Background · Web viewPG&E should be authorized to issue new Debt Securities of up to $8.1 billion...

ALJ/RMD/gp2 PROPOSED DECISION Agenda ID #18963 (Rev.1)

Ratesetting12/17/2020 Item #13

Decision PROPOSED DECISION OF ALJ DEANGELIS (Mailed 11/12/2020)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of PACIFIC GAS ANDELECTRIC COMPANY to issue, sell, and deliver one or more series of Debt Securities and to guarantee the obligations of others in respect of the issuance of Debt Securities, the total aggregate principal amount of such indebtedness and guarantees not to exceed $8.1billion, or $12.6 billion if and to the extent the requested $7.5 billion securitization in A.20-04-023 is not approved; 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 one or more series of preferred stock or depositary shares; to utilize various debt enhancement features; and to enter into interest rate hedges. (U 39 M)

Application 20-05-005

DECISION APPROVING THE APPLICATION OF PACIFIC GAS AND ELECTRIC COMPANY FOR DEBT AND PREFERRED STOCK

AUTHORIZATION

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A.20-05-005 ALJ/RMD/gp2 PROPOSED DECISION (Rev.1)

TABLE OF CONTENTSTitle PageDECISION APPROVING THE APPLICATION OF PACIFIC GAS AND ELECTRIC COMPANY FOR DEBT AND PREFERRED STOCK AUTHORIZATION....................................................................................1Summary...............................................................................................21. Background......................................................................................3

1.1. Primary Request for Financing Authorization of up to $8.1 Billion.......................................................................11

1.2. Contingent Request for Financing Authorization for an Additional up to $4.5 Billion......................................................12

2. The Debt Issuance Request............................................................162.1. Description of Debt Securities...................................................192.2. Description of Debt Securities Enhancement Features..............202.3. Description of Interest Rate Caps, Collars,

Swaps, and Hedges...................................................................213. Discussion......................................................................................24

3.1. Public Utilities Code Requirements for Issuance of Debt Securities.......................................................24

3.2. Forecast of Sources and Uses...................................................283.3. Types of Securities to be Issued................................................303.4. Encumbrance of Utility Property................................................313.5. Securities Enhancements..........................................................33

4. Reporting Requirements.................................................................345. Fees Required by Public Utilities Code

§§ 1904(b) and 1904.1....................................................................356. Financial Information......................................................................367. California Environmental Quality Act..............................................378. Request to File Under Seal.............................................................389. Five-Year Capital Structure Waiver

Authorized in D.20-05-053..............................................................3810.Conclusion......................................................................................4311.Comments on Proposed Decision...................................................4412.Assignment of Proceeding..............................................................44Findings of Fact...................................................................................44Conclusions of Law..............................................................................47ORDER.................................................................................................52

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DECISION APPROVING THE APPLICATION OF PACIFIC GAS AND ELECTRIC COMPANY FOR DEBT AND PREFERRED STOCK

AUTHORIZATIONSummary

This decision grants Pacific Gas and Electric Company’s (PG&E’s) request for the following authorization to meet its anticipated financing needs from 2021 through 2023, allow it to finance its ongoing capital spending requirements, and replace maturing debt: (1) to issue long-term Debt Securities in an aggregate principal amount not to exceed $8.1 billion, or an additional $4.5 billion to pay for wildfire claims costs if and to the extent the requested $7.5 billion securitization in Application (A.) 20-04-023 is not approved, with all such issuances to take place at any time from the date of authorization of this decision and consistent with the capital structure waiver set forth in Decision (D.) 20-05-053,1 until the aggregate principal amount authorized has been fully utilized by PG&E; and (2) to enter into interest rate hedges as described herein. All fees and costs associated with the issuance of Debt Securities for payment of wildfire claims costs are the responsibility of shareholders.

In connection with the issuance of Debt Securities, this decision grants PG&E authorization to (a) guarantee the securities of regulated direct, regulated indirect subsidiaries, or regulated affiliates of PG&E or of governmental entities that issue securities on behalf of PG&E; (b) execute and deliver one or more indentures or supplemental indentures; (c) sell, lease, assign, mortgage, or otherwise dispose of or encumber utility property, including accounts receivable, in connection with the issuance and sale of Debt Securities; and (d) report all Debt

1 D.20-05-053, Decision Approving Reorganization Plan (May 28, 2020) at 72.

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Securities information required by General Order 24-C on a semi-annual basis.

This proceeding is closed.1. Background

On May 11, 2020, Pacific Gas and Electric Company (PG&E) filed Application (A.) 20-05-005. This Application seeks authorization to: (1) to issue, sell, and deliver up to $8.1 billion or $12.6 billion, if and to the extent the requested $7.5 billion securitization in A.20-04-023,2 which is currently pending before the Commission, is not approved, of one or more series of long-term Debt Securities,3 such as first and refunding mortgage bonds, debentures, notes, overseas indebtedness, foreign currency denominated securities, medium-term notes, preferred securities, other floating or variable rate debt, and credit or loan agreements, preferred stock, preference stock, and other evidences of indebtedness, and to enter into interest rate hedges. In connection with the issuance of Debt Securities, PG&E also seeks authorization to (a) guarantee the securities of regulated direct subsidiaries, regulated indirect subsidiaries, or regulated affiliates of PG&E (collectively referred to herein as “regulated affiliates”) or of governmental entities

2 A.20-04-023, In the Matter of the Application of Pacific Gas and Electric Company for (1) Administration of Stress Test Methodology Developed Pursuant to Public Utilities Code Section 451.2(b) and (2) Determination That $7.5 Billion of 2017 Catastrophic Wildfire Costs and Expenses Are Stress Test Costs That May be Financed Through Issuance of Recovery Bonds Pursuant to Section 451.2(c) and Section 850 et seq. (U39E) (filed April 30, 2020).3 The term “Debt Securities,” as used herein and as defined in this Application at 1 and 2 is as follows: “…one or more series of long-term debt securities, such as first and refunding mortgage bonds, debentures, notes, overseas indebtedness, foreign currency denominated securities, medium-term notes, preferred securities, other floating or variable rate debt, credit or loan agreements, Preferred Stock - $25 Par Value, Preferred Stock - $100 Par Value, Preference Stock or any combination thereof, as authorized in PG&E’s Articles of Incorporation (generally referred to herein as ‘preferred stock’), and other evidences of indebtedness….”

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that issue securities on behalf of PG&E; (b) execute and deliver one or more indentures or supplemental indentures; and (c) sell, lease, assign, mortgage, or otherwise dispose of or encumber utility property, including but not limited to its accounts receivable.

On May 11, 2020, PG&E also filed a motion, Motion for Authority to File and Maintain Confidential Information (Schedules I, II, III, and IX-B of Financial Information) Under Seal.

On May 28, 2020, the Commission issued Resolution ALJ 176-3462, which preliminarily categorized A.20-05-005 as a ratesetting proceeding and found that hearings were necessary.4

No protests or responses to A.20-05-005 were filed. A prehearing conference (PHC) was held on July 2, 2020, to

discuss the issues of law and fact and determine the need for hearings and the schedule for resolving the matter. Several parties attended and participated at this PHC.

On July 28, 2020, the assigned Administrative Law Judge (ALJ) issued a ruling seeking additional information from PG&E on the requested authorization.5 PG&E responded on August 4, 2020.6 No parties replied to PG&E’s filing.

On September 9, 2020, the ALJ issued a second ruling seeking additional information from PG&E on the requested authorization. PG&E responded on September 16, 2020. Again, no parties replied. PG&E’s response clarifies that it expects to issue any debt authorized by the Commission in this proceeding that may impact ratepayers as 4 Commission Resolution ALJ 176-3462.5 July 28, 2020 E-Mail Ruling Directing Pacific Gas & Electric Company to Respond to Questions and Provide Additional Information.6 August 4, 2020 Pacific Gas and Electric Company’s Response to the ALJ’s July 28, 2020, E-Mail Ruling Directing PG&E to Respond to Questions and Provide Additional Information.

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secured debt.7 PG&E also clarifies that the costs associated with the contingent request of up to an additional $4.5 billion in long-term debt issuance would be the “sole responsibility” of PG&E shareholders.8 In addition, PG&E raises a further question for the Commission’s consideration, whether the Commission finds PG&E’s interpretation of the capital structure waiver authorized in Decision (D.) 20-05-053, and as explained by PG&E in its September 16, 2020 response, to be correct.9

On October 7, 2020, the ALJ issued an email ruling granting two motions filed by PG&E requesting authority to file and maintain confidential information under seal. PG&E filed the first motion on May 11, 2020, Motion for Authority to File and Maintain Confidential Information Under Seal (Schedules I, II, III, and IX-B of Financial Information). PG&E filed the second motion on September 16, 2020, Motion for Authority to File and Maintain Confidential Information under Seal (Utility Financial Projections and Projected Long-Term Debt Issuance Amounts). The October 7, 2020 ALJ ruling granted the May 11, 2020 and September 16, 2020 motions. We affirm the ALJ ruling today. The Commission will file and maintain the information identified in these motions under seal as confidential for the time established by, and in accordance with, the applicable Commission rules and regulations.

On October 9, 2020, the assigned Commissioner issued an Assigned Commissioner’s Scoping Memo and Ruling (Scoping Memo), in which the Commission’s preliminary finding for the need for hearings

7 September 16, 2020 PG&E Response at 11.8 September 16, 2020 PG&E Response at 6.9 September 16, 2020 PG&E Response at 7-10.

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in this proceeding was changed to no hearings necessary.10 The Scoping Memo also framed the issues to be considered in this proceeding to include the following:

1. Does the request comply with all applicable Commission Rules, General Orders, and decisions and with the Public Utilities Code?

2. Is the Application complete (compliant with former decisions and the Public Utilities Code) with all information provided to render a decision?

3. Is the Application reasonable and in the public interest?11

In its Application, PG&E states that the authorizations requested in this Application are substantially similar to those requested in other recent PG&E applications, including A.18-10-003 (filed on October 9, 2018), A.18-11-001 (filed on November 1, 2018), and A.14-06-020 (filed on June 24, 2014). We note that the difference between these prior PG&E applications and this pending Application is that the circumstances surrounding PG&E’s financial status have changed since the beginning of 2019.

On January 29, 2019, PG&E and its holding company, PG&E Corporation (PG&E Corp), filed voluntary bankruptcy petitions under Chapter 11 of the U.S. Bankruptcy Code.12 PG&E only recently, on July 1, 2020, formally exited from bankruptcy.13

As a result, PG&E’s request in this Application is different from these prior applications, as this Application is related, in part, to its bankruptcy financing. More specifically, in this Application PG&E

10 October 9, 2020, Assigned Commissioner’s Scoping Memo and Ruling at 3. 11 October 9, 2020, Assigned Commissioner’s Scoping Memo and Ruling at 2.12 D.20-05-053, Decision Approving Reorganization Plan (May 28, 2020) at 2.13 A.20-05-005 Reporter’s Transcript June 2, 2020 PHC at 8.

