WEBVTT
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The feed for this streaming event--
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Be on the record.
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This is the time and place for further evidentiary hearing
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in investigation 1909016.
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I am an Assistant Chief Administrative Law Judge,
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Michelle Cooke, and I will be covering today's hearing
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for Administrative Law Judge, Peter Allen,
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who is the assigned Administrative Law Judge.
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When we left off yesterday we had just sworn
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in Mr. Wells, and Mr. Weitzman had some clarifications
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to add to the items that he is sponsoring today.
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Mr. Weitzman.
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Thank you your Honor.
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Good morning Mr. Wells.
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Are you sponsoring what's been marked
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for identification as PG&E2
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which contains exhibits to your testimony?
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I am.
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Are you also sponsoring what's been marked
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for identification as PG&E3 containing additional
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exhibits to your testimony?
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I am.
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Are you also examining
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within what's been marked
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for identification as PG&E4 exhibits 2.7, 2.8, and 2.9?
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Yes I am.
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Thank you, the witness is
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available for cross examination.
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All right thank you.
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Before we turn to cross examination I'm gonna identify
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a few exhibits that may be coming up today.
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At this time I will mark
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for identification as exhibit Abrahams-X9,
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a cross examination exhibit titled, "Better Way
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"Out of PG&E Bankruptcy."
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At this time I will mark
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for identification as exhibit Turn-X5,
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a TURN cross examination exhibit,
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PG&E response to Turn DR-5, question five.
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At this time, I will mark
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for identification as exhibit Turn-X6,
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a turn cross examination exhibit
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which is excerpts from an EPUC data response
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and PGD responses to Turn DR7.
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At this time, I will mark for identification
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as Cal advocates dash X1, PG&E's public responses
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to the public advocates offices data request
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number 001 through number 006, dated February 2020.
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At this time I will mark
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for identification as Cal advocates dash X2, excerpts
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from PG&E 2019 form 10K.
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The cover page is dated February 20th, 2020.
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At this time we'll turn to cross examination
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by MCE, Ms. Kelly.
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Thank you your honor.
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Thank you Mr. Wells.
Good morning.
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So in your testimony you state that PG&E will pursue
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a securitization, this is the rate payer
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securitization that is rate neutral on average
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for the wildfire, for the $7 billion
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in wildfire claim cost.
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Is that correct?
That's correct.
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And you propose to basically securitize
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rate payer revenues under that transaction.
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Is that correct?
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That's correct.
Great.
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Now if you could please turn to exhibit MCEX1, page 54.
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Let me know when you're there.
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Okay.
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Okay.
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So for the benefit of the folks
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in the room here, this is
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the motion of the debtors regarding
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customer programs and public purpose
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programs dated March 12th, 2019.
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And you are familiar with this document?
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Yes I am.
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Thank you.
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So starting on page 54, PG&E describes funds received
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by PG&E that flowed
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to what is being broadly called customer programs.
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Is that correct?
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That's correct, yeah.
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And I will quickly list those,
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and you can correct me if I'm wrong.
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Those customer programs are,
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deposit and reimbursement programs, public purpose programs,
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environmental cleanup programs, third party programs,
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GHG credit programs and customer support programs.
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Correct?
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That's correct.
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And community choice aggregator
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or CCA funds are a
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part of what is called third party programs.
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Correct?
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(faintly speaking)
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If I can take just a minute to.
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Let's be off the record.
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Let me know when you're ready.
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(faintly speaking)
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All right.
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Back on the record.
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I would not characterize the community choice aggregation
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as customer relating programs, no.
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Please turn to page 69 of that same document
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which defines third party programs.
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I see the reference.
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You're right.
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So third party programs includes CCA funds.
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That is correct.
Okay.
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So speaking about customer programs broadly,
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the list of six items that we went through just now,
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does PG&E propose to pledge or encumber
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or securitize any of the funds associated
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with these customer programs?
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No we would not anticipate securitizing
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or covering these revenues associated with these programs.
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And is that showed in your testimony anywhere?
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No, the testimony that I sponsored does not address
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the specifics of the securitization
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transaction that we intend
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to file on a separate application.
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So no, it is not addressed specifically.
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Okay, thank you.
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So turning to exhibit PG&E 12, slide 29.
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Yes, I'm there.
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Okay.
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So this comes from PG&E's business outlook February 2020.
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So in this chart what does this chart show?
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This chart is highlighting
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the rate based growth that the company has forecasted
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under its five year financial projections.
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Okay, so.
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So this is for the forecast you're saying that it
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would be a year over year increase of 8%
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or is that 8% over the entire period?
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It's a compounded annual growth rate,
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so year annually on average rate base will grow 8%.
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So subject to check, you expect your rate base
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to go (mumbles) during the period of 2019 to 2024 by 47%?
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Subject to check, but it sounds directionally accurate.
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Okay.
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And we were just talking about customer programs.
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What is defined as customer programs funds included
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in this rate based figure?
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This rate based figure doesn't take
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into consideration customer related programs.
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Rate based is essentially, I'd characterize
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it as our cumulative investment
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in our gas and electric systems.
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So it's actual cost to deliver electricity
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and gas to customers less the depreciation in taxes.
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Thank you.
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May I interrupt for just a moment.
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Ms. Kelly can you direct me
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to where it is that you are
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what document you're looking at again?
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Yes, I'm happy to do that your Honor.
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This is PG&E hearing room exhibit 12, slide 29.
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Thank you.
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Okay, now turning back
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to your testimony, let's go to page 2-1.
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And is this in PG&E1?
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Yes, I'm sorry.
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In exhibit PG&E1, page 2-1.
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Okay I'm there.
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Okay, so if you could please read the last bullet
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in your list on that page?
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Positions and utility in PG&E corporation
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to be financially healthy upon emergence.
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That one?
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Yeah, so you're saying that the plan of
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reorganization will position the utility
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and PG&E Corporation to be
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financially healthy upon emergence?
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Okay.
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So what is an average secure data credit rating of an
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investor owned utility in the United States?
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I don't have the figures in front of me,
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but I would anticipate high investment grade ratings,
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triple B plus, A minus.
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Using S&P's rating methodology.
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Okay using S&P, you're saying that triple
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B plus or A minus?
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Yeah.
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Subject to verification, but generally speaking, yes.
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Yeah, thank you.
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(faintly speaking)
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Okay.
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And what would be an average unsecured debt rating of an
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investor owned utility in the United States?
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I'm sorry could you repeat the question?
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Yes what would be an average unsecured
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debt rating of an investor owned utility
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in the United States?
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I think most are trading probably
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around triple B plus or better.
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Okay.
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So that would be a reasonable investor owned
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utility credit grade rating?
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I object to the term reasonable.
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But I would say yes generally speaking that's where
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utility investment grade
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ratings are occurring, currently set.
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Okay, great.
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And then so you had said it positions the utility
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to be financially healthy.
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Can you clarify that?
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Are you saying that immediately
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after emergence from chapter 11 the utility
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and PG&E Corporation will be financially healthy?
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I believe that's the case.
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Yes.
Okay.
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So earlier this week Mr. Plaster testified that the secured
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credit rating of the utility would be
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about triple B or triple B minus.
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Is that indicative of a financial healthy company?
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Sorry, could you repeat
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the question please?
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Yes.
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Earlier this week, Mr. Plaster testified that the secured
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credit rating of the utility would be
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about triple B or triple B minus.
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Is that indicative of a financially healthy company?
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Objection, misstates
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Mr. Plaster's testimony.
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Would you like to correct what Mr. Plaster stated?
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Yes, he was talking about unsecured.
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Mr. Plaster testified to both secured and unsecured.
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He did.
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And he said secured would be investment grade.
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Yes, correct.
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That the secured credit rating of the utility would be
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about triple B or triple B minus
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which is an investment grade rating?
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That's incorrect.
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Why don't we let the witness answer.
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Let's let the witness answer,
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and people can review the transcript
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and determine what Mr. Plaster said early in the work.
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Yes I do think
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it's reflective of a financially healthy utility.
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I think what's important
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to unpack here are that ratings are driven by two things.
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They're driven by quantitative--
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Objection your honor.
00:14:49.590 --> 00:14:51.250
May we please skip to the line of questioning.
00:14:51.250 --> 00:14:55.860
Unfortunately, I only have 30 minutes.
00:14:55.860 --> 00:14:58.060
Let's answer the question that
00:14:58.060 --> 00:15:01.700
the attorney asked, and if you attorney would like
00:15:01.700 --> 00:15:04.646
to have clarification on redirect, that's okay.
00:15:04.646 --> 00:15:06.020
Thank you very much.
00:15:06.020 --> 00:15:07.370
Let's approach that this way
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as much as possible today for everybody.
00:15:09.770 --> 00:15:10.990
Thank you very much.
Thank you.
00:15:10.990 --> 00:15:15.040
Okay, so Mr. Plaster testified, getting back
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to this, that the secure credit rating would be a triple B
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or triple B minus.
00:15:24.090 --> 00:15:27.080
Are those investment grade ratings?
00:15:27.080 --> 00:15:28.280
Yes they are.
Okay.
00:15:29.240 --> 00:15:34.240
And are the secured credit ratings of triple B
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or triple B minus indicative of a financially
00:15:40.940 --> 00:15:44.780
healthy investor owned utility?
00:15:44.780 --> 00:15:45.613
Yes they are.
00:15:47.690 --> 00:15:51.680
Yesterday, Mr. Plaster testified that the unsecured
00:15:51.680 --> 00:15:56.680
credit rating of the utility would be non-investment grade.
00:15:57.550 --> 00:15:58.670
Is that correct?
00:15:58.670 --> 00:15:59.720
That's likely, yes.
00:16:01.320 --> 00:16:03.890
Having a unsecured credit
00:16:03.890 --> 00:16:08.890
rating is that indicative of a financially healthy company?
00:16:16.380 --> 00:16:21.380
Quantitatively we have targeted financial
00:16:21.680 --> 00:16:23.210
metrics that are consistent
00:16:23.210 --> 00:16:25.030
with a financially healthy utility.
00:16:25.030 --> 00:16:27.040
That rating that you're referring
00:16:27.040 --> 00:16:29.940
to is more of a reflection of the qualitative
00:16:29.940 --> 00:16:33.150
business, risk assessment of the California environment.
00:16:33.150 --> 00:16:38.150
So let's just use an abstract utility
00:16:40.740 --> 00:16:45.740
with an unsecured credit rating of say double B
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which I believe is one of the potential unsecured
00:16:52.170 --> 00:16:54.320
debt ratings of the company.
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So that is considered non-investment grade speculative.
