and hedging transactions in its regular report to the Commission.
b. Swap and hedging transactions will not exceed at any time 20 percent of PG&E's total long-term debt outstanding.
c. If PG&E elects to terminate a swap or hedging transaction before the original maturity or the swap or hedging partner terminates the agreement, all costs associated with the termination hedging transactions will be subject to review in PG&E's next Cost of Capital proceeding.
d. Swap and hedging transactions, and other derivative financial instruments carrying potential counterparty risk which PG&E receives in connection with long-term debt, must have counterparties with investment grade credit ratings.
14. PG&E should maintain and make available, within 30 days of request, the following:
a. A report analyzing swap and hedging transactions including all costs associated with the swap and hedge in comparison to a projection of all-in costs without such interest rate risk management transactions.
b. A complete copy of executed swap and/or hedging agreements and all associated documentation.
15. PG&E should be authorized to competitively bid all underwritten public offerings of fixed-rate debentures and first mortgage bonds of $200 million or less.
16. PG&E should be authorized to competitively bid all underwritten public offerings of first and refunding bonds, intermediate- and long-term notes, and debentures (fixed rate bonds and debentures), of $200 million or less in principal amount (other than tax-exempt securities) that are sold publically in the domestic market.
17. PG&E should be granted an exemption from the CBR for issues in excess of $200 million.
18. PG&E should be granted an exemption from the CBR to issue the following types of debt securities because they are typically issued through negotiated arrangements: notes sold through a placement agent on a reasonable efforts basis; trust preferred and hybrid securities; loans; variable or floating rate securities; accounts receivable financings; overseas indebtedness; foreign currency securities; notes; tax-exempt securities, and interest-rate hedges.
19. PG&E should be granted an exemption from the CBR to permit PG&E to use the following procedures for those situations where the CBR remains applicable:
a. To shorten the time between the issuance of an invitation for bids and the scheduled receipt of bids to a period which is the shortest time reasonably required to obtaining a sufficient number of bids from underwriters or purchasers or groups thereof (which time period may be as short as a few hours).
b. To accelerate, postpone, or cancel the scheduled date and time for receipt of bids.
c. To reject all bids submitted.
d. To request the resubmission of bids.
e. To reschedule subsequent receipt of bids.
f. To vary the amount, terms, and conditions of the debt securities submitted for bids.
g. To waive the requirement for newspaper publication of the above items.
20. PG&E should file with the Commission, on or before the 25th day of the month following each quarter, a report under GO 24-B.
21. The order herein is not a finding of the reasonableness of PG&E's proposed construction plan or expenditures, the resulting plant balances in rate base, the capital structure, or the cost of money, nor does it indicate approval of matters subject to review in a general rate case or other proceedings.
22. PG&E should remit a check for $1,581,000 to the Commission, as required by Pub. Util. Code §§ 1904(b) and 1904.1 to the Commission's Fiscal Office at 505 Van Ness Avenue, Room 3000, San Francisco, CA 94102. The number of this Decision must appear on the face of the check.
23. The authority granted by this Decision should not become effective until PG&E has paid the fees prescribed by §§ 1904(b) and 1904.1.
24. PG&E should not use the proceeds from the debt authorized by this decision to fund its capital projects until PG&E has obtained all required Commission approvals for the projects, including any required environmental review under CEQA.
25. The order herein does not involve any commitment to any specific project which may result in a potentially significant impact on the environment; thus it is not a project subject to CEQA.
26. The authority granted PG&E herein is in compliance with Pub. Util. Code §§ 701.5, 816, 817, 818, 824, and 851.
27. A.11-11-001 should be closed.
IT IS ORDERED that:
1. Pacific Gas and Electric Company (PG&E) is authorized to issue new debt securities and new par or stated-value preferred or preference stock of up to $4.75 billion, all of which are for proper purposes (including construction expenditures, acquisition of property, reimbursement of PG&E treasury, or retirement, refund, or reissuance of previously issued securities).
2. Pacific Gas and Electric Company (PG&E) is authorized to issue new debt securities in compliance with Public Utilities Code §§ 701.5, 816, 817, 818, 824, and 851, and the Affiliate Transaction Rules applicable to PG&E.