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includes a contingent request to issue up to an additional $4.5 billion14 in long-term debt depending on the outcome of the Commission’s current and ongoing consideration of the securitization authority requested in A.20-04-023.15 PG&E’s contingent request is to issue up to an additional $4.5 billion in long-term debt in the event that the Commission either does not approve or does not approve in full the $7.5 billion securitization sought in A.20-04-023.16

PG&E’s Application refers to several prior requests for long-term debt authorization from the Commission that PG&E states are similar to the requests presented here, including a 2014 proceeding, A.14-06-020, which was decided by the Commission in D.15-01-030.17 In D.15-01-030, the Commission authorized PG&E to issue up to $6.0 billion of new debt securities and new preferred and preference stock to fund capital expenditure plans and for other purposes for the three year period, 2015 through 2017.

14 Regarding financing-related fees and costs associated with this $4.5 billion contingent requests, PG&E states that any such fees and costs will be addressed in a separate proceeding and the treatment of such fees and costs, if any, would be consistent with PG&E’s position and commitments in Investigation (I.) 19-09-016, that debt is the sole responsibility of PG&E shareholders and no fees or costs associated with the contingent request would be included in calculating PG&E’s embedded cost of debt in future cost of capital proceedings. See, August 4, 2020 Pacific Gas and Electric Company’s Response to the ALJ’s July 28, 2020, E-Mail Ruling Directing PG&E to Respond to Questions and Provide Additional Information at 5-6.15 A.20-04-023, In the Matter of the Application of Pacific Gas and Electric Company for (1) Administration of Stress Test Methodology Developed Pursuant to Public Utilities Code Section 451.2(b) and (2) Determination That $7.5 Billion of 2017 Catastrophic Wildfire Costs and Expenses Are Stress Test Costs That May Be Financed Through Issuance of Recovery Bonds Pursuant to Section 451.2(c) and Section 850 et seq. (U39E) (filed April 30, 2020).16 A.20-05-005 Reporter’s Transcript June 2, 2020 PHC at 13.17 D.15-01-030 (A.14-06-020) Decision Authorizing PG&E to issue up to $6.0 billion of Debt and Preferred and Preference Stock (January 29, 2015).

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PG&E also refers to two additional debt issuance applications filed in 2018, A.18-10-00318 and A.18-11-001.19 These two applications differ from the current Application in that both 2018 applications involve debtor-in-possession financing.

In A.18-10-003, filed on October 9, 2018, PG&E initially requested to increase its authorized amount of financing for its short-term borrowing needs by $2.0 billion, to bring its authorized aggregate short-term debt to $6.0 billion.20 PG&E subsequently filed to amend its request on November 21, 2018 and again on November 28, 2018. The amendments modified its initial October 9, 2018 request by correcting a typographical numeric error and requesting authority to issue and secure securities to the full amount of $6 billion of short-term debt requested in accordance with Public Utilities (Pub. Util.) Code21 § 851.22 Then, on January 18, 2019, PG&E filed a motion advising the Commission of PG&E’s expected filing for reorganization under Chapter 18 A.18-10-003, Application of Pacific Gas and Electric Company to increase its authority to finance short-term borrowing needs and procurement-related collateral costs by $2.0 billion to an aggregate amount not to exceed $6.0 billion (U39M) (filed October 9, 2018). 19 A.18-11-001, 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 in respect of the issuance of Debt Securities, the total aggregate principal amount of such long-term indebtedness and guarantees not to exceed $6.1 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, cumulative Preferred Stock -- $25 Par Value, Preferred Stock -- $100 Par Value, Preference Stock or any combination thereof; to utilize various debt enhancement features; and enter into interest rate hedges. (U39M) (filed November 1, 2018). 20 A.18-10-003 at 1.21 All code section references are to the Pub. Util. Code, unless otherwise indicated.22 A.18-10-003, Second Amendment to The Application of Pacific Gas and Electric Company (U 39 M) For Authority to Issue Up to $6,000,000,000 to Finance its Short-Term Borrowing Needs and Procurement-Related Collateral Costs and to Sell, Lease, Assign, Mortgage or Otherwise Dispose of or Encumber Utility Property (filed November 28, 2018) at 1.

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11 in the U.S. Bankruptcy Court for the Northern District of California and requesting an exemption from the requirement for Commission approval under Pub. Util. Code §§ 823 and 851 for debtor-in-possession financing.23 On January 28, 2019, a day before PG&E filed for Chapter 11 bankruptcy, the Commission issued D.19-01-025, which decided A.18-10-003. In D.19-01-025, the Commission granted PG&E’s requested exemption from the requirement of prior Commission approval under §§ 823 and 851 for debtor-in-possession financing undertaken in conjunction with its planned Chapter 11 bankruptcy filing and directed PG&E not to incur more than $10 billion in debtor-in-possession financing without further Commission authorization.24

In A.18-11-001, filed on November 1, 2018, PG&E sought approval for long-term debt issuance in the aggregate principal amount not to exceed $6.1 billion.25 Similar to the motion filed in A.18-10-003 (PG&E’s 2018 application for short-term debt issuance approval), on January 18, 2019, PG&E also filed a motion advising the Commission of its intent to file for Chapter 11 bankruptcy and its need for authorization to incur debtor-in-possession financing.26 On January 28, 2019, also the day before PG&E filed for Chapter 11 bankruptcy and on the same day the Commission issued D.19-01-025, the Commission issued D.19-01-026 which decided A.18-11-001. In D.19-01-026, the Commission granted the exemption from the requirement

23 A.18-10-003, Motion of Pacific Gas and Electric Company for Exemption from Public Utilities Code Sections 823 And 851 (filed January 18, 2019) at 1.24 D.19-01-025 (A.18-11-001), Decision Granting Pacific Gas and Electric Company an Exemption from Public Utilities Codes Sections 817, 818 and 851 for the Limited Purpose of Debtor-in-Possession Financing (January 28, 2019) at 12-13. 25 A.18-11-001 at 1.26 A.18-11-001, Motion of Pacific Gas and Electric Company for Exemption from Public Utilities Code Sections 817, 818 And 851 (January 18, 2019) at 1.

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of prior Commission approval under §§ 817, 818, and 851 for debtor-in-possession financing undertaken in conjunction with its planned Chapter 11 bankruptcy filing and authorized PG&E to incur not more than $10 billion in debtor-in-possession financing without further Commission authorization.27

More recently, and in connection with PG&E’s exit from Chapter 11 bankruptcy, PG&E requested certain financing authorizations in the Commission proceeding reviewing PG&E’s plan of reorganization under Chapter 11 (PG&E’s Plan), I.19-09-016.28 On May 28, 2020 in D.20-05-053, the Commission granted PG&E’s request, among other things, to issue temporary utility debt post-emergence from bankruptcy of $6 billion.29

In this Application, A.20-05-005 filed on May 11, 2020, PG&E states that, upon PG&E’s anticipated emergence from Chapter 11 – which occurred on July 1, 2020 - PG&E will require additional, normal-course long-term financing authorization to meet its anticipated financing needs from 2021 through 2023 to allow it to finance its ongoing capital spending requirements and replace maturing debt. PG&E also may require an additional amount of up to $4.5 billion to pay wildfire claims costs. In furtherance of PG&E’s need to meet its

27 D.19-01-026 (A.18-11-001), Decision Granting Pacific Gas and Electric Company an Exemption from Public Utilities Codes Sections 817, 818 and 851 for the Limited Purpose of Debtor-in-Possession Financing (January 28, 2019) at 13-14. 28 I.19-09-016, Order Instituting Investigation on the Commission’s Own Motion to Consider the Ratemaking and Other Implications of a Proposed Plan for Resolution of Voluntary Case filed by Pacific Gas and Electric Company, pursuant to Chapter 11 of the Bankruptcy Code, in the United States Bankruptcy Court, Northern District of California, San Francisco Division, In re Pacific Gas and Electric Corporation and Pacific Gas and Electric Company, Case No.19-30088 (September 26, 2019). 29 D.20-05-053, Decision Approving Reorganization Plan (May 28, 2020) at 72.

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anticipated financing needs from 2021 through 2023, PG&E filed this Application on May 11, 2020.

1.1. Primary Request for Financing Authorization of up to $8.1 BillionThis Application can be characterized as having two requests by

PG&E. The primary request is for authorization to issue up to $8.1 billion in long-term debt. From 2021 through 2023, PG&E estimates that approximately $8.1 billion in long-term debt will be needed. PG&E states that its need for this amount is largely driven by (1) capital expenditure forecasts from 2021 through 2023 and (2) $1.2 billion of maturing debt obligations over the 2021-2023 forecast period.

PG&E states that it will use the funds for capital expenditures, maturing debt obligations, as well as working capital and other approved uses. This financing request, according to PG&E, is based on PG&E’s recent rate case applications and decisions for approval of capital expenditures for infrastructure replacements and upgrades to gas and electric transmission and distribution facilities, wildfire risk mitigation capital spend, PG&E’s owned generation assets, as well as to support its infrastructure, such as IT systems, service centers, and office buildings.30 PG&E states that its long-term debt financing requirements could increase if these and other investments in utility plant and equipment are greater than expected or if other unforeseen events occur which necessitate the issuance of additional long-term debt.

PG&E further states that it currently has approximately $780 million of remaining Commission long-term debt authority but that it expects to need the additional authority requested in this Application

30 A.20-05-005 at 3.

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by 2021.31 PG&E proposes to reserve this amount, the approximately $780 million of authority, for contingency purposes, which could include financing construction expenditures, acquisition of property, and/or financing the early redemption of outstanding securities.32

Apart from PG&E’s additional request in this Application, (the contingent request for an additional up to $4.5 billion in long-term debt authorization, further described below), PG&E expects that the requested financing authorization of $8.1 billion will meet its financial and service obligations from 2021 through 2023 based on the current forecast.33

1.2. Contingent Request for Financing Authorization for an Additional up to $4.5 Billion

In addition to PG&E’s primary request for financing authorization of up to $8.1 billion, PG&E also requests contingent authority for an additional up to $4.5 billion in long-term debt authorization to pay 2017 wildfire claims costs if and to the extent its request for $7.5 billion securitization requested in A.20-04-023 is not approved or is not fully approved.34 To understand this request, it is helpful to provide some background of Commission proceedings that reviewed PG&E’s Reorganization Plan, I.19-09-016 and PG&E’s pending request in A.20-04-023.

31 A.20-05-005 at 3-4.32 A.20-05-005 at 4, fn. 1, PG&E states “To the extent PG&E uses its existing authority before the Commission issues a decision on this Application, PG&E’s request would still enable it to reserve approximately $780 million for contingency purposes.”33 A.20-05-005 at 4.34 A.20-05-005 at 4. In general, a securitization is a bond issuance where the bonds are “secured” by a non-bypassable fixed recovery charge on customer bills, enabling very low-cost financing. A securitization, therefore, can reduce rates compared to traditional utility financing mechanisms.