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Correct?
00:16:59.680 --> 00:17:00.580
That is correct.
00:17:01.560 --> 00:17:06.560
So would a utility with a double B unsecured credit rating
00:17:10.370 --> 00:17:15.370
would you consider that to be a financially healthy company?
00:17:15.920 --> 00:17:18.220
I could, depending on the financial metrics.
00:17:23.610 --> 00:17:24.770
Okay, so.
00:17:30.520 --> 00:17:34.810
And credit metrics are not the same as a credit rating.
00:17:34.810 --> 00:17:36.622
Correct?
Correct.
00:17:36.622 --> 00:17:37.455
Okay.
00:17:38.410 --> 00:17:43.410
When would PG&E inspect to have an investment grade
00:17:44.530 --> 00:17:47.880
credit rating for unsecured debt?
00:17:53.599 --> 00:17:55.340
It's hard to speculate exactly when
00:17:55.340 --> 00:17:56.640
the credit rating agencies
00:17:59.080 --> 00:18:00.730
would raise the company's rating,
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because the driver of the rating that you're referring
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to is more of an assessment of the business risk environment
00:18:07.400 --> 00:18:09.220
here in California, as opposed
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to the financial plan that we put forward.
00:18:11.360 --> 00:18:16.360
And in your best professional judgment, based
00:18:17.050 --> 00:18:20.540
on your knowledge as the CFO of a publicly traded
00:18:20.540 --> 00:18:25.540
company and just knowing the market, what do you think
00:18:26.790 --> 00:18:29.430
in your professional judgment would be
00:18:29.430 --> 00:18:33.790
the timing for PG&E to have an investment grade
00:18:33.790 --> 00:18:36.430
credit rating for unsecured debt?
00:18:37.810 --> 00:18:40.140
I'm trying to be responsive that I believe
00:18:40.140 --> 00:18:42.620
we put forward a plan that based
00:18:42.620 --> 00:18:43.730
on the credit metrics--
00:18:43.730 --> 00:18:44.563
Yes.
00:18:44.563 --> 00:18:45.970
Objection your honor, non-responsive.
00:18:47.020 --> 00:18:49.420
I'm gonna allow him to answer.
00:18:49.420 --> 00:18:52.560
We put forward a plan that I believe meets
00:18:52.560 --> 00:18:55.850
the definition of investment grade from a financial profile.
00:18:57.090 --> 00:18:59.049
Another party's assessment of the California
00:18:59.049 --> 00:19:03.510
business environment is difficult for me to speculate as
00:19:03.510 --> 00:19:05.530
to when they will have confidence
00:19:05.530 --> 00:19:08.030
to upgrade the overall rating to investment grade.
00:19:09.170 --> 00:19:10.870
And when would PG&E seek
00:19:10.870 --> 00:19:14.090
to receive an investment grade
00:19:19.236 --> 00:19:21.540
credit rating for unsecured debt?
00:19:21.540 --> 00:19:22.790
As quickly as possible.
00:19:28.010 --> 00:19:32.030
But as testified yesterday, currently, my apologies.
00:19:32.030 --> 00:19:36.560
The other day Mr. Plaster said
00:19:38.150 --> 00:19:41.690
at this point those would be non-investment grade.
00:19:42.990 --> 00:19:44.140
Correct?
00:19:44.140 --> 00:19:44.990
That's correct.
00:19:47.720 --> 00:19:48.570
Okay thank you.
00:19:54.090 --> 00:19:59.090
So next I wanna turn to just some questions
00:19:59.270 --> 00:20:02.400
about what PG&E is saying in its testimony
00:20:02.400 --> 00:20:04.110
and what it's asking for.
00:20:05.610 --> 00:20:09.930
So MCE had requested that the sources
00:20:09.930 --> 00:20:14.930
and uses of PG&E be broken out into the utility sources
00:20:18.990 --> 00:20:22.300
and uses and the corporation sources and uses.
00:20:23.337 --> 00:20:24.530
Is that correct?
00:20:24.530 --> 00:20:26.270
I think that's correct, yes.
00:20:26.270 --> 00:20:27.620
And did you provide that?
00:20:29.610 --> 00:20:31.660
I'm not aware of us providing that yet.
00:20:33.460 --> 00:20:36.790
Subject to check, would you say that in your data request
00:20:36.790 --> 00:20:39.190
response you stated that that
00:20:39.190 --> 00:20:41.210
was quote, "highly confidential?"
00:20:42.650 --> 00:20:44.020
Subject to check, yes.
00:20:45.940 --> 00:20:50.530
And in the bankruptcy context, are
00:20:53.190 --> 00:20:55.580
the finances of the utility
00:20:55.580 --> 00:20:58.360
and the corporation highly confidential?
00:21:05.800 --> 00:21:09.320
As a publicly traded company, much of the details of our
00:21:09.320 --> 00:21:11.880
financial projections, yes, are highly confidential.
00:21:11.880 --> 00:21:13.680
In the bankruptcy context.
Yes.
00:21:26.781 --> 00:21:29.614
Would you please turn to page...
00:21:35.150 --> 00:21:38.360
Actually given that we're short on time I'll pass
00:21:38.360 --> 00:21:41.640
on that question, but I'll refer to that in two.
00:21:41.640 --> 00:21:44.480
The bankruptcy filing and
00:21:44.480 --> 00:21:47.230
the financials that for example are given
00:21:47.230 --> 00:21:52.230
to the bankruptcy court on a regular basis that is set forth
00:21:53.490 --> 00:21:58.490
in MCEX1, beginning on page 25.
00:22:02.760 --> 00:22:04.630
And have you provided
00:22:04.630 --> 00:22:08.560
to the Commission a breakdown of sources
00:22:08.560 --> 00:22:11.640
and uses between the company and the corporation?
00:22:14.070 --> 00:22:15.770
I'm not aware of doing that yet.
00:22:20.370 --> 00:22:24.910
And MCE had also requested for a visual representation
00:22:24.910 --> 00:22:27.530
such as a cashflow diagram of this transactions.
00:22:30.312 --> 00:22:31.812
Does PG&E have such a diagram?
00:22:34.510 --> 00:22:36.730
Can you specify which transaction?
00:22:36.730 --> 00:22:39.280
Yeah, just, how 'bout the transactions at close?
00:22:41.820 --> 00:22:46.420
In order to emerge from bankruptcy, those transactions?
00:22:47.400 --> 00:22:48.630
That's something I, it's reflected
00:22:48.630 --> 00:22:50.380
in the second page of my testimony.
00:22:53.740 --> 00:22:56.260
What I'm discussing is a visual representation,
00:22:56.260 --> 00:22:59.270
a visual map, not just a list of sources and uses.
00:23:00.350 --> 00:23:01.600
Yeah, we don't have a visual map.
00:23:01.600 --> 00:23:04.170
We've identified the party, where the funding's coming
00:23:04.170 --> 00:23:06.120
from, the party's where that funding's going.
00:23:06.120 --> 00:23:06.953
Okay.
00:23:07.830 --> 00:23:12.830
So now I'd like to clarify a bit what PGE is actually saying
00:23:13.970 --> 00:23:16.830
at its testimony, and what it's asking of the Commission.
00:23:17.970 --> 00:23:22.970
So you asked for four financing authorizations.
00:23:24.610 --> 00:23:25.443
Correct?
00:23:25.443 --> 00:23:26.276
That's correct.
00:23:27.680 --> 00:23:32.147
And you also have those tables set forth
00:23:32.147 --> 00:23:37.147
on tables 2.2 to 2.4.
00:23:39.660 --> 00:23:40.493
Is that correct?
00:23:42.060 --> 00:23:44.017
I believe that's correct, yes.
00:23:44.017 --> 00:23:45.010
Okay.
00:23:45.010 --> 00:23:50.010
So for table 2.2, what--
00:23:50.580 --> 00:23:52.150
Can you direct us to the page?
00:23:52.150 --> 00:23:53.540
Oh yes--
216.
00:23:53.540 --> 00:23:57.500
At two dash 16 of your testimony.
00:24:04.180 --> 00:24:05.090
I'm there.
00:24:05.090 --> 00:24:05.923
Thank you.
00:24:08.310 --> 00:24:11.220
For table two dash two, what is
00:24:11.220 --> 00:24:15.300
the date of sources that you're contemplating there?
00:24:15.300 --> 00:24:17.060
What is the date, as of what
00:24:17.060 --> 00:24:18.860
date are you're contemplating there?
00:24:20.530 --> 00:24:22.580
We haven't specified the specific date.
00:24:23.690 --> 00:24:26.370
That will be dependent upon the receipt of the confirmation
00:24:26.370 --> 00:24:30.440
order and effectuating the exit financing
00:24:30.440 --> 00:24:33.030
and ultimately emergence from bankruptcy.
00:24:33.030 --> 00:24:37.330
We're anticipating roughly middle of the summer.
00:24:37.330 --> 00:24:38.500
Middle of the summer, okay.
00:24:38.500 --> 00:24:41.570
And so this is the immediate exit from bankruptcy?
00:24:41.570 --> 00:24:42.518
That's correct.
00:24:42.518 --> 00:24:46.410
Okay.
00:24:46.410 --> 00:24:51.410
And in table 2.3, those uses are upon the immediate exit.
00:24:54.550 --> 00:24:55.383
Is that correct?
00:24:55.383 --> 00:24:56.216
That's correct.
00:24:59.060 --> 00:25:04.060
And table 2.4, what is that date?
00:25:09.630 --> 00:25:11.760
That would be immediately upon exit as well.
00:25:12.680 --> 00:25:17.680
Okay, so the items set forth in 2.4 are contained
00:25:19.470 --> 00:25:23.597
within table 2...
00:25:29.230 --> 00:25:30.980
Can you explain where those fit in?
00:25:32.180 --> 00:25:35.920
They would reconcile to 2.2, the sources.
00:25:38.860 --> 00:25:42.720
So the line in table 2.2, new utility
00:25:42.720 --> 00:25:47.310
debt of 23.7, $75 billion reconciles.
00:25:47.310 --> 00:25:51.627
This is an expansion of that detail under 2.4.
00:25:55.130 --> 00:25:55.963
Thank you.
00:25:59.050 --> 00:26:03.200
So getting into the more specifics of things,
00:26:07.680 --> 00:26:10.610
I'm just gonna go one, two, three, four
00:26:10.610 --> 00:26:12.570
with your financing request.
00:26:12.570 --> 00:26:13.460
Is that okay?
00:26:13.460 --> 00:26:14.620
Sure.
Okay.
