ALJ/TIM/hkr Mailed 10/29/2004
Decision 04-10-037 October 28, 2004
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Application of Pacific Gas and Electric Company to issue, sell, and deliver one or more series of Debt Securities and to guarantee the obligations of others with respect to the issuance of Debt Securities, the total aggregate principal amount of such long-term indebtedness and guarantees not to exceed $2 billion; to execute and deliver one or more indentures; to sell, lease, assign, mortgage, or otherwise dispose of or encumber utility property; to issue, sell and deliver in one or more series, an aggregate amount not to exceed $200 million par or stated value of First Preferred Stock -- $25 Par Value; to issue an aggregate $2 billion of short-term debt obligations; to utilize various debt enhancement features; enter into interest-rate hedges; and for an exemption from the Commission's Competitive Bidding Rule. (U 39 M) |
Application 04-05-041 (Filed May 27, 2004) |
OPINION AUTHORIZING THE ISSUANCE OF DEBT AND PREFERRED STOCK
TABLE OF CONTENTS
Title Page
OPINION 2
1. Summary 2
2. Procedural Background 3
3. PG&E's Current Financing Arrangements 4
4. PG&E's Application to Issue Debt and Preferred Stock 5
A. Short-Term Debt 5
B. Long-Term Debt & Preferred Stock 12
C. Encumbrance of Utility Property 18
D. Types of Debt and Preferred Stock 21
E. Interest-Rate Caps, Collars, Swaps, and Hedges 25
F. Exemption from the Competitive Bidding Rule 26
G. Use of Subsidiaries 29
H. General Order 24-B 31
I. Matters Not Addressed 32
5. Fees 33
6. California Environmental Quality Act 34
7. Category and Need for Hearings 36
8. Comments on the Draft Decision 36
9. Assignment of Proceeding 36
Findings of Fact 36
Conclusions of Law 41
ORDER 48
Exhibit A: PG&E's Authorized and Outstanding Debt and Equity
Exhibit B: Projected Uses and Sources of PG&E's Cash
1. Summary
In Application (A.) 04-05-041, Pacific Gas and Electric Company (PG&E) requests authority to issue $2.7 billion of short-term debt, long-term debt, and preferred stock. In response to A.04-05-041, this Opinion authorizes PG&E to do the following pursuant to Pub. Util. Code §§ 701.5, 816 - 830, and 8511:
1. Issue $2 billion of short-term debt. Of this amount, $500 million may only be used for the following purposes:
a. Procure natural gas and electricity for PG&E's utility customers during spikes in the total monthly cost to procure gas and/or electricity.
b. Respond to major natural disasters or other cataclysms.
c. Provide liquidity during a major disruption of PG&E's ability to bill, collect, and/or process utility customer bills.
2. Issue $1.538 billion of long-term debt and preferred stock for the following purposes:
a. Finance capital expenditures.
b. Retire long-term debt.
c. Redeem preferred stock.
3. Issue contingent First Mortgage Bonds as security for other debt.
4. Pledge gas and electric accounts receivable for the purpose of procuring gas and electricity for PG&E's customers.
5. Issue a wide variety of short-term debt, long-term debt, and preferred stock.
6. Exclude from the determination of PG&E's outstanding debt any credit enhancements (e.g., letters of credit, mortgage bonds, etc.) that do not increase the amount of debt owed by PG&E.
7. Utilize interest-rate caps, collars, hedges, and other financial instruments for the purpose of managing interest rate risks.
8. Issue Debt Securities2 without obtaining competitive bids, except fixed-rate Debt Securities in the form of mortgage bonds, intermediate and long-term notes, and debentures of $200 million or less in principal amount that are sold publicly in the domestic market.
9. Issue Debt Securities through regulated subsidiaries and governmental agencies when doing so results in lower cost of debt for PG&E and its ratepayers.
10. Guarantee the Debt Securities of regulated subsidiaries and governmental agencies that issue securities on behalf of PG&E.
11. Report the information required by General Order (GO) 24-B on a quarterly basis instead of monthly as required by GO 24-B.
This Opinion denies A.04-05-041 to the extent the Application requests authority to issue $547 million of long-term debt and $115 million of preferred stock because PG&E has not demonstrated that it has a need to issue this long-term debt and preferred stock. This Opinion also denies A.04-05-041 to the extent it requests that all hedges be excluded from the determination of PG&E's outstanding debt. Hedges recorded as a liability shall be counted as outstanding debt to the extent that such hedges are not effective in offsetting the changes to the fair value or cash flows associated with the risks being hedged.
1 All statutory references are to the Public Utilities Code unless otherwise indicated.
2 A.04-05-041 defines "Debt Securities" as "long-term debt securities, including but not limited to first and refunding mortgage bonds, debentures, notes, overseas indebtedness, foreign currency denominated securities, medium-term notes, preferred securities, floating rate debt, credit or loan agreements, and other evidence of indebtedness."