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In A.20-04-023, PG&E seeks authority for a transaction to finance $7.5 billion of 2017 wildfire claims costs35 through the issuance of recovery bonds pursuant to Senate Bill 901 (Pub. Util. Code §§ 451.2 and 850.1). The proposed transaction, referred to as a securitization, would enable PG&E to retire the $6 billion of temporary utility debt authorized in I.19-09-016, and further described below, to pay wildfire claims costs and accelerate the final payment to the Fire Victims Trust. The proposed transaction is intended to be rate-neutral.

This $6 billion of temporary utility debt was first addressed by the Commission in I.19-09-016, PG&E requested authorization, as part of its bankruptcy exit financing, for $6 billion of temporary utility debt that PG&E stated would be used to pay wildfire claims costs.36 PG&E further stated that this $6 billion of temporary debt, “will be the financial responsibility of shareholders, not customers.”37

More specifically, in I.19-09-016, PG&E requested authorization to issue the $6 billion in temporary utility debt either as short-term or long-term debt but suggested that it would “initially use $6 billion in short-term, not long-term, debt.”38 Importantly, for purposes of this Application, PG&E also requested in I.19-09-016 authorization to “subsequently refinance [any short-term debt issuance] with the long-

35 A.20-04-023 at 3, fn. 4, PG&E states: This application and accompanying testimony focus on claims costs attributable to the 2017 North Bay Wildfires, but other related expenses also fall within Section 451.2 and may be financed through the issuance of recovery bonds pursuant to Section 850 et seq. PG&E has not quantified those related expenses in this application as they are not needed to demonstrate at least $7.5 billion in costs eligible for securitization pursuant to SB 901, but reserves the right to quantify and incorporate them into this application at a later date if necessary.36 A.20-05-005 at 4.37 I.19-09-016, PG&E-01 (PG&E Prepared Testimony) at 2-15.38 A.20-05-005 at 5, citing to I.19-09-016, PG&E Brief, Appendix B at 2-33.

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term debt.”39 The Commission granted this request, authorizing PG&E to refinance the $6 billion in temporary utility debt as long-term debt, to the extent PG&E initially issues the $6 billion as short-term debt at its exit from Chapter 11.

In the event the requested $7.5 billion securitization in A.20-04-023 is approved, PG&E will retire this $6 billion in temporary utility debt. However, if and to the extent the requested $7.5 billion securitization in A.20-04-023 is not approved, PG&E states that it will need to refinance the $6 billion of temporary utility debt in order to align the tenor of the temporary utility debt with PG&E’s anticipated realization of net operating losses associated with the payment of wildfire claims under PG&E’s Plan.40

In this Application, PG&E states that it determined for commercial and market reasons, to issue up to $4.5 billion of the temporary utility debt as long-term debt at its exit from Chapter 11.41 PG&E states that this long-term debt carried a tenor of one to three years with early redemption features to provide flexibility if A.20-04-023 is approved.42 If and to the extent the requested $7.5 billion securitization in A.20-04-023 is not approved, PG&E states that this $4.5 billion in long-term debt will need to be refinanced as longer-term debt, and this new, longer-term debt will require authorization from the Commission.43 Accordingly, PG&E requests financing authorization in this Application to refinance up to $4.5 billion of long-term temporary utility debt as 39 A.20-05-005 at 5, citing to I.19-09-016, PG&E Brief, Appendix B at 2-33.40 A.20-05-005 at 4, citing to I.19-09-016, PG&E Brief at 35 (stating that “PG&E has committed to … using the NOLs to pay down the Temporary Utility debt”).41 A.20-05-005 at 5.42 A.20-05-005 at 5.43 A.20-05-005 at 5.

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that debt matures, as longer-term debt, if and to the extent the requested $7.5 billion securitization in A.20-04-023 is not approved.44 PG&E makes clear that this is a contingent request since authorization of the additional up to $4.5 billion would not be needed if A.20-04-023 is granted.

Furthermore, PG&E provides the reasons its contingent request is $4.5 billion, rather than $7.5 billion, in the event its request for the $7.5 billion securitization in A.20-04-023 is not approved in full.45 First, PG&E explains that the Commission already provided PG&E with authority in D.20-05-053 to refinance amounts issued as short-term debt as then long-term debt, i.e., PG&E is already authorized to issue $1.5 billion of this $6 billion46 in long-term debt to replace the $1.5 billion of this $6 billion it already issued in short-term debt. PG&E states that:

This contingent request is not for the full amount of the proposed securitization transaction because PG&E does not need an additional $7.5 billion in incremental financing authorization in the event A.20-04-023 is denied. As authorized in D.20-05-053, PG&E issued $6 billion in Temporary Utility Debt at emergence to fund wildfire claims costs under its Plan of Reorganization. A portion of this Temporary Utility Debt—$1.5 billion—was issued as short-term debt and D.20-05-053 authorizes PG&E to refinance that amount with long-term debt in the event the proposed securitization transaction is not approved. Accordingly, PG&E does not need additional Commission authorization to

44 A.20-05-005 at 5.45 The $7.5 billion securitization request is to refinance $6 billion of temporary utility debt and to expedite other payments to the Wildfire Victim’s Trust. PG&E’s $4.5 billion contingent request here is related solely to refinancing part of the $6 billion.46 As authorized in D.20-05-053 at 72, PG&E issued $6 billion in Temporary Utility Debt at emergence from bankruptcy to fund wildfire claims costs under PG&E’s Plan.

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issue $1.5 billion in long-term debt to replace this short-term debt in the event the Commission does not approve the securitization transaction in A.20-04-023. In contrast, PG&E issued the remaining amount of the Temporary Utility Debt—$4.5 billion—as long-term debt. The Commission has not authorized PG&E to refinance any long-term debt issued as part of the Temporary Utility Debt with additional long-term debt, as PG&E did not request such authorization in I.19-09-016.47

Second, regarding the remaining amount of $1.5 billion (or the difference between the requested $7.5 securitization and the $6 billion of temporary utility debt), PG&E states that this difference represents PG&E’s request in A.20-04-023 to fund $1.35 billion post-emergence deferred payments to the Fire Victim Trust.48 PG&E explains in this Application that, should the Commission deny its request for the $1.35 billion in A. 20-04-023, it would still need to pay $1.35 billion due to the Fire Victim Trust but that PG&E is not requesting additional long-term debt authorization in this Application for that purpose.49

2. The Debt Issuance RequestOn May 11, 2020, PG&E filed this Application requesting

authorization from the Commission to conduct the following:1. Issue, sell and deliver one or more series of long term debt

securities and term loans, such as Debt Securities, in an aggregate principal amount not to exceed $8.1 billion, or $12.6 billion if and to the extent the requested $7.5 billion securitization in A.20-04-023 is not approved, to guarantee the Debt Securities of a regulated affiliate, the proceeds of which may be loaned to PG&E or to another regulated affiliate of PG&E, and/or to guarantee or otherwise secure the obligations of one or more governmental entities in respect of their

47 August 4, 2020 Pacific Gas and Electric Company’s Response to the ALJ’s July 28, 2020, E-Mail Ruling Directing PG&E to Respond to Questions and Provide Additional Information at 1-2. (Footnotes omitted.)48 PG&E August 4, 2020 Response at 2, citing to A.20-04-023 at 3 and 37.49 PG&E August 4, 2020 Response at 3.

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issuance of debt securities for pollution control and sanitary and solid waste disposal, or other eligible facilities; all such issuances, sales, and guarantees of such Debt Securities and obligations to take place upon terms and conditions substantially consistent with those set forth in or contemplated by this Application and related documents submitted to the Commission in connection with this proceeding;

2. Arrange credit agreements or other credit facilities as may be necessary for the purpose of issuing the Debt Securities as set forth in or contemplated by this Application or such other documents filed or to be filed with the Commission in connection with this proceeding and to modify such credit facilities in the manner set forth in this Application without further authorization from the Commission;

3. Guarantee the securities of regulated affiliates or of governmental entities that issue securities on behalf of PG&E and to enter a performance guaranty in connection with transactions involving accounts receivable facilities in which PG&E does not act as servicer;

4. Pursuant to Pub. Util. Code § 851 to pledge or otherwise dispose of or encumber utility property in order to secure the Debt Securities authorized in this proceeding by (i) a mortgage on PG&E’s property, including by issuing collateral mortgage bonds or first mortgage bonds, (ii) a pledge or sale of PG&E’s accounts receivable and/or (iii) a lien on PG&E’s property or another credit enhancement arrangement;

5. Execute and deliver an indenture or supplemental indenture in connection with any issuance of Debt Securities herein and to sell, lease, assign, mortgage, or otherwise dispose of or encumber utility property in connection with the issuance and sale of secured Debt Securities herein; provided that any such encumbrance of utility property, to the extent it is undertaken as credit enhancement for the primary obligation, shall not be counted against the amounts authorized under this Application.

6. Issue, sell, and deliver Debt Securities by public offering or private placement;

7. Debt Securities authorized herein may be issued, sold and delivered at any time or times and from time to time, in an

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aggregate principal amount of Debt Securities of up to $8.1 billion, or $12.6 billion if and to the extent the requested $7.5 billion securitization in A.20-04-023 is not approved; that the proceeds therefrom shall be applied for the purposes referred to in this Application;

8. Authorization to utilize, at its discretion, the features described in Section IV of this Application;

9. A Commission finding, as required by Pub. Util. Code § 818, that in the opinion of the Commission, the money, property or labor to be procured or paid for by such issues is reasonably required for the purposes so specified, and that, except as otherwise permitted in the order in the case of bonds, notes, or other evidences of indebtedness, such purposes are not, in whole or in part, reasonably chargeable to operating expenses or to income;

10. The authority granted shall be effective when PG&E has paid the fees, if any, prescribed by § 1904 and § 1904.1 of the Pub. Util. Code;

11. Providing that if PG&E intends to use any portion of the authority described in Section VII of its Application that it currently expects to use for the retirement or refunding of securities previously issued instead for construction expenditures and acquisition of property, it shall notify the Commission and pay the corresponding fee before making such use;

12. Confirming that PG&E shall report to the Commission all of the information required by the Commission’s General Order 24-C for any instruments issued by PG&E pursuant to this decision and that PG&E may report this information on a semiannual basis; and

13. Granting such additional authorizations or further relief to PG&E with respect to the authorizations sought in its Application as the Commission may deem appropriate.50

In addition, as mentioned above, in PG&E’s September 16, 2020 response to the September 9, 2020 ALJ ruling, PG&E presents its interpretation of, and requests that the Commission confirm, PG&E’s 50 A.20-05-005 at 22-25.