00:26:14.620 --> 00:26:17.260
So your first request is
00:26:17.260 --> 00:26:20.300
for $11.85 billion in longterm debt.
00:26:21.280 --> 00:26:22.130
That's correct.
00:26:23.660 --> 00:26:26.890
And that is also immediately upon exit?
00:26:26.890 --> 00:26:28.760
That's correct.
Okay.
00:26:28.760 --> 00:26:32.510
And is there a shorthand that is used
00:26:32.510 --> 00:26:35.170
more globally for that?
00:26:35.170 --> 00:26:40.170
So for example, longterm note holder RSA debt
00:26:40.850 --> 00:26:43.500
or some other defined term that's used consistently
00:26:43.500 --> 00:26:45.590
throughout your financials,
00:26:45.590 --> 00:26:47.980
the bankruptcy plan, and your testimony.
00:26:52.324 --> 00:26:53.900
If I can have just one minute to flip.
00:26:53.900 --> 00:26:56.300
It's defined in my testimony a little bit later.
00:26:56.300 --> 00:26:57.590
Let's be off the record.
00:26:59.910 --> 00:27:01.440
I just find it your Honor.
00:27:01.440 --> 00:27:03.235
Back on the record.
00:27:03.235 --> 00:27:07.880
H2-27, kind of at the bottom of the page there.
00:27:08.750 --> 00:27:12.010
It starts a description of the $11.85 billion
00:27:12.010 --> 00:27:13.770
in longterm debt securities contemplated
00:27:13.770 --> 00:27:15.610
by the note holder RSA.
00:27:15.610 --> 00:27:20.100
It then over the next, call it page and a quarter,
00:27:20.100 --> 00:27:23.680
page and a third breaks down those specific insurance.
00:27:25.270 --> 00:27:30.270
And so this is reflected on exhibit 2.7.
00:27:32.810 --> 00:27:33.643
Is that correct?
00:27:39.060 --> 00:27:40.510
No exhibit 2.7.
00:27:40.510 --> 00:27:45.420
It's volume four, H&E four.
00:27:48.490 --> 00:27:49.510
Let's be off the record.
00:27:49.510 --> 00:27:51.520
Apologies, which page?
00:27:51.520 --> 00:27:54.300
It's at PG&E dash four.
00:27:54.300 --> 00:27:55.550
PG&E dash four.
00:28:03.606 --> 00:28:05.350
And just for clarification purposes, I've.
00:28:06.400 --> 00:28:07.690
What page are you going to?
00:28:07.690 --> 00:28:09.420
No I don't need to turn to any page of it.
00:28:09.420 --> 00:28:11.240
All I need to know what it is.
00:28:11.240 --> 00:28:13.240
I just wanted to make sure that I'm corresponding
00:28:13.240 --> 00:28:15.860
everything that is for example just even
00:28:15.860 --> 00:28:20.040
in the table of contents to what you're talking about.
00:28:20.040 --> 00:28:20.873
Thank you.
00:28:21.800 --> 00:28:22.633
Yes.
00:28:22.633 --> 00:28:23.801
Wait, wait, we're off
00:28:23.801 --> 00:28:25.301
the record (faintly speaking).
00:28:28.530 --> 00:28:30.140
Let's be back on the record.
00:28:30.140 --> 00:28:32.990
I think what we're doing is doing a
00:28:32.990 --> 00:28:36.150
nomenclature reconciliation and
00:28:36.150 --> 00:28:38.780
across different volumes of the testimony.
00:28:38.780 --> 00:28:40.790
And the plan your Honor.
And the plan.
00:28:40.790 --> 00:28:41.623
Yeah.
00:28:42.790 --> 00:28:46.690
Okay, so let's start from the beginning, thank you.
00:28:46.690 --> 00:28:50.804
Okay, so your first request is
00:28:50.804 --> 00:28:55.804
$11.85 billion in longterm debt.
00:29:06.584 --> 00:29:09.417
Where are the term sheets for this
00:29:13.660 --> 00:29:16.710
or my apologies, let me go back to my original question.
00:29:18.400 --> 00:29:22.827
Is this the same debt as reflected in exhibit 2.7?
00:29:26.630 --> 00:29:27.680
In 2.6.
00:29:33.820 --> 00:29:38.640
So you have to look at 2.6 and 2.7 combined
00:29:39.490 --> 00:29:41.330
in order to reach this figure?
00:29:42.500 --> 00:29:43.333
That's correct.
00:29:43.333 --> 00:29:46.250
And a summary of that can be found basically
00:29:46.250 --> 00:29:48.320
on page 228 of my testimony.
00:29:49.210 --> 00:29:54.010
Okay, and so it isn't exactly longterm debt.
00:29:54.010 --> 00:29:59.010
It's a split of medium term debt and longterm debt.
00:30:00.160 --> 00:30:00.993
Is that correct?
00:30:02.950 --> 00:30:04.050
Technically, it's longterm,
00:30:04.050 --> 00:30:05.620
because it's greater than a a year,
00:30:05.620 --> 00:30:07.400
but the maturities do differ.
00:30:07.400 --> 00:30:09.110
And so we characterize them as medium term
00:30:09.110 --> 00:30:11.570
for the essentially five and eight year notes
00:30:12.420 --> 00:30:14.862
and in the longer term notes as longterm.
00:30:14.862 --> 00:30:19.862
And what are the mandatory uses of that debt
00:30:20.170 --> 00:30:24.187
on your tables, table 2.3?
00:30:37.130 --> 00:30:42.130
It addresses the line item on table 2.3 that is entitled
00:30:44.380 --> 00:30:47.970
"Pre-petition Debt, 22.18 billion."
00:30:53.700 --> 00:30:55.590
Okay let me just take a quick pause there.
00:30:55.590 --> 00:30:59.530
So these notes that you're talking
00:30:59.530 --> 00:31:04.530
about are notes of the utility, correct?
00:31:05.550 --> 00:31:07.060
That is correct, yes.
00:31:07.060 --> 00:31:09.210
And that is paying off
00:31:10.240 --> 00:31:12.860
items that include holding company debt?
00:31:16.420 --> 00:31:18.190
May I explain with a longer answer?
00:31:19.110 --> 00:31:24.110
Yeah, let's turn to page two dash 10 of your testimony.
00:31:25.100 --> 00:31:25.933
I'm at PG1.
00:31:32.580 --> 00:31:35.020
And I would appreciate a short answer.
00:31:35.020 --> 00:31:36.880
And then if the short answer doesn't answer it,
00:31:36.880 --> 00:31:38.930
then we can talk about the longer answer.
00:31:40.119 --> 00:31:40.952
The short answer is it doesn't relate
00:31:40.952 --> 00:31:45.100
to the items identified on page two dash 10 of my testimony.
00:31:45.100 --> 00:31:50.100
It relates to table 2.3, that pre-petition debt
00:31:51.570 --> 00:31:53.120
which I can break down for you.
00:31:58.060 --> 00:31:58.893
I'm sorry.
00:31:58.893 --> 00:31:59.726
I couldn't follow that.
00:31:59.726 --> 00:32:00.559
Can you say that again?
00:32:03.620 --> 00:32:06.730
It might be easier if I have the opportunity to--
00:32:06.730 --> 00:32:07.880
Yeah, please.
00:32:08.930 --> 00:32:10.350
When we enter bankruptcy we had
00:32:10.350 --> 00:32:14.660
22.18 billion of debt at the utility.
00:32:14.660 --> 00:32:17.980
That is entitled "Pre-petition Debt" under table 2.3.
00:32:19.150 --> 00:32:24.150
Some of that debt was Haiku Pond debt that we negotiated
00:32:27.270 --> 00:32:28.860
with note holders to exchange
00:32:28.860 --> 00:32:33.190
into new, lower cost notes that are outlined
00:32:33.190 --> 00:32:34.700
later in my testimony.
00:32:34.700 --> 00:32:39.030
That's that 11.825 billion, if you look on table 2.2.
00:32:40.360 --> 00:32:43.480
Just above that line on table 2.2, there is
00:32:43.480 --> 00:32:45.350
a reinstatement of utility debt.
00:32:46.660 --> 00:32:50.787
So that 9.575 billion were the low coupon
00:32:53.130 --> 00:32:54.510
bonds that we thought were
00:32:54.510 --> 00:32:57.040
in customers' interest to reinstate.
00:32:57.040 --> 00:33:00.150
So if you add the 9.575 billion
00:33:00.150 --> 00:33:04.580
and the 11.85, it's essentially addressing
00:33:04.580 --> 00:33:09.363
the pre-petition debt of the utility in that manner.
00:33:09.363 --> 00:33:10.480
Would you please turn
00:33:10.480 --> 00:33:12.520
to page two dash 10 of your testimony?
00:33:16.150 --> 00:33:16.983
I'm there.
00:33:18.030 --> 00:33:21.850
So one of the items that's identified as pre-petition
00:33:21.850 --> 00:33:26.673
debt is utility PC bond claims
00:33:29.939 --> 00:33:32.270
and HoldCo funded debt claims.
00:33:33.640 --> 00:33:36.620
What are the HoldCo funded debt claims?
00:33:42.480 --> 00:33:44.630
Prior to entering bankruptcy, we had
00:33:44.630 --> 00:33:47.440
a term loan at the holding company.
00:33:47.440 --> 00:33:51.530
And we had drawn on the corporate revolver.
00:33:51.530 --> 00:33:52.620
And so we had two borrowings
00:33:52.620 --> 00:33:54.323
at the holding company as we entered bankruptcy.
00:33:54.323 --> 00:33:55.260
(faintly speaking)
00:33:55.260 --> 00:33:56.093
Borrowings.
00:33:58.402 --> 00:33:59.552
At the holding company.
00:34:02.543 --> 00:34:06.050
So turning back to table 2.3, is that included
00:34:06.050 --> 00:34:09.620
in the pre-petition debt line item?
00:34:21.900 --> 00:34:23.820
Can you distribute your question please?
00:34:23.820 --> 00:34:25.140
Yes.
00:34:25.140 --> 00:34:28.370
So what I'm trying to understand just more generally
00:34:28.370 --> 00:34:33.370
there is this longterm debt that is planned
00:34:33.648 --> 00:34:35.920
to be taken out by the utility.
00:34:35.920 --> 00:34:38.720
So this is this 11.85 billion.
00:34:40.140 --> 00:34:44.750
It is going to be used for pre-petition debt.
00:34:46.700 --> 00:34:48.920
And that pre-petition debt includes
00:34:48.920 --> 00:34:51.340
debt of PG&E Corporation.
00:34:52.250 --> 00:34:55.950
So I'm trying to understand that.