3. Pacific Gas and Electric Company is authorized to issue new debt securities including: first and refunding mortgage bonds; medium-term notes; notes; debentures; direct with banks, insurance companies or other financial lenders; accounts receivable financing; tax-exempt debt issued through one or more governmental entities; variable rate debt; subordinated debt; overseas indebtedness; hybrid securities; and foreign currency denominated securities. Such securities may be issued with: a fixed, floating or deferrable rate of interest; secured or unsecured; at par or with a discount or premium; or, to both domestic or foreign investors.
4. Pacific Gas and Electric Company (PG&E) is authorized to issue hybrid securities with the following terms: (i) restrictive redemption provisions, including, but not limited to, capital replacement provisions, (ii) interest rates which may be fixed, floating, adjustable, deferrable or which may be set by a market auction procedure, (iii) mandatory sinking funds, and (iv) such other provisions as PG&E may deem appropriate in connection with its issuance and sale of hybrid securities.
5. Pacific Gas and Electric Company is authorized to offer, issue, and sell preferred or preference stock in one or more offerings with the method of sale, price, dividend rate, liquidation preferences, and other rights, preferences, privileges, and restrictions to be determined prior to each offering in consideration of then prevailing market conditions.
6. Pacific Gas and Electric Company is authorized to issue preferred or preference stock with the following terms: (i) restrictive redemption provisions; (ii) dividend rates which may be fixed, floating, adjustable, or which may be set by a market auction procedure; (iii) mandatory sinking funds; and (iv) such other provisions as PG&E may deem appropriate in connection with its issuance and sale of the preferred stock.
7. Pacific Gas and Electric Company's (PG&E) motion for leave to file and maintain confidential materials under seal, including Attachment A, Schedule DR1-Q1 and Attachment C, DR3-Schedules I and II, to its response to the assigned Administrative Law Judge's (ALJ) ruling, is granted. The information will remain under seal for a period of two years after the date of this order. During this two-year period, this information may not be viewed by any person other than the assigned Commissioner, the assigned ALJ, the Assistant Chief ALJ, or the Chief ALJ, except as agreed to in writing by PG&E or as ordered by a court of competent jurisdiction. If PG&E believes that it is necessary for this information to remain under seal for longer than two years, PG&E must file a new motion at least 30 days before the expiration of this limited protective order.
8. Pursuant to Public Utilities Code § 851, Pacific Gas and Electric Company is authorized to encumber (sell, lease, assign, mortgage, pledge) its utility property, including but not limited to accounts receivable and utility property, to secure debt securities, authorized herein.
9. Pacific Gas and Electric Company is authorized to guarantee the securities and interest rate hedges of its regulated subsidiaries or regulated affiliates, pursuant to Public Utilities Code § 701.5.
10. Pacific Gas and Electric Company (PG&E) is authorized to issue debt securities through one or more governmental entities to obtain tax-exempt status for the securities, authorized herein, whenever PG&E's facilities qualify for tax-exempt financing under federal or state law. In this structured financing, PG&E may be authorized to unconditionally guarantee or otherwise secure the obligations of the governmental entities. As a means of securing the governmental entities obligations, PG&E should be authorized to issue and pledge or deliver bonds in an equal principal amount to the governmental entities.
11. Pacific Gas and Electric Company is authorized to use the following kinds of debt enhancements to manage interest rate risks of its debt securities authorized herein: put options; sinking funds; swaptions; interest rate caps, collars, swaps, hedges, and floors; credit enhancements; treasury lock caps and collars; redemption provisions; tax-exempt financing; warrants; and forward starting swaps.
12. Pacific Gas and Electric Company is authorized to not consider securities enhancements authorized herein as separate debt for purposes of calculating its remaining financing authorization hereunder, since the use of such interest rate management contracts would not affect the amount of the underlying securities issued.