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interpretation of the 5-year capital structure waiver authorized in D.20-05-053.51

2.1. Description of Debt SecuritiesIn connection with PG&E’s primary request for authorization to

issue up to $8.1 billion in long-term debt and the contingent request to issue up to an additional $4.5 billion, it requests authorization to issue various types of debt instruments,52 including secured Debt Securities,53 unsecured Debt Securities, overseas indebtedness, medium-term notes, direct loans from financial institutions, accounts receivable financing,54 floating or variable rate debt, hybrid securities, and preferred stock or depositary shares.55

PG&E further states that the principal amount, form and terms and conditions of each series of Debt Securities will be determined by PG&E’s board of directors or management according to market conditions at the time of sale or issuance.

51 PG&E September 16, 2020 Response at 7-10.52 A.20-05-005 at 6-11, PG&E describes these debt instruments in detail.53 A.20-05-005 at 6, stating “Because any such Secured Debt Securities would be an encumbrance on PG&E’s utility properties under a Trust Indenture, PG&E requests authorization under Public Utilities Code Section 851 to mortgage and encumber utility property.” 54 A.20-05-005 at 9, stating “Because an accounts receivable financing would be an encumbrance on PG&E’s utility properties to the extent that accounts receivable are considered to be utility property, PG&E requests authority herein pursuant to Pub. Util. Code § 851.” 55 A.20-05-005 at 10-11, stating “PG&E states that any offering of preferred stock or depositary shares will bear such terms and conditions as may be approved by PG&E’s board of directors at or immediately prior to the date of issuance or sale in light of market conditions that may exist at that time. PG&E Application at 10. PG&E further states that it seeks authority to offer, issue, and sell preferred stock or depositary shares with the method of sale, price, dividend rate, liquidation preferences, and other rights, preferences, privileges, and restrictions to be determined in consideration of then prevailing market conditions.”

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In addition, PG&E states that the Debt Securities may bear a fixed, floating, or variable rate of interest and may be issued at par or with an original issue discount or premium. Trust preferred securities may have either mandatory or optional redemption features. PG&E may issue Debt Securities directly or may issue them through a regulated affiliate that will in turn lend or otherwise transfer the proceeds to or for the benefit of PG&E.

PG&E states it will notify the Commission by letter on a semiannual basis after the issuance of any Debt Securities and include in this letter the information required by General Order 24-C with respect to such Debt Securities.56

PG&E also states that it expects to issue all Debt Securities as secured debt.57 Moreover, to the extent related to the contingent request for debt issuance up to an additional amount of $4.5 billion and consistent with the Commission’s authorization in D.20-05-053, debt issuance fees and costs will be allocated to shareholders.58

2.2. Description of Debt Securities Enhancement FeaturesPG&E requests authority to include at its discretion one or a

combination of the following additional enhancement features in the PG&E or regulated affiliate Debt Securities issued as part of the primary request for up to $8.1 billion and the contingent request for an additional up to $4.5 billion: (1) credit enhancements,59 (2) redemption

56 A.20-05-005 at 6.57 PG&E September 16, 2020 Response at 11.58 PG&E August 4, 2020 Response at 2, stating that the $6 billion will be used to fund wildfire claims costs under PG&E’s Plan, citing to D.20-05-053 at 72.59 A.20-05-005 at 11: “Debt used as credit enhancement would not count against the amount of debt authorized under this Application as long as there was no possibility that such credit enhancements would ever increase the amount of PG&E’s debt obligations. (see D. 08-10-013.)”

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provisions, (3) put options, (4) sinking funds, (5) tax-exempt financings, and (6) warrants. PG&E states it will use such enhancement features as appropriate to improve the terms and conditions of the Debt Securities and to lower PG&E’s overall cost of financing for the benefit of customers.60

2.3. Description of Interest Rate Caps, Collars, Swaps, and HedgesPG&E requests authority to enter into various financial

instruments for the purpose of managing interest rate risk in connection with both its primary request for debt issuance up to $8.1 billion and its contingent request for debt issuance up to $4.5 billion. According to PG&E, such instruments could take a number of forms, including (1) interest rate cap agreements, (2) interest rate floor agreements, (3) interest rate collar agreements, (4) swaptions, and (5) interest rate swap agreements.61

PG&E also requests authority to enter into contracts to manage the risk of increased interest rates associated with planned financings. According to PG&E, such contracts could include (1) hedging future debt issuances using instruments such as Treasury locks, (2) caps, and (3) collar agreements.62

In addition, PG&E requests that its use of such authority not be considered 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.63

60 A.20-05-005 at 11-14.61 A.20-05-005 at 14.62 A.20-05-005 at 14.63 A.20-05-005 at 14.

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PG&E also requests the flexibility to enter into other hedging and interest rate swap arrangements not specifically described in this Application.64

Collectively, PG&E refers to all these instruments as the “interest rate hedges.”65 In order to reduce exposure to interest rate risk, PG&E states that it may negotiate a maximum rate, usually called a cap. In that case, even if floating rates increase above the cap or ceiling rate, PG&E states it would pay only the ceiling rate. In addition to the ceiling rate, sometimes the counterparty to the contract desires to have a floor rate. In the event that the floating rate falls below the floor rate, PG&E states it would pay the floor rate. PG&E explains that such floor and ceiling rates are called interest rate collars because the interest rate fluctuates within a band which is negotiated between PG&E and the counterparty.

From time to time, PG&E states that it may be able to manage its borrowing costs by issuing fixed or floating rate debt and entering into one or a series of interest rate swap contracts to convert fixed interest payments into floating rate payments or vice versa, or to convert floating rate payments tied to one index (e.g., London Interbank Offer Rate or LIBOR) into floating rate payments tied to another index (e.g., Federal Reserve Composite Rate for Commercial Paper).66 If the resulting interest rate is lower than PG&E could have obtained by issuing a comparable security directly, then PG&E states the result is a savings for PG&E and its customers.67

64 A.20-05-005 at 14.65 A.20-05-005 at 14.66 A.20-05-005 at 15.67 A.20-05-005 at 15.

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PG&E states that swaps may be denominated in U.S. dollars or in a foreign currency. If PG&E enters into a swap denominated in a foreign currency, PG&E states that any exchange risk will be hedged through one or more forward contracts or through a currency swap. According to PG&E, swaps would be negotiated with a major financial intermediary (like a commercial bank) or directly with a principal seeking the other side of the swap transaction. PG&E further states that the swap contract may specify that the exchange of interest payments will commence either immediately or at a future date.

PG&E states that contracts for hedging future issuances could take various forms, including Treasury lock, cap, and collar agreements. PG&E explains that Treasury lock agreements are used to “lock in” the forward rate of a specified Treasury or other security on which a fixed rate debt financing will be priced at a specific date in the future. PG&E further explains that Treasury collars and cap agreements would be used to limit the maximum interest cost of a debt instrument using the forward rate of a specified Treasury or other security on which a fixed rate debt issuance would be priced at a specified date in the future. In addition to these contracts which hedge the underlying Treasury rate or other index upon which debt issuances are priced, PG&E explains that there are also contracts which hedge the overall cost of a debt issuance, not just the underlying index rate. According to PG&E, these hedges are accomplished through the use of forward starting swaps, whereby an issuer contracts to pay a predetermined rate at a specified date in the future.

PG&E states that it will enter into these swap or hedging contracts only when a future financing is required (such as replacement of a maturing issue).

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PG&E proposes to comply with the following restrictions regarding swap and hedging transactions entered into pursuant to this Application:

(1) 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.

(2) Swap and hedging transactions will not exceed at any time 20 percent of PG&E’s total long-term debt outstanding.

(3) All costs associated with hedging transactions are subject to review in a utility’s next regulatory proceeding addressing its cost of capital.

(4) 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.

(5) 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.

(6) PG&E will maintain and make available, within 30 days of request, the following: (1) 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; (2) a complete copy of executed swap and/or hedging agreements and all associated documentation.68

PG&E further states that the terms and conditions of swaps and hedges will be determined by PG&E according to market conditions at the time such transactions are negotiated and that interest rate hedges entered into by a regulated affiliate may be guaranteed by PG&E.

68 A.20-05-005 at 16-17.

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3. Discussion3.1. Public Utilities Code Requirements for Issuance of Debt Securities

PG&E’s request to issue Debt Securities up to $8.1 billion and its contingent request to issue Debt Securities up to an additional $4.5 billion are subject to Pub. Util. Code §§ 816, 817, and 818.

Pursuant to Pub. Util. Code § 816, the Commission has broad discretion to determine if a utility should be authorized to issue debt.69 Where necessary and appropriate, the Commission may attach conditions to the issuance of utility debt to protect and promote the public interest.

Pursuant to Pub. Util. Code § 817, a public utility may only issue and use debt financing for selected purposes.70 Those purposes not

69 Pub. Util. Code § 816 provides: “The power of public utilities to issue stocks and stock certificates or other evidence of interest or ownership and bonds, notes, and other evidences of indebtedness and to create liens on their property situated within this State is a special privilege, the right of supervision, regulation, restriction, and control of which is vested in the State, and such power shall be exercised as provided by law under such rules as the commission prescribes.”70 Pub. Util. Code § 817 provides: “A public utility may issue stocks and stock certificates or other evidence of interest or ownership, and bonds, notes, and other evidences of indebtedness payable at periods of more than 12 months after the date thereof, for any one or more of the following purposes and no others:

(a) For the acquisition of property.(b) For the construction, completion, extension, or improvement of its facilities.(c) For the improvement or maintenance of its service. (d) For the discharge or lawful refunding of its obligations.(e) For the financing of the acquisition and installation of electrical and plumbing appliances and agricultural equipment which are sold by other than a public utility, for use within the service area of the public utility.(f) For the reorganization or readjustment of its indebtedness or capitalization upon a merger, consolidation, or other reorganization.(g) For the retirement of or in exchange for one or more outstanding stocks or stock certificates or other evidence of interest or ownership of such public utility, or bonds, notes, or other evidence of indebtedness of such public utility, with or without the payment of cash.

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listed in Pub. Util. Code § 817 may only be paid with by funds from normal utility operations, not debt issuance.

PG&E proposes that it will use up to $8.1 billion of new Debt Securities to: (1) finance planned funding for capital expenditures over the 2021-2023 forecast period and (2) cover $1.2 billion of maturing debt obligations over the 2021-2023 forecast period. PG&E expects to use $1.2 billion of the $8.1 billion request for retirement, refunding, or reissuance of Debt Securities previously issued (and upon which PG&E has previously paid the prescribed fees in Pub. Util. Code § 1904 and § 1904.1.)71 These proposed uses are consistent with § 817, subsections(a), (b), (c), (d), and (g). PG&E proposes that it may use the contingent amount of up to $4.5 billion of new Debt Securities to pay wildfire claims costs, consistent with § 817(d), for the discharge or lawful refunding of its obligations. PG&E expects to use the contingent amount of up to $4.5 billion for reissuance of debt previously issued (and upon which PG&E has previously paid the prescribed fees in Pub. Util. Code § 1904 and § 1904.1).