00:34:55.950 --> 00:34:57.740
That's states his testimony,
00:34:57.740 --> 00:34:58.690
but you can answer.
00:35:01.680 --> 00:35:05.590
Included in 22.18 billion is the funded debt
00:35:05.590 --> 00:35:08.490
at the holding company which is approximately 650 million.
00:35:13.290 --> 00:35:17.390
And are there any other amounts of pre-petition
00:35:17.390 --> 00:35:19.340
debt that are at the corporation level?
00:35:21.800 --> 00:35:22.633
No.
00:35:23.840 --> 00:35:27.930
And so is that 650 million going
00:35:28.990 --> 00:35:31.960
to be paid for directly or indirectly
00:35:31.960 --> 00:35:36.310
by the 11.5 billion in longterm debt?
00:35:38.620 --> 00:35:39.453
No.
00:35:40.736 --> 00:35:41.569
Okay.
00:35:43.010 --> 00:35:47.120
So your next request is 11.925 billion
00:35:48.820 --> 00:35:52.520
in what you call additional longterm debt.
00:35:55.810 --> 00:35:58.170
Where is that reflected on these tables?
00:36:03.290 --> 00:36:08.290
On table 2.2 there is new debt of 5.825 billion
00:36:09.540 --> 00:36:13.830
and then temporary utility debt of 6 billion.
00:36:14.880 --> 00:36:17.630
And then, apologies, above those two lines,
00:36:17.630 --> 00:36:19.270
there's the refinancing of pollution control
00:36:19.270 --> 00:36:21.580
bonds for 0.1 billion.
00:36:23.134 --> 00:36:23.990
Okay.
00:36:23.990 --> 00:36:26.610
So time check, you're at about half an hour.
00:36:26.610 --> 00:36:27.480
Okay, thanK you.
00:36:27.480 --> 00:36:29.140
I hope to be done...
00:36:32.830 --> 00:36:35.673
This is taking longer than I expected your Honor.
00:36:42.850 --> 00:36:43.730
May we go off the record
00:36:43.730 --> 00:36:45.180
for a moment, off the record.
00:36:46.440 --> 00:36:48.710
I have quite a number of more clarifications.
00:36:50.300 --> 00:36:52.420
Again, we got three witnesses today.
00:36:52.420 --> 00:36:53.820
They have to get on and off.
00:37:00.510 --> 00:37:02.320
I'll give you five more minutes.
00:37:02.320 --> 00:37:03.750
Do as much as you can.
00:37:03.750 --> 00:37:06.400
See if somebody else can take (mumbles) in their time.
00:37:15.554 --> 00:37:18.471
(faintly speaking)
00:37:21.123 --> 00:37:22.470
(mumbles) off the record.
Yes.
00:37:22.470 --> 00:37:25.046
San Francisco will donate
00:37:25.046 --> 00:37:27.656
our 15 minutes to MC.
00:37:27.656 --> 00:37:28.798
Okay.
Thank you.
00:37:28.798 --> 00:37:30.053
Thank you.
00:37:30.053 --> 00:37:32.906
Back on the record, Ms. Kelly.
00:37:32.906 --> 00:37:37.906
Thank you your Honor.
00:37:40.970 --> 00:37:43.970
In your exhibits where are the term sheets for those
00:37:45.460 --> 00:37:50.460
or where are those documented referenced in your exhibits?
00:37:50.600 --> 00:37:52.870
Please clarify what documents you're referring to counsel?
00:37:52.870 --> 00:37:57.870
The 11.925 billion in additional longterm debt.
00:38:04.710 --> 00:38:06.180
I don't believe they were referenced in the exhibits,
00:38:06.180 --> 00:38:07.280
because they're the debt that we need
00:38:07.280 --> 00:38:08.500
to issue upon exit.
00:38:11.370 --> 00:38:14.610
So we're looking for authorization here to do so.
00:38:14.610 --> 00:38:16.260
So there are no term sheets
00:38:16.260 --> 00:38:19.780
or commitment letters for that?
00:38:19.780 --> 00:38:22.660
The 5.825 billion is
00:38:22.660 --> 00:38:27.660
part of the bridge commitment letter in exhibit 2.8.
00:38:35.640 --> 00:38:37.690
And the remainder does not have
00:38:37.690 --> 00:38:40.140
any commitment letter or term sheet.
00:38:41.020 --> 00:38:41.900
Correct.
00:38:41.900 --> 00:38:44.150
We have not negotiated one currently.
00:38:50.300 --> 00:38:52.610
And you're intending for the Commission
00:38:52.610 --> 00:38:55.590
to authorize this transaction
00:38:56.840 --> 00:39:01.813
without the terms and conditions of those debts?
00:39:05.330 --> 00:39:06.890
Yes we're asking for authorization
00:39:06.890 --> 00:39:09.500
to issue six billion of debt at the utility.
00:39:09.500 --> 00:39:11.900
But that debt would be paid for by shareholders.
00:39:16.930 --> 00:39:19.380
But it would be taken out at the utility level.
00:39:20.310 --> 00:39:21.160
That's correct.
00:39:26.290 --> 00:39:27.123
So--
00:39:27.123 --> 00:39:27.956
Let me ask a question.
00:39:27.956 --> 00:39:31.817
Mr. Wells, are you aware of when the Commission reviews
00:39:34.400 --> 00:39:38.640
applications to grant utilities authority
00:39:38.640 --> 00:39:43.640
to issue debt, of whether those applications incLude terms
00:39:46.680 --> 00:39:49.710
and conditions related to that authority to issue date?
00:39:51.320 --> 00:39:52.930
Yes I am generally aware, yep.
00:39:52.930 --> 00:39:54.790
And are you aware of whether
00:39:54.790 --> 00:39:56.960
those applications typically do include those terms
00:39:56.960 --> 00:39:58.210
and conditions or do not?
00:40:00.170 --> 00:40:01.003
I'm not aware.
00:40:02.460 --> 00:40:04.470
You're not aware of what they include?
00:40:04.470 --> 00:40:05.810
What they typically include, yeah.
00:40:05.810 --> 00:40:07.080
Okay, thank you.
00:40:14.110 --> 00:40:14.943
Okay.
00:40:16.170 --> 00:40:19.100
So we have the bridge commitment letter which we've defined
00:40:19.100 --> 00:40:20.700
which I do want to come back to.
00:40:21.980 --> 00:40:26.980
And some other needs that do not have
00:40:28.310 --> 00:40:30.650
commitment letters or term sheets.
00:40:30.650 --> 00:40:35.650
Now turning on to item three, this $6 billion
00:40:39.540 --> 00:40:42.970
in short term debt, where is that reflected
00:40:42.970 --> 00:40:44.380
in the sources and uses,
00:40:47.600 --> 00:40:49.150
rather sources, my apologies?
00:40:52.690 --> 00:40:54.580
That third authorization is not
00:40:54.580 --> 00:40:56.360
directly reflected in sources.
00:40:56.360 --> 00:40:59.140
It's authorization for ongoing short term borrowing.
00:41:01.210 --> 00:41:06.210
And that would be executed immediately upon exit?
00:41:09.540 --> 00:41:13.360
It would be a variety of instruments that we've outlined
00:41:13.360 --> 00:41:14.750
later in my testimony.
00:41:14.750 --> 00:41:16.810
And each of those instruments are expected
00:41:16.810 --> 00:41:20.410
to be entered immediately upon emergence?
00:41:20.410 --> 00:41:21.550
Not necessarily.
00:41:21.550 --> 00:41:23.750
Some of them may, but not all of them.
00:41:23.750 --> 00:41:26.310
And where are the term sheets
00:41:26.310 --> 00:41:29.880
and commitment letters for those transactions?
00:41:29.880 --> 00:41:32.710
We have not finalized the negotiations.
00:41:36.990 --> 00:41:37.823
Okay.
00:41:39.990 --> 00:41:43.700
Next item, item four, 11.925 billion
00:41:45.560 --> 00:41:46.700
in short term debt
00:41:46.700 --> 00:41:49.910
to temporarily finance PG&E's exit from bankruptcy.
00:41:51.290 --> 00:41:52.220
Ms. Kelly can you direct me
00:41:52.220 --> 00:41:53.590
to where that number is?
00:41:53.590 --> 00:41:57.350
Yeah, that is, sorry (faintly speaking).
00:42:01.370 --> 00:42:03.560
That is item four.
00:42:03.560 --> 00:42:06.614
My apologies, I'll speak into the microphone,
00:42:06.614 --> 00:42:11.614
item four on page 2-3 of exhibit PG&E1,
00:42:16.398 --> 00:42:18.520
the main part of PG&E's testimony.
00:42:20.250 --> 00:42:21.083
Thank you.
00:42:21.083 --> 00:42:21.916
Thanks.
00:42:24.370 --> 00:42:27.970
So that's showing on line 21 of two dash three?
00:42:29.310 --> 00:42:34.310
Line 25 of two dash, 26, my apologies, of two dash three.
00:42:37.430 --> 00:42:38.904
Okay.
00:42:38.904 --> 00:42:41.020
Okay.
00:42:44.060 --> 00:42:47.987
So where does that 11.925 billion show
00:42:53.080 --> 00:42:55.700
up in the sources and uses?
00:43:00.570 --> 00:43:04.440
It's essentially the short term financing of the three
00:43:04.440 --> 00:43:06.680
line items that I mentioned under new utility
00:43:06.680 --> 00:43:08.700
debt that would be refinancing of pollution control
00:43:08.700 --> 00:43:12.840
bonds for 0.1 billion new debt of 5.825 billion.
00:43:14.790 --> 00:43:17.840
New debt of 5.825 billion
00:43:17.840 --> 00:43:20.090
in temporary utility debt six billion.
00:43:22.740 --> 00:43:24.010
So you're actually talking
00:43:24.010 --> 00:43:28.370
about, when you had said that, when you identified
00:43:28.370 --> 00:43:32.680
the items of what I'm going to call request number two,
00:43:32.680 --> 00:43:35.100
same amount 11.925 billion.
00:43:41.334 --> 00:43:42.550
Can you explain the relationship
00:43:42.550 --> 00:43:45.900
between request number two and request number four?
00:43:47.190 --> 00:43:48.090
They're similar.
00:43:49.770 --> 00:43:52.940
Request four authorizes the short term nature.
00:43:52.940 --> 00:43:56.340
To the extent that we have to issue the securities
00:43:56.340 --> 00:43:59.030
under the bridge commitment that is referenced
00:43:59.030 --> 00:44:03.530
in exhibit 2.8 and to the extent that we issue
00:44:03.530 --> 00:44:06.720
short term temporary utility debt.