13. Pacific Gas and Electric Company (PG&E) must comply with the following restrictions regarding swap and hedging transactions entered into pursuant to this decision:
a. PG&E will separately report all interest income and expense (as recorded for ratemaking purposes) arising from all swap and hedging transactions in its regular report to the Commission.
b. Swap and hedging transactions will not exceed at any time 20 percent of PG&E's total long-term debt outstanding.
c. If PG&E elects to terminate a swap or hedging transaction before the original maturity or the swap or hedging partner terminates the agreement, all costs associated with the termination hedging transactions will be subject to review in PG&E's next Cost of Capital proceeding.
d. Swap and hedging transactions, and other derivative financial instruments carrying potential counterparty risk which PG&E receives in connection with long-term debt, must have counterparties with investment grade credit ratings.
14. Pacific Gas and Electric Company must maintain and make available, within 30 days of request, the following:
a. A report analyzing swap and hedging transactions including all costs associated with the swap and hedge in comparison to a projection of all-in costs without such interest rate risk management transactions.
b. A complete copy of executed swap and/or hedging agreements and all associated documentation.
15. Pacific Gas and Electric Company is required to competitively bid all underwritten public offerings of fixed-rate debentures and first mortgage bonds of $200 million or less.
16. Pacific Gas and Electric Company is required to competitively bid all underwritten public offerings of first and refunding bonds, intermediate- and long-term notes, and debentures (fixed rate bonds and debentures), of $200 million or less inn principal amount (other than tax-exempt securities) that are sold publically in the domestic market.
17. Pacific Gas and Electric Company is granted an exemption from the Competitive Bidding Rule for issues in excess of $200 million.
18. Pacific Gas and Electric Company is granted an exemption from the Competitive Bidding Rule to issue the following types of debt securities because they are typically issued through negotiated arrangements: notes sold through a placement agent on a reasonable efforts basis; trust preferred and hybrid securities; loans; variable or floating rate securities; accounts receivable financings; overseas indebtedness; foreign currency securities; notes; tax-exempt securities, and interest-rate hedges.
19. Pacific Gas and Electric Company is granted an exemption from the Competitive Bidding Rule to permit Pacific Gas and Electric Company to use the following procedures for those situations where the Competitive Bidding Rule remains applicable:
a. To shorten the time between the issuance of an invitation for bids and the scheduled receipt of bids to a period which is the shortest time reasonably required to obtaining a sufficient number of bids from underwriters or purchasers or groups thereof (which time period may be as short as a few hours).
b. To accelerate, postpone, or cancel the scheduled date and time for receipt of bids.
c. To reject all bids submitted.
d. To request the resubmission of bids.
e. To reschedule subsequent receipt of bids.
f. To vary the amount, terms, and conditions of the debt securities submitted for bids.
g. To waive the requirement for newspaper publication of the above items.
20. Pacific Gas and Electric Company must file with the Commission, on or before the 25th day of the month following each quarter, a report under General Order 24-B.
21. The order herein is not a finding of the reasonableness of Pacific Gas and Electric Company's proposed construction plan or expenditures, the resulting plant balances in rate base, the capital structure, or the cost of money, nor does it indicate approval of matters subject to review in a general rate case or other proceedings.
22. Pacific Gas and Electric Company should remit a check for $1,581,000, as required by Public Utilities Code §§ 1904(b) and 1904.1 to the Commission's Fiscal Office at 505 Van Ness Avenue, Room 3000, San Francisco, CA 94102. The number of this Decision must appear on the face of the check.
23. The authority granted by this decision does not become effective until Pacific Gas and Electric Company has paid the fees prescribed by Pub. Util. Code §§ 1904(b) and 1904.1.
24. Pacific Gas and Electric Company may not use the proceeds from the debt authorized by this decision to fund its capital projects until Pacific Gas and Electric Company has obtained all required Commission approvals for the projects, including any required environmental review under California Environmental Quality Act.
25. The order herein does not involve any commitment to any specific project which may result in a potentially significant impact on the environment; thus it is not a project subject to California Environmental Quality Act.
26. Application 11-11-001 is closed.
This order is effective today.
Dated April 19, 2012, at San Francisco, California.
MICHAEL R. PEEVEY
President
TIMOTHY ALAN SIMON
MICHEL PETER FLORIO
CATHERINE J.K. SANDOVAL
MARK J. FERRON
Commissioners