Pub. Util. Code § 818 states that no public utility may issue notes or other evidences of indebtedness payable at periods of more than 12

(h) For the reimbursement of moneys actually expended from income or from any other money in the treasury of the public utility not secured by or obtained from the issue of stocks or stock certificates or other evidence of interest or ownership, or bonds, notes, or other evidences of indebtedness of the public utility, for any of the aforesaid purposes except maintenance of service and replacements, in cases where the applicant has kept its accounts and vouchers for such expenditures in such manner as to enable the commission to ascertain the amount of money so expended and the purposes for which such expenditure was made.”

71 A.20-05-005 at Schedule X, PG&E sets forth the calculation for its proposed payment of fees on the remaining amount, $6.9 billion (under both the primary and contingent requests). The fees are further addressed in Section 5, herein.

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months unless, in addition to the other requirements of law, it shall first have secured from the Commission a decision authorizing the issue, stating the amount thereof and the purposes to which the issue or the proceeds thereof are to be applied.72 Pub. Util. Code § 818 also requires the Commission, in issuing such a decision, to find that the money, property, or labor to be procured or paid for with the proceeds of the debt authorized is reasonably required for the purposes specified in the decision and, unless expressly permitted in a decision authorizing debt, that those purposes are not, in whole or in part, reasonably chargeable to expenses or to income.

PG&E has substantiated that its need for issuance of new Debt Securities, both the primary request of up to $8.1 billion and the contingent request of up to an additional $4.5 billion, are necessary and are for proper purposes, as discussed above in Section 2 of this decision. These purposes are authorized by Pub. Util. Code § 817 and, consistent with Pub. Util. Code § 818, are not reasonably chargeable to operating expenses or income.

Since PG&E’s request is in compliance with Pub. Util. Code § 816 et seq., we grant it authority to issue new Debt Securities for the aforementioned purposes and terms, and for the primary amount of up to $8.1 billion and contingent amount of an additional up to $4.5 billion

72 Pub. Util. Code § 818 provides: “No public utility may issue stocks and stock certificates, or other evidence of interest or ownership, or bonds, notes, or other evidences of indebtedness payable at periods of more than 12 months after the date thereof unless, in addition to the other requirements of law it shall first have secured from the commission an order authorizing the issue, stating the amount thereof and the purposes to which the issue or the proceeds thereof are to be applied, and that, in the opinion of the commission, the money, property, or labor to be procured or paid for by the issue is reasonably required for the purposes specified in the order, and that, except as otherwise permitted in the order in the case of bonds, notes, or other evidences of indebtedness, such purposes are not, in whole or in part, reasonably chargeable to operating expenses or to income.”

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if and to the extent its request for $7.5 billion securitization in A.20-04-023 is not approved or is not fully approved, and as determined in this decision.

3.2. Forecast of Sources and UsesApplications by utilities for authorization to issue debt and other

securities are, in part, based on forecasted sources and uses of funds that demonstrate the utility’s need for the requested funding.

As part of its Application, PG&E provided a forecast of its sources and uses covering the three-year period of 2021-2023.73 PG&E requested confidential treatment of this forecast by the concurrently filed Motion of Pacific Gas and Electric Company for Authority to File and Maintain Confidential Information (Schedules I, II, III, and IX-B of Financial Information) Under Seal. PG&E also provided the aggregate financing authority available from previous Commission decision,74and as detailed in confidential Schedule VI to the Application, but it forecasts that it expects to consume these amounts to meet its financial needs for the remainder of 2020.75 As set forth in the October 7, 2020 ALJ ruling, PG&E’s motion that its forecast of sources and uses available (and aggregate detailed financing authority) be sealed was granted for a period of three years. We affirm this ruling herein. Therefore, the details of PG&E’s sources and uses (aggregate detailed financing authority available) are not provided in this decision.

Based on our review of this confidential information to determine whether the Commission supports PG&E’s need for new debt financing authority, the Commission finds that PG&E’s forecasted sources and 73 A.20-05-005 at 22, Schedule I, is a three-year forecast of PG&E’s capital expenditures.74 A.20-05-005 at 3.75 A.20-05-005 at 3.

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uses for 2021-2023 approximate the amounts of new debt financing requested, both the primary request for up to $8.1 billion and the contingent request for up to $4.5 billion.

We further find that PG&E has substantiated its need for issuance of new Debt Securities, both the primary request for authority to issue up to $8.1 billion of new Debt Securities and the contingent request for authority to issue an additional up to $4.5 billion if and to the extent its request for $7.5 billion securitization in A.20-04-023 is not approved or is not fully approved in new Debt Securities, and are necessary and are for proper purposes.

Therefore, we find it reasonable to authorize PG&E to issue up to $8.1 billion of new Debt Securities and an additional up to $4.5 billion of new Debt Securities, if and to the extent its request for $7.5 billion securitization that PG&E has requested in A.20-04-023 is not approved or is not fully approved. The new financing authority will allow PG&E to fund its capital expenditure plans for the three-year period of 2021 through 2023, and for the other proper purposes as discussed in Section 2 of this decision, including to payment of wildfire claims costs.

We also find that PG&E’s request complies with Pub. Util. Code § 816 et seq. and grant it authority to issue new Debt Securities and authority for the aforementioned purposes and terms. Those purposes not listed in Pub. Util. Code § 817 may only be paid with funds from normal utility operations.

A grant of financing authority to a utility does not obligate the Commission to approve capital projects to be conducted by the utility. This financing authority is limited to providing PG&E with sufficient liquid resources to timely finance its upcoming utility projects and to reimburse its treasury for the three-year period of 2021 through 2023.

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Review of the reasonableness of capital projects occur as needed through the regulatory process applicable to each capital project. Approval of this financing request does not prejudge any of PG&E’s capital projects or forecasted capital projects for the three-year period of 2021 through 2023.

3.3. Types of Securities to be IssuedPG&E’s requests for authority to issue new Debt Securities,

described in Section 2 of this decision, are similar to the types of debt securities authorized by the Commission in D.15-01-030, issued on January 29, 2015.76 Authorizing PG&E the option to issue these different types of Debt Securities gives PG&E flexibility and allows it to lower the cost of money for the benefit of ratepayers.

Therefore, we authorize PG&E to issue the specific types of Debt Securities detailed in Section 2 of this decision and enumerated in the ordering paragraphs herein.

PG&E also requested authority to issue other forms of hybrid securities, not specifically mentioned in the Application. The Commission, however, cannot authorize something that has not been identified. Therefore, we will authorize PG&E to issue only the specific types of hybrid securities described in this decision and we deny PG&E’s request to use other forms of debt that are not specifically identified.

In connection with the issuance of Debt Securities, PG&E also requested authority to guarantee the Debt Securities of a regulated subsidiary and a regulated affiliate and to guarantee or secure the

76 D.15-01-030 (A.14-06-020) Decision Authorizing PG&E to issues up to $6.0 billion of Debt and Preferred and Preference Stock (January 29, 2015).

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obligations of governmental entities.77 Consistent with D.15-01-030,78 the Commission grants authority to issue Debt Securities to guaranty the Debt Securities of a regulated subsidiary or regulated affiliate and to guarantee or secure the obligations of governmental entities. PG&E is reminded that when it issues debt through a regulated subsidiary or regulated affiliate, it must remain in compliance with the Commission’s Affiliate Transaction Rules in D.06-12-029.79 In particular, Rule IX.C. of the Affiliate Transaction Rules,80 which requires large energy utilities and their holding companies to provide a non-consolidation opinion that demonstrates that the “ring-fencing”81 around the utility is sufficient to prevent it from being pulled into the bankruptcy of its parent, affiliate, or subsidiary. In comments to the proposed decision, PG&E states that it provided the Commission with a non-consolidated opinion in compliance with this requirement, as set forth in Rule IX. C., on March 14. 2007.82 In support of its statement, PG&E cites to PG&E Advice Letter 4267-G/5863-E (June 29, 2020) (PG&E’s 2020 Affiliate Transaction Rules Compliance Plan) at 66.83 The decision further reminds PG&E of Rule IX.D. of the Affiliate Transaction Rules which

77 A.20-05-005 at 2.78 D.15-01-030 at 13.79 D.06-12-029, Opinion Adopting Revisions to (1) the Affiliate Transaction Rules and (2) General Order 77-L, As Applicable to California’s Major Energy Utilities and Their Holding Companies (December 14, 2006). 80 D.06-12-029, Appendix at A-3, Rule IX: Protecting the Utility’s Financial Health. 81 D.06-12-029, Appendix A at A-3, 31-33, sets forth the definition of “ring-fencing.” “Ring-fencing” is defined as the action of a regulated public utility to financially separate itself from a parent/affiliate/subsidiary that engages in non-regulated business, primarily in order to protect ratepayers from financial instability or bankruptcy of the parent/affiliate/subsidiary. 82 PG&E December 2, 2020 Opening Comments to Proposed Decision at 3.83 PG&E December 2, 2020 Opening Comments to Proposed Decision at 3.

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govern PG&E’s ongoing obligations on the subject set forth in Rule IX.C. Rule IX.D. states that a utility “shall notify the Commission of any changes made to its ring-fencing provisions within 30 days.”84 PG&E states in its comments on the proposed decision that it does not expect that the creation of a subsidiary or affiliate used to issue the debt authorized by this decision to involve such a change, and PG&E would comply with the notification requirement if it did.85

Likewise, the Commission authorizes PG&E to arrange credit agreements or other credit facilities and to deliver an indenture or supplemental indenture in connection with the issuance of Debt Securities. These activities are reasonably related to the issuance of Debt Securities and are consistent with D.15-01-030.

Also, in compliance with Pub. Util. Code § 824, PG&E must maintain records to identify the specific Debt Securities issued pursuant to this decision and demonstrate that proceeds from such Debt Securities have been used only for public utility purposes.