00:44:08.680 --> 00:44:12.770
The purpose would be that ultimately that should be
00:44:12.770 --> 00:44:14.950
longterm debt that will be refinanced
00:44:14.950 --> 00:44:18.990
into the longterm notes that are referenced
00:44:18.990 --> 00:44:20.390
in authorization number two.
00:44:21.550 --> 00:44:26.220
So what you're saying is anything that you are not able
00:44:26.220 --> 00:44:31.120
to finance under the 11.925 billion would be
00:44:33.210 --> 00:44:38.210
in essence shifted to this short term financing.
00:44:39.920 --> 00:44:40.753
Is that correct?
00:44:41.700 --> 00:44:42.570
Not necessarily.
00:44:42.570 --> 00:44:45.680
I would look at it as somewhat of an insurance policy
00:44:46.520 --> 00:44:48.970
to make sure that we would have exit financing
00:44:48.970 --> 00:44:51.470
on a short term basis for the exit
00:44:51.470 --> 00:44:54.740
which we would ultimately divert into longterm finances.
00:44:54.740 --> 00:44:56.430
Can I ask a clarifying question here?
00:44:56.430 --> 00:45:01.430
On page 2.3 you have the item at line 21.
00:45:06.410 --> 00:45:11.190
That's the same figure, 11.925 billion,
00:45:11.190 --> 00:45:14.830
in longterm financing, and then in number four
00:45:14.830 --> 00:45:19.830
which shows on the same 11.925 billion
00:45:20.030 --> 00:45:23.840
on Line 26 of page 2.3 of exhibit PG&E1.
00:45:25.410 --> 00:45:30.410
That's the same new utility debt that you're referring to.
00:45:32.540 --> 00:45:33.610
It's just as different points
00:45:33.610 --> 00:45:36.060
in time it might be short term versus longterm.
00:45:36.060 --> 00:45:38.810
It's not twice.
00:45:38.810 --> 00:45:40.950
It's not intended to be duplicative your Honor.
00:45:40.950 --> 00:45:44.070
It's to the extent that for whatever reason
00:45:44.070 --> 00:45:45.820
we can't access the capital markets
00:45:46.680 --> 00:45:48.460
at exit the banks have committed
00:45:48.460 --> 00:45:50.850
to fund on a short term basis a bridge loan
00:45:50.850 --> 00:45:53.120
which would ultimately be taken out with longterm debt.
00:45:53.120 --> 00:45:54.970
And so we wouldn't intend to have
00:45:54.970 --> 00:45:58.870
at the same time the same amount issued twice.
00:45:58.870 --> 00:46:00.480
It's just effectively the same amount,
00:46:00.480 --> 00:46:04.380
in case we have challenges raising the money.
00:46:04.380 --> 00:46:06.080
But you're seeking the authority
00:46:06.080 --> 00:46:08.840
to do it at the full amount at either level,
00:46:08.840 --> 00:46:11.210
because over time that need will change.
00:46:11.210 --> 00:46:12.750
That's correct.
Thank you.
00:46:13.830 --> 00:46:18.830
And to clarify that request would be authorization
00:46:22.020 --> 00:46:27.020
for overall debt outstanding at any one time
00:46:29.590 --> 00:46:34.590
for item two and number item four of 11.925 billion.
00:46:36.840 --> 00:46:37.730
That's correct.
00:46:37.730 --> 00:46:39.090
Okay, thank you.
00:46:39.090 --> 00:46:43.783
Okay, now I would like to turn to your utility bridge loan.
00:46:48.360 --> 00:46:49.440
It's up at 2.8.
00:46:51.350 --> 00:46:53.810
And exhibit 2.8 is in PG&E2.
00:46:55.230 --> 00:46:59.620
No, 2.8 is in PG&E seven.
00:47:04.659 --> 00:47:05.492
Let's be off the record.
00:47:05.492 --> 00:47:10.410
PG&E four, volume four, right, .7.
00:47:10.410 --> 00:47:12.600
But it was replaced in.
00:47:15.230 --> 00:47:19.890
That was replaced by what was contained in PG&E dash seven.
00:47:24.490 --> 00:47:25.587
May I have a time check your Honor?
00:47:25.587 --> 00:47:27.260
Five minutes.
00:47:27.260 --> 00:47:28.093
Dang, okay.
00:47:30.210 --> 00:47:31.800
So we're off the record right now.
00:47:40.588 --> 00:47:43.057
Okay, I think I can do this in five minutes.
00:47:45.330 --> 00:47:46.540
What document are we in?
00:47:46.540 --> 00:47:48.320
I don't know that document (faintly speaking).
00:47:48.320 --> 00:47:52.770
Does it look like this?
00:47:53.830 --> 00:47:57.720
It's PG&E dash seven, supplemental
00:47:57.720 --> 00:48:01.790
testimony including errata at.
00:48:05.565 --> 00:48:07.673
The page number that I'm looking at begins
00:48:09.870 --> 00:48:14.210
on two dash exhibit 2.8-1.
00:48:23.007 --> 00:48:24.020
Okay, commitment letter.
00:48:24.020 --> 00:48:24.853
Yeah.
Okay.
00:48:24.853 --> 00:48:28.050
And since I do have limited time, please--
00:48:28.050 --> 00:48:29.070
All right, I just (mumbles)
00:48:29.070 --> 00:48:31.360
before we end I wanna clarify.
00:48:31.360 --> 00:48:35.110
On this particular page it says personal and confidential.
00:48:35.110 --> 00:48:37.660
I'm assuming PG&E's waived confidentiality of this.
00:48:40.170 --> 00:48:41.820
Yes.
Okay.
00:48:41.820 --> 00:48:43.060
Okay thank you.
00:48:43.060 --> 00:48:44.010
So.
Okay.
00:48:44.010 --> 00:48:45.040
Hang on.
00:48:45.040 --> 00:48:46.180
Sorry your Honor.
00:48:46.180 --> 00:48:47.150
Are you ready?
00:48:47.150 --> 00:48:49.540
Everybody have what we're talking about
00:48:49.540 --> 00:48:51.090
or Mr. Wells are you there yet?
00:48:52.870 --> 00:48:53.703
(faintly speaking)
00:48:53.703 --> 00:48:58.570
It's the commitment letter, JP Morgan, Chase,
00:48:58.570 --> 00:49:01.720
Bank of America, Citigroup, Barclay's, Goldman Sachs--
00:49:01.720 --> 00:49:02.553
Thank you your Honor.
00:49:02.553 --> 00:49:03.600
I have it.
00:49:03.600 --> 00:49:04.433
Okay, great.
00:49:04.433 --> 00:49:06.060
Let's be.
00:49:06.060 --> 00:49:07.310
Are you ready to go back on the record?
00:49:07.310 --> 00:49:08.143
Yes your Honor.
00:49:08.143 --> 00:49:09.290
Okay, let's be back on the record.
00:49:09.290 --> 00:49:13.770
To clarify where we are, we're in exhibit PG&E seven
00:49:13.770 --> 00:49:18.770
page 2-EXH.2.8-1, and although this document is entitled
00:49:23.120 --> 00:49:25.300
personal and confidential in it,
00:49:25.300 --> 00:49:28.020
it is not confidential any longer.
00:49:29.270 --> 00:49:30.103
Thank you.
00:49:30.103 --> 00:49:32.830
And I'm actually, due to the limited number of minutes
00:49:32.830 --> 00:49:36.920
I have in cross examination, please hold that place
00:49:36.920 --> 00:49:39.690
for just a second so that I can ask a quick,
00:49:39.690 --> 00:49:41.640
but important question on another item.
00:49:42.560 --> 00:49:47.280
In the main portion of PG&E's testimony,
00:49:47.280 --> 00:49:50.870
in your testimony page two dash 21.
00:49:54.730 --> 00:49:55.563
Yes.
00:49:56.400 --> 00:49:58.540
Please look at footnote 47.
00:50:08.850 --> 00:50:10.250
Yes.
00:50:10.250 --> 00:50:11.420
Where is the complete
00:50:11.420 --> 00:50:16.420
list of waivers that PG&E is requesting of the Commission
00:50:17.400 --> 00:50:21.800
in connection with this plan?
00:50:26.730 --> 00:50:28.280
I believe we clarified that.
00:50:31.840 --> 00:50:36.100
We began to outline it on page 2-22 of the testimony
00:50:36.100 --> 00:50:41.100
and then clarified that, I forget
00:50:41.260 --> 00:50:43.250
the official title of the document, but
00:50:46.030 --> 00:50:47.280
with testimony this week.
00:50:50.340 --> 00:50:53.680
I can walk through the three adjustments that we're seeking
00:50:53.680 --> 00:50:55.010
if that would be helpful.
00:50:55.010 --> 00:50:56.580
Let's have a statement from counsel
00:50:56.580 --> 00:51:00.850
after lunch of what the clarification was that was done
00:51:00.850 --> 00:51:02.100
in the earlier testimony.
00:51:03.200 --> 00:51:04.210
That would be great.
00:51:04.210 --> 00:51:05.043
Thank you your Honor.
00:51:05.043 --> 00:51:10.043
And just to clarify in the footnote this includes,
00:51:10.580 --> 00:51:12.010
I'm sorry, I just wanna make sure that I'm close
00:51:12.010 --> 00:51:13.160
to the microphone here,
00:51:15.830 --> 00:51:20.810
rate making capital, holding company conditions,
00:51:22.290 --> 00:51:25.700
and affiliate transaction rolls.
00:51:25.700 --> 00:51:26.570
Is that correct?
00:51:26.570 --> 00:51:27.403
That's correct.
00:51:27.403 --> 00:51:31.910
And it says including in connection with any dividends.
00:51:31.910 --> 00:51:33.410
Could you explain that please?
00:51:39.890 --> 00:51:43.230
Part of the company needs
00:51:43.230 --> 00:51:45.260
to satisfy capital structure requirements
00:51:45.260 --> 00:51:47.280
in order to declare a dividend.
00:51:47.280 --> 00:51:51.000
And so we're suggesting here the adjustments would be
00:51:51.000 --> 00:51:53.210
part of the calculation to become in compliance
00:51:53.210 --> 00:51:54.560
with its capital structure.
00:51:55.540 --> 00:52:00.540
And so are you referring here
00:52:00.740 --> 00:52:02.720
to the Commission's requirement
00:52:02.720 --> 00:52:06.910
on the first priority condition of the holding company?
00:52:08.300 --> 00:52:10.030
I'm not familiar with that condition.
00:52:12.100 --> 00:52:13.590
So you have not made a showing
00:52:13.590 --> 00:52:17.210
in your testimony that PG&E is
00:52:17.210 --> 00:52:19.910
in compliance under these transactions
00:52:20.810 --> 00:52:22.600
with the first priority condition?
00:52:24.930 --> 00:52:25.763
What I intended to do
00:52:25.763 --> 00:52:27.430
with this testimony is reflect the adjustments--
00:52:27.430 --> 00:52:29.850
Objection, non-responsive.
00:52:29.850 --> 00:52:34.500
Have you demonstrated in your testimony that PG&E has met
00:52:34.500 --> 00:52:36.040
the first priority condition?
00:52:36.040 --> 00:52:36.873
Objection.
00:52:36.873 --> 00:52:37.870
Calls for legal conclusion.
00:52:38.800 --> 00:52:39.820
The witness can answer
00:52:39.820 --> 00:52:41.170
to the best of his ability.
00:52:42.460 --> 00:52:43.590
I'm not aware.
00:52:43.590 --> 00:52:44.423
Thank you.
00:52:45.360 --> 00:52:49.540
Okay, turning back to the commitment letter.
00:52:50.540 --> 00:52:51.710
Two minutes.
00:52:51.710 --> 00:52:53.653
Thank you your Honor.
00:52:53.653 --> 00:52:56.520
I will make this as quick as possible.
00:52:56.520 --> 00:53:00.400
Okay, so the term sheet refers also
00:53:06.330 --> 00:53:11.330
to a sort of sister financing, let's call it
00:53:12.810 --> 00:53:17.720
or parallel financing, let's call it, of PG&E Corporation.
00:53:17.720 --> 00:53:18.553
Is that correct?
00:53:20.960 --> 00:53:21.900
Yes.
00:53:21.900 --> 00:53:26.120
And these two documents are very interrelated.
00:53:26.120 --> 00:53:26.953
Is that correct?
00:53:29.200 --> 00:53:30.440
Only insofar as it's
00:53:30.440 --> 00:53:33.670
the same banks providing the commitment.
00:53:36.910 --> 00:53:38.310
Okay, so.
00:53:41.360 --> 00:53:44.831
So let's start what's being secured under this note.
00:53:44.831 --> 00:53:49.831
So this note which you call what again, the bridge facility?
00:53:53.020 --> 00:53:54.140
The bridge commitment letter.
00:53:54.140 --> 00:53:58.640
Bridge commitment letter is a first priority
00:53:58.640 --> 00:54:02.350
security interest in substantially all of the present
00:54:02.350 --> 00:54:04.500
and after acquired assets of the borrower.
00:54:05.890 --> 00:54:06.800
That's the utility.
00:54:06.800 --> 00:54:08.410
Correct?
00:54:08.410 --> 00:54:10.390
That's correct.
Okay.
00:54:10.390 --> 00:54:13.690
Now, if you could turn to mandatory pre-payments
00:54:13.690 --> 00:54:16.670
and commitment reductions, starting at page 26.
00:54:28.810 --> 00:54:30.840
I don't have a page 26.
00:54:30.840 --> 00:54:33.610
Oh sorry, this is on MCE.
00:54:35.030 --> 00:54:36.300
No I'm sorry this is in.
00:54:38.130 --> 00:54:39.430
Lets be off the record.
00:54:42.724 --> 00:54:44.410
It's that part of the commitment letter.
00:54:44.410 --> 00:54:45.243
You don't have the full--
00:54:45.243 --> 00:54:47.310
I don't have the full commitment letter then.
00:54:54.410 --> 00:54:55.900
You've got one minute Ms.
00:54:57.530 --> 00:54:58.780
Once he finishes reading.
00:55:11.400 --> 00:55:12.440
All right I'm there.
00:55:12.440 --> 00:55:13.860
Back on the record.
00:55:13.860 --> 00:55:14.750
Okay, so.
00:55:17.660 --> 00:55:21.940
In these mandatory pre-payments it states, let's see, are
00:55:21.940 --> 00:55:26.940
on page 27, middle of the second main paragraph,
00:55:26.980 --> 00:55:29.770
"The borrower may not pre-pay loans
00:55:29.770 --> 00:55:33.350
"or reduce commitments under the facility," that's this
00:55:33.350 --> 00:55:36.110
facility, "without pre-paying
00:55:36.110 --> 00:55:40.330
"or reducing the PG&E facility on a pro-rata basis."
00:55:42.730 --> 00:55:44.670
Do you see where that is?
00:55:44.670 --> 00:55:45.520
Yes I see that.
00:55:46.520 --> 00:55:50.990
Okay, so in essence any payments
00:55:50.990 --> 00:55:53.850
under this facility you have to pro-rata pay
00:55:53.850 --> 00:55:57.670
down the same amount in the corporation's facility?
00:55:59.140 --> 00:56:00.910
I would need time to read this to.
00:56:04.740 --> 00:56:06.430
Who would be the correct witness
00:56:06.430 --> 00:56:11.430
to ask about the terms and conditions of these
00:56:14.090 --> 00:56:16.350
six billion dollar finances?
00:56:16.350 --> 00:56:18.740
That would be you as the chief financial officer.
00:56:18.740 --> 00:56:19.573
Is that correct?
00:56:19.573 --> 00:56:20.406
That's correct, yes.
00:56:20.406 --> 00:56:22.230
I just need a minute to read the document.
00:56:29.050 --> 00:56:29.916
Can we be off the record your Honor.
00:56:29.916 --> 00:56:32.840
Let's be off the record.
00:56:32.840 --> 00:56:35.450
I'm gonna move to the next cross examiner.
00:56:35.450 --> 00:56:38.610
And if we have time we'll resume with questions.
00:56:39.860 --> 00:56:42.130
So, we need to keep moving.
00:56:45.590 --> 00:56:47.950
I believe there are two very important
00:56:47.950 --> 00:56:49.190
clarifications that I would like
00:56:49.190 --> 00:56:50.430
to make with regard to this,
00:56:50.430 --> 00:56:54.970
and those are my last two clarifications of the testimony.
00:56:54.970 --> 00:56:55.803
Okay, it looks like
00:56:55.803 --> 00:56:57.470
Cal advocates is ceding time.
00:56:58.660 --> 00:57:00.130
Yes 10 is plenty, thank you.
00:57:00.130 --> 00:57:01.450
Okay, don't take 10 minutes.
00:57:01.450 --> 00:57:02.290
Take less than 10 minutes.
00:57:02.290 --> 00:57:03.510
I will take less than 10 minutes, thank you.
00:57:03.510 --> 00:57:05.070
Keep reading.
00:57:05.070 --> 00:57:05.903
Are you ready?
I'm ready.
00:57:05.903 --> 00:57:07.330
All right, let's be back on the record.
00:57:08.190 --> 00:57:09.090
Mr. Wells has reviewed it.
00:57:09.090 --> 00:57:10.640
Ms. Kelly what's your question?
00:57:10.640 --> 00:57:11.473
Yes, thank you.
00:57:11.473 --> 00:57:16.190
So the amounts under this facility cannot be repaid
00:57:17.900 --> 00:57:21.510
without also repaying the debt at the corporation level?
00:57:21.510 --> 00:57:22.800
I believe that's correct.
00:57:24.780 --> 00:57:27.200
And is that the term sheet
00:57:27.200 --> 00:57:30.730
for that corporate debt included anywhere in your testimony?
00:57:38.170 --> 00:57:40.970
Other than the bridge commitment, no I don't think so.
00:57:43.210 --> 00:57:45.090
Just to clarify, so you have provided
00:57:45.090 --> 00:57:48.770
the PG&E company bridge commitment letter
00:57:48.770 --> 00:57:51.480
but not the PG&E Corporation bridge commitment
00:57:51.480 --> 00:57:52.980
letter that's referenced here?
00:58:02.920 --> 00:58:06.900
I thought we provided both is my hesitation.
00:58:08.390 --> 00:58:11.467
Perhaps PG&R's counsel can clarify that later.
00:58:11.467 --> 00:58:15.000
Yes, after a break we'll have a clarification
00:58:15.000 --> 00:58:16.050
from counsel on that.
00:58:16.900 --> 00:58:17.750
Okay thank you.
00:58:19.580 --> 00:58:24.490
And in order to be able to repay the amounts
00:58:24.490 --> 00:58:26.330
up at the corporation level,
00:58:26.330 --> 00:58:27.930
where does that money come from?
00:58:31.220 --> 00:58:32.960
Typically it'll come through refinancing
00:58:32.960 --> 00:58:35.610
what is a short term debt instrument with a longterm.
00:58:43.529 --> 00:58:44.698
Is that money coming from the company
00:58:44.698 --> 00:58:46.948
or is that money coming from the corporation?
00:58:48.150 --> 00:58:50.310
Ultimately the money to satisfy
00:58:50.310 --> 00:58:54.250
the debt would be dividend from the utility.
00:58:54.250 --> 00:58:56.460
These instruments are what I would consider
00:58:56.460 --> 00:58:59.700
a form of insurance as a backstop
00:58:59.700 --> 00:59:01.980
so that we can raise the money despite
00:59:01.980 --> 00:59:04.990
what is happening in the market upon exit.
00:59:04.990 --> 00:59:08.160
So the intention here would be that it would be repaid
00:59:08.160 --> 00:59:10.120
with a similar longterm instrument.
00:59:10.970 --> 00:59:13.550
But in the meantime until you refinance all
00:59:13.550 --> 00:59:18.480
these commitments are the responsibility of the company,
00:59:18.480 --> 00:59:20.790
and you're seeking approval of those transactions.
00:59:20.790 --> 00:59:21.623
Is that correct?
00:59:21.623 --> 00:59:23.430
I believe so.
Okay, great.
00:59:23.430 --> 00:59:24.620
And this is my last one.
00:59:24.620 --> 00:59:25.600
I promise your Honor.
00:59:25.600 --> 00:59:28.530
Thank you very, very much for your patience.
00:59:28.530 --> 00:59:30.540
So turning back to mandatory pre-payments
00:59:30.540 --> 00:59:35.540
and commitment reductions, on page 26 subsection A,
00:59:41.510 --> 00:59:45.900
it states that 100% of the net cash
00:59:45.900 --> 00:59:48.690
proceeds of all asset sales are
00:59:48.690 --> 00:59:52.220
other dispositions of property by PG&E, the borrower,
00:59:52.220 --> 00:59:54.070
and the respective subsidiaries
00:59:54.070 --> 00:59:59.070
and any insurance and condemnation proceeds need
01:00:00.580 --> 01:00:02.210
to prepay the debt.