3.4. Encumbrance of Utility PropertyPG&E also seeks authority to encumber its utility property,

including accounts receivable, in connection with the issuance of Debt Securities for both the primary request of up to $8.1 billion and the contingent request of up to an additional $4.5 billion. This request to encumber utility property is subject to Pub. Util. Code § 851 which states, in part, that no utility shall encumber any part of its plant, system, or other property necessary or useful in the performance of its duties to the public, or any franchise or permit or right there under

84 D.06-12-029, Appendix A-3 at 32-33.85 PG&E December 2, 2020 Opening Comments on Proposed Decision at 3.

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without first having secured from the Commission an order authorizing it to do so.86

Consistent with D.15-01-03087 and Pub. Util. Code § 851, the Commission authorizes PG&E to sell, lease, assign, mortgage or otherwise dispose of or encumber its utility property, including its utility plant. The Commission recognizes that such activity may be necessary in connection with the sale and issuance of Debt Securities. PG&E’s request not to deduct the encumbrance of utility property against amounts authorized in this Application to the extent that such encumbrance is undertaken as a credit enhancement is granted.88

Also consistent with D.15-01-030,89 PG&E is granted authority to pledge or otherwise dispose or encumber its account receivables in connection with the issuance of Debt Securities.90

PG&E’s request not to count the encumbrance of PG&E’s account receivables against amounts authorized in this application to the extent that such encumbrance is undertaken as a credit enhancement is also granted.86 Pub. Util. Code § 851(a) provides, in relevant part, that: “(a) A public utility, other than a common carrier by railroad subject to Part A of the Interstate Commerce Act (49 U.S.C. Sec. 10101 et seq.), shall not sell, lease, assign, mortgage, or otherwise dispose of, or encumber the whole or any part of its railroad, street railroad, line, plant, system, or other property necessary or useful in the performance of its duties to the public, or any franchise or permit or any right thereunder, or by any means whatsoever, directly or indirectly, merge or consolidate its railroad, street railroad, line, plant, system, or other property, or franchises or permits or any part thereof, without first having either secured an order from the commission authorizing it to do so….”87 D.15-01-030 at 15. 88 A.20-05-005 at 11, stating: “Debt used as credit enhancement would not count against the amount of debt authorized under this Application as long as there was no possibility that such credit enhancements would ever increase the amount of PG&E’s debt obligations (see D.08-10-013).”89 D.15-01-030 at 15. 90 A.20-05-005 at 8-9.

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3.5. Securities EnhancementsPG&E also requests authorization to include, at its discretion,

securities enhancements described in Section 2 of this decision for both the primary request of up to $8.1 billion and the contingent request of up to an additional $4.5 billion. Such enhancements are designed to improve the terms and conditions of PG&E’s new Debt Securities and lower the overall cost of money for the benefit of the ratepayers.

The Commission has previously granted PG&E this authority and most recently in D.15-01-030.91 Specifically, in D.15-01-030, the Commission granted PG&E authority to (1) use similar security enhancements as requested herein; (2) not consider enhancements as separate debt for purposes of calculating its remaining financing authorization since the use of such authority would not increase the amount of the underlying or related securities to be issued.; and (3) comply with selected restrictions regarding swap and hedging transactions entered into.92

We find that PG&E’s request for authority for both the primary and contingent requests, whenever appropriate and at its discretion, to include certain security enhancement features in its Debt Securities as described in Section 2 of this decision or enter into certain derivative transactions related to underlying debt to be reasonable for the purpose of improving the terms and conditions of PG&E’s Debt Securities with the overall goal of lowering the cost of money, which in turn benefits ratepayers. In doing so, PG&E shall comply with the proposed restrictions listed in this decision and record the financial

91 D.15-01-030 at 15.92 A.20-5-005 at 15-16.

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instruments used to manage rate risk separately from the new debt authorized herein.

PG&E requests flexibility to enter into other hedging and interest rate swap arrangements not specifically described in its Application. However, the Commission cannot authorize something that has not been identified. Therefore, we authorize PG&E only to enter into hedging and interest rate swap arrangements specified in this decision.93

4. Reporting RequirementsThe Commission’s General Order 24-C requires utilities to submit

semi-annual reports to the Commission showing receipts and disbursements from the sale of stocks, bonds and other evidences of indebtedness which the utility has been authorized to issue. The reports contain, among other things, the following information: (a) the amount of debt issued by the utility during the previous six-month period; (b) the total amount of debt outstanding at the end of the six-month period; and (c) the purposes for which the utility expended the proceeds realized from the issuance of debt during the prior six-month period.

PG&E states it will notify the Commission on a semiannual basis after the issuance of any Debt Securities regarding both the primary and contingent requests, including the information required by General Order 24-C with respect to such Debt Securities.

We find that General Order 24-C and the Financing Rule adopted in D.12-06-015 (which includes corrections adopted in D.12-07-003) apply

93 A.20-05-005 at 14, stating: “Furthermore, given the structure imposed through the special limitations and restrictions proposed below, PG&E requests the flexibility to enter into other hedging and interest rate swap arrangements not specifically described in this Application.”

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to certain transactions proposed pursuant to this Application.94 In addition, we find that General Order 24-C and D.12-06-015 require certain periodic reports. PG&E shall comply with all applicable Commission Finance Rules and provisions of General Order 24-C. Consistent with D.12-06-015 and General Order 24-C, PG&E shall provide the Commission with periodic reports regarding the issuance of any Debt Securities.5. Fees Required by Public Utilities Code §§ 1904(b) and 1904.1

Pub. Util. Code § 1904(b) and § 1904.1 set forth the fees required when the Commission authorizes the issuance of debt and preferred stock, respectively. Section 1904.1 does not apply to this Application.

Section 1904(b) provides that “[n]o fee need be paid on such portion of any such issue as may be used to guarantee, take over, refund, discharge, or retire any stock, bond, note, or other evidence of indebtedness on which a fee has theretofore been paid to the commission.” Thus, § 1904(b) is not applicable to any issue used to guarantee, take over, refund, discharge, or retire any stock, bond, note, or other evidence of indebtedness on which a fee has previously been paid to the Commission.

PG&E expects to use $1.2 billion of the $8.1 billion request for the retirement, refunding, or reissuance of securities previously issued and upon which PG&E has previously paid fees. Likewise, PG&E expects to use the contingent request of up to $4.5 billion for the reissuance of securities previously issued and upon which PG&E has previously paid fees.

94 D.12-06-015, Decision Adopting a New Financing Rule and General Order 24-C (June 7, 2012). On June 7, 2012, the Commission adopted the Financing Rule in D.12-06-015, replacing the Competitive Bidding Rule that applied to the issuance of debt securities.

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Therefore, as set forth in Schedule X of its Application, PG&E proposes to pay fees on the remaining amount, $6.925 billion. Based on the fee calculated in the table, below, PG&E must remit a fee in the amount of approximately $3.5 million to the Commission’s Fiscal Office. The authority granted by this decision shall not become effective until PG&E remits the required amount to the Commission’s Fiscal Office.

Calculation of FeeComputation of § 1904(b) Fee for $6.925 Billion of Long-

Term DebtFee on First $1 Million ($2 for every $ 1k)

$2,000

Fee on $1 Million ($1 for every $1k)

$9,000

Fee on $10 Million and above ($0.50 for every $1k)

$3,457,500

Total Fee $3,468,500

If PG&E intends to use any portion of the authority described in its Application that it currently expects to use for the retirement or refunding of securities previously issued instead for construction expenditures and acquisition of property, it shall notify the Commission and pay the corresponding fee before making such use. PG&E shall also identify in its next securities report after issuance, how it used the $1.2 billion of new financing authority earmarked to replace existing long-term debt.

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6. Financial InformationPG&E is placed on notice that the reasonableness of any resulting

interest rate and cost of money arising from the issuance of Debt Securities as well as capital structures, are normally subject to review in the appropriate cost of capital or general rate case proceeding. Therefore, there is no finding in this decision of the reasonableness of the projected capital ratios for ratemaking purposes or the appropriate cost of money. In addition, there is no finding in this decision on the reasonableness of PG&E’s proposed construction program. Construction expenditures and the resulting plant balances in rate base are issues that are normally addressed in a general rate case or other specific application. The authority to issue Debt Securities is distinct from the authority to undertake construction or the right to recover the cost of capital in rates.7. California Environmental Quality Act

The California Environmental Quality Act (CEQA)95 applies to projects that require discretionary approval from a governmental agency, unless exempted by statute or regulation. It is long established that the act of ratemaking by the Commission is exempt from CEQA review. As stated in the California Public Resources Code, the “establishment, modification, structuring, restructuring or approval of rates, tolls, fares, or other charges by public agencies” is exempt from CEQA.96 Likewise, the creation of government funding mechanisms or other government fiscal activities which do not involve any commitment to any specific project which may result in a

95 Public Resources Code §§ 21000, et seq. 96 Public Resources Code § 21080(b)(8).

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potentially significant impact on the environment is not a “project” subject to CEQA.97

This decision does not authorize any capital expenditures or construction projects. Construction projects which PG&E may finance pursuant to the authority granted by this decision must undergo CEQA review as required by CEQA and CEQA Guidelines.8. Request to File Under Seal

Concurrent with the filing of A.20-05-005 on May 11, 2020, PG&E filed, pursuant to Pub. Util. Code § 583 and Rule 11.4 of the Commission’s Rules of Practice and Procedure, a Motion of Pacific Gas and Electric Company for Authority to File and Maintain Confidential Information (Schedules I, II, III, and IX-B of Financial Information) Under Seal. PG&E states that the information it seeks to file under seal contains a cash flow statement and capital ratios. The financial information contains forward-looking statements that are necessarily subject to various risks and uncertainties and are subject to change. The schedules for which PG&E has requested confidentiality include forecasts of cash flows, cash requirements and capitalization ratios over the period 2020-2023. This information has not been disclosed to the public. The October 7, 2020 ALJ ruling found PG&E’s request reasonable and granted the motion for a period of three years.9. Five-Year Capital Structure Waiver Authorized in D.20-05-053

In the September 9, 2020 ALJ ruling, PG&E was asked to explain how PG&E understands the 5-year capital structure waiver granted in D.20-05-053 would be implicated if the Commission grants PG&E’s contingent request for $4.5 billion in long-term debt in this proceeding

97 CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, §§ 15000-15387.

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and denies the proposed $7.5 billion securitization requested in A.20-04-023.98

In PG&E’s September 16, 2020 response to this ALJ ruling, PG&E responds to the question by (1) stating that PG&E would remain in compliance with this waiver and also (2) requesting that the Commission confirm in this decision that PG&E’s interpretation of the 5-year capital structure waiver authorized in D.20-05-053 is correct.99 In support of the Commission’s confirmation of this matter, PG&E states that a decision from the Commission would provide the certainty needed to make the required representation to banks for debt issuances.100 PG&E explains,

In order to issue new long-term debt to fund rate base growth, PG&E will be required to represent to banks that it is, and will be, in compliance with applicable laws, which includes its capital structure requirement. This representation is typical of such debt issuances, and PG&E has made this representation to banks in the past. While PG&E believes that its interpretation of the waiver, as set forth below [in PG&E’s September 16, 2020 response], is reasonable, a decision by the Commission confirming PG&E’s interpretation would provide the certainty needed to make the required representation to banks for debt issuances.101

PG&E further states that a decision by the Commission confirming the acceptability of PG&E’s interpretation of the waiver at this time would

98 September 9, 2020 ALJ Ruling at 3.99 PG&E September 16, 2020 Response at 7, stating “PG&E respectfully requests that the Commission confirm in the decision in this proceeding that PG&E’s interpretation of the capital structure waiver is consistent with D.20-05- 053.”100 PG&E September 16, 2020 Response at 7.101 PG&E September 16, 2020 Response at 7.