01:00:02.210 --> 01:00:04.750
I'm paraphrasing, other than the important phrase,
01:00:04.750 --> 01:00:07.260
"any insurance and condemnation proceeds."
01:00:08.500 --> 01:00:09.950
Is that accurate?
01:00:12.480 --> 01:00:13.313
Yes.
01:00:13.313 --> 01:00:14.870
Okay.
01:00:14.870 --> 01:00:19.700
So for example if there were a fire
01:00:20.890 --> 01:00:25.890
and PG&E received insurance proceeds
01:00:28.600 --> 01:00:33.600
at the company level, all of those
01:00:33.760 --> 01:00:37.767
proceeds would be required to go
01:00:37.767 --> 01:00:40.410
to paying down this debt.
01:00:40.410 --> 01:00:41.243
Is that correct?
01:00:42.200 --> 01:00:44.000
That's correct, because again this is intended
01:00:44.000 --> 01:00:45.600
to be short term in nature.
01:00:45.600 --> 01:00:46.433
Okay.
01:00:46.433 --> 01:00:49.880
And say the insurance proceeds are $500 million.
01:00:50.860 --> 01:00:52.410
I'm just picking any number.
01:00:54.490 --> 01:00:59.490
So PG&E company receives $500 million in insurance proceeds.
01:01:01.630 --> 01:01:05.590
And PG&E, the corporation, who has an equivalent size
01:01:05.590 --> 01:01:07.180
facility would then have to come
01:01:07.180 --> 01:01:08.710
up with $500 million
01:01:08.710 --> 01:01:12.800
to repay their pro-rata, their amount under their facility.
01:01:12.800 --> 01:01:14.220
Is that correct?
01:01:14.220 --> 01:01:15.120
Yes.
01:01:15.120 --> 01:01:20.120
And in addition the insurance proceeds are intended
01:01:20.120 --> 01:01:22.980
for something, are intended to pay for a loss.
01:01:22.980 --> 01:01:24.030
Is that correct?
01:01:24.030 --> 01:01:24.863
That is correct.
01:01:24.863 --> 01:01:26.170
So those losses would still have
01:01:26.170 --> 01:01:27.570
to be paid for in some way.
01:01:27.570 --> 01:01:28.650
That is correct.
01:01:29.560 --> 01:01:32.970
And how would those losses be compensated otherwise?
01:01:35.040 --> 01:01:36.450
Through a typical financing in the market.
01:01:36.450 --> 01:01:37.689
Again, this is short term.
01:01:37.689 --> 01:01:39.650
(faintly speaking)
01:01:39.650 --> 01:01:41.050
Through a typical financing.
01:01:43.080 --> 01:01:45.560
This facility is just short term insurance
01:01:45.560 --> 01:01:49.560
to insure that we have the committed capital on exit.
01:01:49.560 --> 01:01:50.393
This is not intended
01:01:50.393 --> 01:01:53.242
to be a longterm borrowing of the company.
01:01:53.242 --> 01:01:55.560
I understand that it is not intended
01:01:55.560 --> 01:01:58.220
to be a longterm borrowing of the company.
01:01:58.220 --> 01:02:03.220
But my specific interest is with regards to rate payers.
01:02:04.570 --> 01:02:09.210
Are they bearing those risks in this transaction
01:02:09.210 --> 01:02:13.420
or solely to understand how this transaction works?
01:02:13.420 --> 01:02:18.420
So I now understand that if PG&E receives
01:02:18.990 --> 01:02:22.040
insurance proceeds it has to pay off a loan.
01:02:23.530 --> 01:02:26.550
PG&E Corporation would also at that time also have
01:02:26.550 --> 01:02:31.550
to pay essentially an equivalent amount on its loan,
01:02:34.070 --> 01:02:39.040
and PG&E would need to come up with additional money
01:02:39.040 --> 01:02:42.120
to offset the losses that would
01:02:42.120 --> 01:02:46.430
otherwise be paid for by insurance.
01:02:49.080 --> 01:02:50.360
Well I agree with that interpretation.
01:02:50.360 --> 01:02:51.960
It mis-characterizes the intent.
01:02:53.750 --> 01:02:55.500
But that's what it says on paper.
01:02:56.590 --> 01:02:58.830
Yes, but it mis-characterizes the intent.
01:02:58.830 --> 01:03:03.280
And that it was is being committed to on this term sheet.
01:03:05.550 --> 01:03:08.970
I think the benefit of this is regardless of what occurs
01:03:08.970 --> 01:03:10.570
in the financial markets, and we've seen
01:03:10.570 --> 01:03:13.200
incredible disruption this week with the coronavirus,
01:03:13.200 --> 01:03:15.620
customers would have the benefit of the ability
01:03:15.620 --> 01:03:18.080
for the company to make a timely contribution
01:03:18.080 --> 01:03:19.560
to the state's Wildfire Fund
01:03:19.560 --> 01:03:21.830
and to participate in AB1054.
01:03:21.830 --> 01:03:25.140
We have that certainty with this committed financing.
01:03:25.140 --> 01:03:30.140
It also provides victims the comfort that the amounts
01:03:30.650 --> 01:03:33.840
we agreed to pay will be available at exit.
01:03:33.840 --> 01:03:35.580
It's a short term instrument,
01:03:35.580 --> 01:03:38.870
but it's considered to be what I would characterize
01:03:38.870 --> 01:03:42.870
as insurance on the exit financing.
01:03:42.870 --> 01:03:44.650
The agreement works the way you've described,
01:03:44.650 --> 01:03:46.570
but it mis-characterizes the intent.
01:03:47.520 --> 01:03:49.830
And would any refinancing of this
01:03:49.830 --> 01:03:52.120
facility have similar terms?
01:03:52.120 --> 01:03:53.070
I don't think so.
01:03:54.160 --> 01:03:56.410
But that is not provided in your testimony.
01:03:57.800 --> 01:04:02.210
It would be uncommon to have the relationship
01:04:02.210 --> 01:04:03.690
between the holding company financing
01:04:03.690 --> 01:04:05.790
and the utility financing
01:04:05.790 --> 01:04:09.417
in a longterm debt financing agreement.
01:04:14.870 --> 01:04:18.560
And is it common in a short term debt financing agreement?
01:04:18.560 --> 01:04:23.520
Yes, because of what is in effect the insurance
01:04:23.520 --> 01:04:25.450
nature of this committed financing.
01:04:27.710 --> 01:04:28.543
Thank you your Honor.
01:04:28.543 --> 01:04:29.890
I have no further questions.
01:04:29.890 --> 01:04:30.723
All right, thank you.
01:04:30.723 --> 01:04:33.300
And just for purposes of the records
01:04:33.300 --> 01:04:35.850
and some of the discussion occurred off the record,
01:04:37.520 --> 01:04:41.700
we had city and council of San Francisco ceded
01:04:42.640 --> 01:04:47.150
their questioning time to MCE and Cal Advocates also ceded
01:04:47.150 --> 01:04:51.520
some of their time to MCE to allow Ms. Kelly
01:04:51.520 --> 01:04:53.540
to finish her line of questioning.
01:04:54.410 --> 01:04:58.140
The next cross examiner is Mr. Geesman for A4NR.
01:04:58.140 --> 01:05:00.750
And again please speak into the microphone.
01:05:00.750 --> 01:05:01.930
Thank you your Honor.
01:05:01.930 --> 01:05:03.310
Good morning Mr. Wells.
01:05:03.310 --> 01:05:04.821
Good morning.
01:05:04.821 --> 01:05:06.430
I'd like to start with a follow-up
01:05:06.430 --> 01:05:09.640
to the question that the judge asked you.
01:05:09.640 --> 01:05:13.820
And I will ask you to please explain how
01:05:13.820 --> 01:05:15.830
it is that the chief financial
01:05:15.830 --> 01:05:20.810
officer of this company is unaware of whether
01:05:20.810 --> 01:05:24.780
the application for financial authorization
01:05:24.780 --> 01:05:27.380
it seeks from this Commission
01:05:28.480 --> 01:05:31.420
typically includes terms and conditions (faintly speaking).
01:05:43.760 --> 01:05:46.300
I didn't understand the specific term
01:05:46.300 --> 01:05:49.080
and how that related to the procedural requirements.
01:05:49.080 --> 01:05:53.200
I understand the various filings we make,
01:05:53.200 --> 01:05:57.490
but I couldn't connect to the description that was provided.
01:05:58.440 --> 01:06:00.920
You have participated in those types of applications
01:06:00.920 --> 01:06:02.020
to this Commission before.
01:06:02.020 --> 01:06:02.853
Have you not?
01:06:02.853 --> 01:06:03.686
I have, yes.
01:06:03.686 --> 01:06:04.519
Thank you.
01:06:05.600 --> 01:06:09.850
I'd like to turn to page two dash three of your testimony,
01:06:09.850 --> 01:06:11.260
lines 12 through 15.
01:06:14.110 --> 01:06:16.500
This is in exhibit PG&E1.
01:06:16.500 --> 01:06:17.820
Yes your Honor.
01:06:17.820 --> 01:06:18.653
I'm there.
01:06:21.740 --> 01:06:26.190
Lines 12 through 15 you say that the company will achieve
01:06:26.190 --> 01:06:29.780
investment grade ratings for secured debt
01:06:29.780 --> 01:06:32.410
and also expects to have investment grade
01:06:32.410 --> 01:06:34.240
credit metrics at emergence
01:06:34.240 --> 01:06:36.140
and will have a clear path
01:06:36.140 --> 01:06:38.650
for improving its credit metrics over time.
01:06:40.990 --> 01:06:45.990
I believe you've clarified with Ms. Kelly that those
01:06:46.720 --> 01:06:51.450
references to investment grade credit metrics were focused
01:06:51.450 --> 01:06:55.300
on the unsecured debt of the utility.
01:06:55.300 --> 01:06:56.140
Is that correct?
01:06:59.810 --> 01:07:01.270
No I don't believe that is correct.
01:07:01.270 --> 01:07:02.920
Okay, would you clarify for me?
01:07:10.860 --> 01:07:12.560
Can you help me clarify
01:07:12.560 --> 01:07:14.670
the question you're seeking me to answer?
01:07:14.670 --> 01:07:18.310
When you speak of investment grade metrics, are
01:07:18.310 --> 01:07:21.290
you referring to the utilities unsecured debt?
01:07:23.560 --> 01:07:27.600
I'm speaking to the quantitative assessment of the metrics
01:07:27.600 --> 01:07:30.590
under the plan, not the holistic credit rating
01:07:30.590 --> 01:07:31.590
which would also include
01:07:31.590 --> 01:07:33.910
an assessment of the business risk environment.