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not constrain the Commission’s ability to review PG&E’s capital structure on an ongoing basis.102

In explaining its interpretation, PG&E first recounts that in D.20-05-053, the Commission granted PG&E a temporary waiver from its authorized capital structure for a period of five years. In doing so, PG&E states that the Commission recognized that PG&E will need some time to execute on its plan to de-leverage and return to a 52% equity ratio required by the Commission’s most recent PG&E cost of capital decision, D.19-12-056.103 In granting this temporary waiver in D.20-05-053, PG&E explains that the Commission stated:

We deny PG&E’s proposed adjustments to the calculation of its capital structure except as required by Public Utilities Code § 3292(g), but grant PG&E’s alternative request for a temporary waiver from its authorized capital structure, which we find preferable to a hypothetical capital structure. PG&E’s capital structure waiver is subject to the following conditions: PG&E is granted a waiver from its current authorized capital structure for a period of five years from the date of this decision. This waiver applies only to the financing in place upon PG&E’s exit from bankruptcy. Consistent with PG&E’s plan we expect PG&E to expeditiously pay down Temporary Utility debt over the projected five-year period and regain a closer alignment between aggregate utility debt and the amount of recoverable utility debt. PG&E may seek to achieve this through its securitization application, A.20-04-023 filed April 30, 2020, its commitment to use Net Operating Losses [NOLs] to reduce leverage, its commitment to not pay common dividends for a time, or through other forms of deleveraging it may identify in the future.104

102 PG&E September 16, 2020 Response at 7.103 PG&E September 16, 2020 Response at 8.104 PG&E September 16, 2020 Response at 6-7, citing to D.20-05-053 at 92.

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With this background, PG&E explains that it interprets the waiver granted in D.20-05-053 to mean that so long as PG&E is executing on its plan to de-leverage over time, and continuing to increase its equity ratio, on average, following emergence, then PG&E’s compliance with its capital structure requirement is waived for five years in accordance with D.20-05-053.105

On this basis, PG&E states that, to determine its compliance with the waiver, on a going forward basis, PG&E would measure its equity ratio as recorded in accordance with GAAP, with the following adjustments:106

Wildfire Fund contributions. Pursuant to Public Utilities Code section 3292(g), “[a]ll initial and annual contributions [to the Wildfire Fund] shall be excluded from the measurement of the authorized capital structure.” No adjustment is required in connection with the contributions themselves because PG&E plans to finance those contributions to the Wildfire Fund with debt and equity consistent with its authorized capital structure (48 percent debt, 52 percent equity). To give effect to the statute, however, an adjustment is necessary to remove the reduction to equity that results from amortization of the Fund contributions. Specifically, PG&E will recognize charges to earnings reflecting amortization of the contributions over 15 years. For purposes of its ratemaking capital structure, PG&E would add back to equity the after-tax charges to earnings reflecting the amortization of the initial and ongoing contributions to the Wildfire Fund. (Footnote in original omitted.)Wildfire mitigation capital expenditures. Pursuant to Public Utilities Code section 8386.3(e), and consistent with PG&E’s 2020 General Rate Case Settlement Agreement, PG&E is required to finance certain Community Wildfire Safety Program capital expenditures with 100% debt, which will be

105 PG&E September 16, 2020 Response at 9.106 PG&E September 16, 2020 Response at 9.

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replaced with securitized debt. For purposes of calculating its projected capital structure, PG&E would exclude any such debt, including any conventional debt financing of these expenditures prior to refinancing with securitized debt, from the capital structure calculation.107 Based on this interpretation of the capital structure waiver in

D.20-05-053, PG&E responds to the above question posed in the September 9, 2020 ALJ ruling, stating that, in the absence of the Commission’s authorization of the $7.5 billion securitization requested in A.20-04-023, PG&E would have to refinance the temporary utility debt, the $6 billion – hence the request for the contingent amount of up to $4.5 billion. PG&E explains that the refinancing of the $6 billion would result in a slower rate of increase in PG&E’s equity ratio, but PG&E does not anticipate that its equity ratio would drop below the equity ratio following emergence (which PG&E indicated was “below 52%”), on average, through 2025. Accordingly, under PG&E’s interpretation of the waiver, PG&E argues that it would remain in compliance with the 5-year waiver and the waiver extends to the issuance of the up to $4.5 billion in long-term debt to refinance the $6 billion (for the 5-year term of such waiver).

PG&E requests clarity that it is in compliance with the D.20-05-053 capital structure waiver so long as its equity ratio, on average, does not drop below the equity ratio following emergence (which PG&E indicated was “below 52%”) through 2025. In D.20-05-053, the Commissioned acknowledged PG&E’s concern that PG&E lacked certainty regarding how PG&E would deleverage over time. Parties expressed concern with an unconditional capital structure waiver. To balance these concerns, the Commission granted a 5-year waiver

107 PG&E September 16, 2020 Response at 9-10.

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whereby PG&E would annually provide updates to Commission staff based on its capital structure, equity ratio, and credit metrics and its deleveraging progress for achieving its five-year projections in order to improve its credit ratings and underlying credit profile following its emergence from Chapter 11.

PG&E’s suggested interpretation is generally accurate, that the waiver is conditioned on deleveraging over time. More specifically, PG&E must attempt to deleverage consistent with its projections provided to the Commission and parties in I.19-09-016,108 or as otherwise directed by the Commission. The temporary waiver provided by D.20-05-053 gives PG&E flexibility to emerge from bankruptcy, while requiring PG&E to file annual updates in Advice Letters on its progress of deleveraging, including deviations from its projections. The annual Advice Letter updates are intended to provide stakeholders and the Commission an opportunity to review PG&E’s actual capital structure, and should deviations be material, identify solutions to achieve deleveraging and return to the authorized capital structure over time.109

In this way, the 5-year capital structure waiver is flexible to accommodate changed circumstances,110 but tied to PG&E’s projections to deleverage its capital structure.111 This does not constrain the ability of the Commission to review PG&E’s capital structure on an ongoing basis.

108 I.19-09-016, Exhibit EPUC-02: Attachment to PG&E's Omnibus Supplemental Data Response, Set 2 on February 19, 2020, titled "PLANOFREORGANIZATIONOII-2019_DR_MISC_ATCH02CPUC."109 D.20-05-053 at 84, Ordering Paragraph 9.110 D.20-05-053 at 83-84.111 D.20-05-053 at 80-85.

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10. ConclusionPG&E should be granted authority to issue up to $8.1 billion in

long-term Debt Securities and to issue its contingent request of up to an additional $4.5 billion in long-term Debt Securities, recognizing the 5-year capital structure waiver term, if and to the extent its request for the $7.5 billion securitization PG&E has requested in A.20-04-023 is not approved or is not fully approved, encumber accounts receivable and utility property, guarantee the securities or other obligations of PG&E’s regulated subsidiaries or regulated affiliates and governmental entities that issue securities on behalf of PG&E, and enter into various enhancement features. The below, however, identifies the requests specified in PG&E’s Application that are not granted:

a. PG&E’s requested authority to issue other forms of hybrid securities not specifically mentioned in the Application;

b. PG&E’s requested authority to include terms in its debt issuance or preferred and preference stock, other than those terms and conditions described in the Application; and

c. PG&E’s request to enter into other hedging and interest swap arrangements not specifically described in the Application.

11. Comments on Proposed DecisionThe proposed decision of ALJ DeAngelis in this matter was mailed

to the parties in accordance with Section 311 of the Public Utilities Code and comments were allowed under Rule 14.3 of the Commission’s Rules of Practice and Procedure. Comments were filed on December 2, 2020 by PG&E and no reply comments were filed.

In response to PG&E’s comments, Ordering Paragraph 16 herein is revised to permit payment of applicable fees under §§ 1904(b) and 1904.1 by wire transfer consistent with maintaining recommended state and local social distancing protocols during the Covid-19

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pandemic and consistent with modern business practices. In addition, in response to PG&E’s comments, the body of the decision and Conclusion of Law 13 herein are modified to accurately reflect the directives set forth in the Affiliate Transaction Rules, D.06-12-029, Appendix A-3.12. Assignment of Proceeding

Marybel Batjer is the assigned Commissioner and Regina DeAngelis is the assigned Administrative Law Judge in this proceeding.Findings of Fact

1. The requested debt issuance authority of up to $8.1 billion in long-term Debt Securities and the contingent request of up to an additional $4.5 billion in long-term Debt Securities, if and to the extent PG&E’s request for the $7.5 billion securitization in A.20-04-023 is not approved or is not fully approved, is necessary to provide the external funding required to meet PG&E’s projected cash requirements 2021 through 2023.

2. PG&E’s remaining long-term debt financing authorization, $780 million, is projected to be exhausted to meet PG&E’s projected cash requirements by 2021.

3. The principal amount, form and terms and conditions of each series of Debt Securities will be determined by PG&E’s board of directors or management according to market conditions at the time of sale or issuance.

4. PG&E’s request to issue Debt Securities is subject to Pub. Util. Code §§ 816, 817, and 818.

5. The Commission has broad discretion under Pub. Util. Code § 816, et. seq. to determine if a utility should be authorized to issue debt.

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6. Where necessary and appropriate, the Commission may attach conditions to the issuance of utility debt to protect and promote the public interest.

7. PG&E proposes to use up to $8.1 billion of new Debt Securities to: (1) finance planned funding for capital expenditures and (2) cover $1.2 billion of maturing debt obligations over the 2021-2023 forecast period, and PG&E proposes to use its contingent request of up to an additional $4.5 billion of new Debt Securities to pay wildfire claims costs.

8. PG&E’s need for the issuance of new Debt Securities must be necessary and for proper purposes and authorized by Pub. Util. Code § 817 and, furthermore, as required by Pub. Util. Code § 818, must not be reasonably chargeable to operating expenses or income.

9. PG&E’s request is in compliance with Pub. Util. Code § 816 et seq.10. Those purposes not listed in Pub. Util. Code § 817 may only be

paid with funds from normal utility operations. 11. PG&E’s request for authority to issue new Debt Securities is

similar to the types of debt securities authorized by the Commission in D.15-01-030, issued on January 29, 2015.12. Pub. Util. Code § 824 requires PG&E to maintain records to

identify the specific securities issued pursuant to Commission authorization and to demonstrate that proceeds from such securities have been used only for public utility purposes.13. PG&E’s request to sell, lease, assign, mortgage or otherwise

dispose of or encumber its utility property, including accounts receivable, in connection with the issuance of Debt Securities is subject to Pub. Util. Code § 851.

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14. PG&E’s request to include, at its discretion, securities enhancements is designed to improve the terms and conditions of PG&E’s new Debt Securities and lower the overall cost of money for the benefit of ratepayers.15. 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. 16. General Order 24-C requires PG&E to submit semi-annual reports

to the Commission that contain, among other things: (a) the amount of debt issued by the utility during the previous six-month period; (b) the total amount of debt outstanding at the end of the six-month period; and (c) the purposes for which the utility expended the proceeds realized from the issuance of debt during the prior six-month period. 17. Pub. Util. Code § 1904(b) and § 1904.1 set forth the fees required

when the Commission authorizes the issuance of debt and preferred stock, respectively.18. PG&E expects to use $1.2 billion of the $8.1 billion request for the

retirement, refunding, or reissuance of securities previously issued and upon which PG&E has previously paid fees, and the same applies to PG&E’s contingent request of up to an additional $4.5 billion.19. The information PG&E seeks to file under seal contains a cash

flow statement and capital ratios with forward-looking statements related to the period 2020-2023 that are necessarily subject to various risks and uncertainties and are subject to change.20. Public notice of A.20-05-005 appeared in the Commission’s Daily

Calendar on May 13, 2020, and no protests were filed.

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21. May 28, 2020, the Commission issued Resolution ALJ 176-3462 which preliminarily categorized A.20-05-005 as ratesetting and determined that a hearing would be necessary. The assigned Commissioner changed this preliminary finding to no hearings needed in the October 9, 2020 Scoping Memo. Conclusions of Law22. PG&E should be authorized to issue new Debt Securities of up to

$8.1 billion in long-term debt and an additional up to $4.5 billion in long-term debt, if and to the extent its request for $7.5 billion securitization in A.20-04-023 is not approved or is not fully approved, all of which are for proper purposes (including construction expenditures, acquisition of property, reimbursement of PG&E’s treasury, or for the retirement, refund, or reissuance of previously issued securities) and consistent with the requirements of Pub. Util. Code §§ 817 and 818, subject to the limitations discussed in Section 10, herein. 23. PG&E should be authorized to issue new Debt Securities including

new long-term debt securities, including first and refunding mortgage bonds, debentures, notes, overseas indebtedness, foreign currency denominated securities, medium-term notes, preferred securities, other floating or variable rate debt, credit or loan agreements, Preferred Stock - $25 Par Value, Preferred Stock - $100 Par Value, Preference Stock or any combination thereof, as authorized in PG&E’s Articles of Incorporation, and other evidences of indebtedness, and to enter into interest rate hedges.24. 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

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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. 25. PG&E should be authorized to offer, issue, and sell preferred and

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. 26. PG&E’s request is in compliance with Pub. Util. Code § 816 et

seq., and its request for authority to issue new Debt Securities is granted for the aforementioned purposes and terms, and for the primary amount of up to $8.1 billion and contingent amount of an additional up to $4.5 billion if and to the extent its request for $7.5 billion securitization in A.20-04-023 is not approved or is not fully approved. 27. PG&E’s need for issuance of new Debt Securities are necessary

and are for proper purposes and are authorized by Pub. Util. Code § 817 and, as required by Pub. Util. Code § 818, are not reasonably chargeable to operating expenses or income. 28. Pursuant to Pub. Util. Code § 817, PG&E may only pay for those

purposes not listed therein with funds from normal utility operations. 29. Pursuant to Pub. Util. Code § 824, PG&E must maintain records to

identify the specific securities issued pursuant to this decision and demonstrate that proceeds from such securities have been used only for public utility purposes. 30. Pursuant to Pub. Util. Code § 851, PG&E should be authorized to

encumber (sell, lease, assign, mortgage, pledge) its utility property,

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including but not limited to, accounts receivable and utility property, to secure the Debt Securities authorized herein. 31. 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. 32. 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 should 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. 33. PG&E should comply with the Affiliate Transaction Rules set forth

in Appendix A-3 of D.06-12-029 such as Rule IX.C and Rule IX.D., which require(1) within three months of the effective date of D.06-12-029, that large energy utilities and their holding companies, 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 any parent, affiliate, and subsidiary; and (2) that large energy utilities notify the Commission of any changes made to its ring-fencing provisions within 30 days.

34. 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; tax-exempt financing; warrants; cap agreements; floor agreements; collar agreements,

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swaptions; swap agreements; hedges; issue fixed or floating rate debt; and convert floating rate payments. 35. 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. 36. 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 of the 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.

37. 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, and

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b. A complete copy of executed swap and/or hedging agreements and all associated documentation.

38. PG&E should file with the Commission, on or before the 25th day of the month following each six-month period, a report under General Order 24-C. 39. The amount of $1.2 billion (of the primary request of up to $8.1

billion) and the contingent amount of up to an additional $4.5 billion of the requested financing authority, will be used to refinance existing long-term debt and should be excluded from the computation of the filing fee under Pub. Util. Code § 1904(b) and § 1904.1. 40. PG&E’s May 11, 2020 Motion of Pacific Gas and Electric Company

for Authority to File and Maintain Confidential Information (Schedules I, II, III, and IX-B of Financial Information) Under Seal, should be granted for a period of three years. 41. PG&E’s September 16, 2020, Motion for Authority to File and

Maintain Confidential Information under Seal (Utility Financial Projections and Projected Long-Term Debt Issuance Amounts) should be granted for a period of three years.42. The decision 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. 43. 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.

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44. PG&E’s requested financing authorization does not involve any commitment to any specific project which may result in a potentially significant impact on the environment and, therefore, it is not a project subject to CEQA. 45. PG&E’s request complies with Pub. Util. Code §§ 701.5, 816, 817,

818, 824, and 851. O R D E R

IT IS ORDERED that:46. Pacific Gas and Electric Company (PG&E) is authorized under

Public Utilities Code Sections 816-818, 821, 823(d), 830, and 851 to issue, sell and deliver one or more series of new long-term debt securities, including first and refunding mortgage bonds, debentures, notes, overseas indebtedness, foreign currency denominated securities, medium-term notes, preferred securities, other floating or variable rate debt, credit or loan agreements, Preferred Stock - $25 Par Value, Preferred Stock - $100 Par Value, Preference Stock or any combination thereof, as authorized in PG&E’s Articles of Incorporation, and other evidences of indebtedness as set forth in this decision in an aggregate principal amount not to exceed $8.1 billion, or $12.6 billion if and to the extent the requested $7.5 billion securitization in Application 20-04-023 is not approved, with all such issuances to take place at any time from the date of authorization herein until the aggregate principal amount authorized has been fully utilized and subject to the limitation herein and for proper purposes (including construction expenditures, acquisition of property, reimbursement of PG&E treasury, or retirement, refund, or reissuance of previously issued securities); and (2) to enter into interest rate hedges as described herein.

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47. Pacific Gas and Electric Company (PG&E) is authorized, in connection with the issuance of debt securities authorized herein, to (a) guarantee the securities of regulated direct or regulated indirect subsidiaries or regulated affiliates of PG&E or of governmental entities that issue securities on behalf of PG&E; (b) execute and deliver one or more indentures or supplemental indentures; and (c) sell, lease, assign, mortgage, or otherwise dispose of or encumber utility property, including but not limited to its accounts receivable and utility property, in connection with the issuance and sale of Debt Securities authorized herein, pursuant to Public Utilities Code Section 851. 48. Pacific Gas and Electric Company is authorized to issue new debt

securities in compliance with Public Utilities Code Sections 701.5, 816, 817, 818, 824, and 851 and the Commission’s Affiliate Transaction Rules. 49. Pacific Gas and Electric Company is authorized to issue new debt

securities including: first and refunding mortgage bonds; debentures; long-term and medium-term notes direct with banks, insurance companies or other financial lenders; preferred securities; tax exempt financing; overseas indebtedness; foreign currency denominated securities; direct loans from financial institutions; accounts receivable financing; floating rate debt; and hybrid securities. Such securities may be issued with a fixed, floating or variable rate of interest; secured or unsecured; at par or with a discount or premium; and, to domestic or foreign investors. 50. 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

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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.51. Pacific Gas and Electric Company is authorized to offer, issue, and

sell preferred and 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. 52. Pacific Gas and Electric Company (PG&E) is authorized to issue

preferred and 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 and preference stock. 53. 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 Section 701.5. 54. 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. 55. 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

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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.

56. 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.

57. If a default occurs and title to any of Pacific Gas and Electric Company’s (PG&E’s) assets, property, franchise, permit, or right that is necessary or useful in the performance of PG&E’s duties to the public is transferred pursuant to the terms of a secured debt indenture, pledge, or other encumbrance, the assets, property, franchise, permit, or right transferred shall continue to be used to provide utility service to the public until the Commission authorizes otherwise.58. Pacific Gas and Electric Company and the authority granted by

this decision are subject to (a) Financing Rule adopted in Decision (D.) 12-06-015, as corrected in D.12-07-003; (b) General Order 24-C; and

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(c) the capital structure and associated capital ratios adopted by the Commission.59. Pacific Gas and Electric Company must file with the Commission,

on or before the 25th day of the month following each six-month period, a report pursuant to General Order 24-C. 60. The decision 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. 61. Pacific Gas and Electric Company (PG&E) shall remit the payment

of $3,468,500 to the Commission, as required by Public Utilities Code Sections 1904(b) and 1904.1. Such payment shall be by wire transfer, check, or money order payable to the California Public Utilities Commission and mailed or delivered within 30 days after the effective date of this decision to the Commission’s Fiscal Office at 505 Van Ness Avenue, Room 3000, San Francisco, California 94102 or by wire transfer as directed by Commission staff. The decision number of this decision must prominently appear with the submission of the payment. To the extent Rule 1.16 of the Commission’s Rules only permit payment by check, money order, or credit card, Rule 1.16 is modified for purposes of this decision to also permit payment by wire transfer. The authority granted by this decision shall become effective when the fee required by Pub. Util. Code Section 1904 has been paid.62. Pacific Gas and Electric Company (PG&E) may not use the

proceeds from the debt authorized by this decision to fund its capital projects until PG&E has also obtained all required Commission

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approvals for the projects, including any required environmental review under California Environmental Quality Act. 63. Pacific Gas and Electric Company’s (PG&E’s) May 11, 2020

Motion of Pacific Gas and Electric Company for Authority to File and Maintain Confidential Information (Schedules I, II, III, and IX-B of Financial Information) Under Seal and PG&E’s September 16, 2020, Motion for Authority to File and Maintain Confidential Information under Seal (Utility Financial Projections and Projected Long-Term Debt Issuance Amounts) are granted for a period of three years. If PG&E believes that it is necessary for this information to remain under seal for longer than three years, PG&E may file a new motion stating the justification of further withholding of the information from public inspection. This motion shall be filed at least 30 days before the expiration of today’s limited protective order. 64. Application 20-05-005 is closed.

This order is effective today.Dated , at San Francisco, California.

Attachment 1: A2005005 (Redline Version) Approving Application of PG&E.pdf

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http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M355/K074/355074852.pdf

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