01:07:37.140 --> 01:07:42.010
But would that distinguish between the rating
01:07:42.010 --> 01:07:47.010
on a secured instrument from a unsecured instrument?
01:07:50.430 --> 01:07:51.350
What I was trying to convey
01:07:51.350 --> 01:07:54.550
with this statement is that on a unsecured, insecured
01:07:54.550 --> 01:07:57.090
basis I do believe that the quantitative
01:07:57.090 --> 01:07:58.940
metrics the company is proposing
01:07:58.940 --> 01:08:02.190
under its financial plan would qualify for investment grade.
01:08:05.920 --> 01:08:09.860
Based on the five year projections that PG&E's made
01:08:11.530 --> 01:08:15.940
when do you expect either Standard & Poor's
01:08:15.940 --> 01:08:18.860
or Moody's or Fitch
01:08:18.860 --> 01:08:22.910
to recognize PG&E's achievement of these objectives?
01:08:22.910 --> 01:08:24.640
Objection, asked and answered.
01:08:29.290 --> 01:08:32.090
I do believe Ms. Kelly asked that question.
01:08:33.610 --> 01:08:34.750
Next question.
01:08:34.750 --> 01:08:38.070
Is there any point during that five year period
01:08:38.070 --> 01:08:43.000
when you expect Standard & Poor's, Moody's or Fitch
01:08:43.000 --> 01:08:47.510
to issue a investment grade rating
01:08:47.510 --> 01:08:49.850
on the utility's unsecured debt?
01:08:49.850 --> 01:08:51.100
Same objection.
01:08:53.550 --> 01:08:55.540
I'll allow that question.
01:08:57.540 --> 01:08:58.420
I think they should.
01:08:58.420 --> 01:09:00.000
I can't speculate as to the timing,
01:09:00.000 --> 01:09:00.980
because it's not driven
01:09:00.980 --> 01:09:02.850
by the financial plan that we put forward,
01:09:02.850 --> 01:09:05.530
but more of an assessment of the business risk.
01:09:05.530 --> 01:09:08.960
Would you describe the business risk
01:09:09.830 --> 01:09:12.320
you believe will drive your ratings
01:09:12.320 --> 01:09:13.570
over the next five years?
01:09:16.000 --> 01:09:17.340
I'm sorry, could you repeat the question?
01:09:17.340 --> 01:09:21.690
Would you describe the business risk that will drive
01:09:21.690 --> 01:09:23.990
your ratings over the five year
01:09:23.990 --> 01:09:27.130
period that the company has projected?
01:09:27.130 --> 01:09:28.640
I think it's a reflection of a concern
01:09:28.640 --> 01:09:30.860
around the California Regulatory Compact.
01:09:32.960 --> 01:09:37.540
So that's a blame your regulator type of problem?
01:09:38.670 --> 01:09:39.910
Not at all.
01:09:39.910 --> 01:09:43.030
Would you elaborate then on what problems
01:09:43.030 --> 01:09:46.390
in the California Regulatory Compact you believe
01:09:46.390 --> 01:09:50.500
may prevent PG&E from achieving an investment grade rating
01:09:50.500 --> 01:09:53.300
on its unsecured debt?
01:09:53.300 --> 01:09:55.090
I think probably the best example of this is
01:09:55.090 --> 01:09:55.923
while the credit rating
01:09:55.923 --> 01:09:59.730
agencies acknowledge that the passage of AB-1054 was
01:09:59.730 --> 01:10:02.720
credit positive, they did not increase
01:10:02.720 --> 01:10:07.330
the credit rating of Southern California Edison,
01:10:07.330 --> 01:10:11.970
specifically pointing to the credit rating agencies wanting
01:10:11.970 --> 01:10:14.520
to understand how the Commission would apply
01:10:15.580 --> 01:10:18.750
the new prudent manager standard under AB-1054.
01:10:18.750 --> 01:10:21.080
So there are certain conditions that the financial
01:10:21.080 --> 01:10:24.170
markets are looking to to gain confidence
01:10:24.170 --> 01:10:28.450
in the broader California regulatory environment.
01:10:28.450 --> 01:10:30.180
And does Southern California Edison have
01:10:30.180 --> 01:10:32.310
an investment grade rating on its debt?
01:10:32.310 --> 01:10:33.630
They currently do.
01:10:33.630 --> 01:10:38.230
So what distinguishes PG&E during that five year
01:10:38.230 --> 01:10:41.390
post-emergence period from Southern California Edison?
01:10:42.720 --> 01:10:43.900
We also will carry
01:10:43.900 --> 01:10:45.450
the burden of proving that we can execute
01:10:45.450 --> 01:10:47.300
on our financial plan post-emergence.
01:10:48.530 --> 01:10:52.110
We can execute on our financial plan post-emergence.
01:10:55.720 --> 01:11:00.720
And are there prospects under your investment grade
01:11:01.330 --> 01:11:06.330
metrics, the debt of the holding company
01:11:06.490 --> 01:11:08.590
on an unsecured basis would achieve
01:11:08.590 --> 01:11:10.900
an investment grade rating?
01:11:10.900 --> 01:11:12.300
I think it's possible yes.
01:11:14.430 --> 01:11:15.650
During those five years.
01:11:15.650 --> 01:11:16.483
Yes.
01:11:19.060 --> 01:11:22.070
Page two dash five, lines 13
01:11:22.070 --> 01:11:27.070
through 14 where you speak of PG&E's mission of safely
01:11:27.370 --> 01:11:31.970
and reliably delivering affordable clean energy.
01:11:33.230 --> 01:11:35.360
Is that affordability objective subject
01:11:35.360 --> 01:11:38.870
to any sort of market price benchmark?
01:11:42.100 --> 01:11:43.130
Yes.
01:11:43.130 --> 01:11:44.980
And would you explain what that is?
01:11:46.950 --> 01:11:50.930
For residential customers we look at the total bill cost.
01:11:50.930 --> 01:11:53.130
I'm proud to say that the company's total bills are
01:11:53.130 --> 01:11:55.190
about 30% less than the national average.
01:11:56.230 --> 01:11:57.550
And how do your rates compare
01:11:57.550 --> 01:11:58.750
to the national average?
01:12:00.730 --> 01:12:03.280
They're about a third higher on a rate basis,
01:12:04.730 --> 01:12:08.190
but as I said, from a residential customer standpoint,
01:12:08.190 --> 01:12:10.330
the focus is more on the share of wallet
01:12:10.330 --> 01:12:12.060
or the total bill that's paid.
01:12:12.060 --> 01:12:13.620
So you're giving yourself credit
01:12:13.620 --> 01:12:17.240
for operating in a temperate climate?
01:12:17.240 --> 01:12:18.073
Not at all.
01:12:18.073 --> 01:12:18.906
That is one of the factors,
01:12:18.906 --> 01:12:20.510
but I'm also proud of the company's track record
01:12:20.510 --> 01:12:22.910
with respect to supporting energy efficiency.
01:12:24.210 --> 01:12:27.130
That has kept per capita energy consumption flat
01:12:27.130 --> 01:12:29.110
since the late '80s.
01:12:30.680 --> 01:12:33.920
When you look at energy consumption per capita
01:12:33.920 --> 01:12:36.650
for the rest of the country it is continued to increase.
01:12:37.710 --> 01:12:39.250
And do you believe your customers' credit
01:12:39.250 --> 01:12:41.900
PG&E's programs with that accomplishment?
01:12:43.430 --> 01:12:45.170
I think some do, yes.
01:12:45.170 --> 01:12:46.420
You think your customers consider
01:12:46.420 --> 01:12:47.820
your rates to be affordable?
01:12:49.560 --> 01:12:51.710
I think many have expressed concerns around it.
01:12:53.800 --> 01:12:58.800
Page two dash 15, line seven through nine, state,
01:13:00.490 --> 01:13:03.330
and I'm quoting, "Other material adverse events
01:13:03.330 --> 01:13:06.280
"may also impair PG&E's ability
01:13:06.280 --> 01:13:10.080
"to raise capital for its emergence," close quote.
01:13:11.340 --> 01:13:13.600
Have you performed any stress tests
01:13:13.600 --> 01:13:18.600
to determine what financial magnitude of adverse event
01:13:18.710 --> 01:13:20.090
your plan can withstand
01:13:20.090 --> 01:13:22.530
without impairing the company's ability
01:13:22.530 --> 01:13:24.340
to raise capital for emergence?
01:13:24.340 --> 01:13:25.400
We have.
01:13:25.400 --> 01:13:28.340
And what have those stress tests revealed to you?
01:13:31.100 --> 01:13:33.210
The company has adequate capacity
01:13:33.210 --> 01:13:35.360
from a financials metrics standpoint
01:13:36.410 --> 01:13:38.410
for material adverse events.
01:13:38.410 --> 01:13:40.770
Coming back to my response
01:13:40.770 --> 01:13:45.450
on the credit ratings, the qualitative
01:13:45.450 --> 01:13:48.290
assessments of what occurs will also factor in.
01:13:48.290 --> 01:13:51.700
And that is harder to pinpoint specifically.
01:13:51.700 --> 01:13:53.480
Well let's focus on the quantitative.
01:13:53.480 --> 01:13:57.430
What threshold of adverse event
01:13:58.480 --> 01:14:01.330
in your judgment could your plan withstand
01:14:01.330 --> 01:14:02.710
without impairing your ability
01:14:02.710 --> 01:14:04.360
to raise capital for emergencies?
01:14:05.880 --> 01:14:08.510
It is completely facts and circumstances based.
01:14:08.510 --> 01:14:10.790
One situation that we looked
01:14:10.790 --> 01:14:12.710
at is the risk of a catastrophic
01:14:12.710 --> 01:14:17.670
fire as we comply with ABHN-54.
01:14:19.120 --> 01:14:21.150
The threshold for that may be different
01:14:21.150 --> 01:14:22.710
than a threshold for a different transaction.
01:14:22.710 --> 01:14:24.700
So it's not a universal assessment.
01:14:25.540 --> 01:14:30.030
But over the period of time that you evaluated
01:14:31.450 --> 01:14:35.380
would it be correct to assume you must have hypothesized
01:14:35.380 --> 01:14:38.840
an adverse event with a particular dollar consequence
01:14:38.840 --> 01:14:42.670
at a particular point in time, irrespective of the cause?
01:14:44.570 --> 01:14:45.480
I think cause matters.
01:14:45.480 --> 01:14:50.130
We hypothesized about different events occurring.
01:14:51.480 --> 01:14:56.340
The threshold for those events is different, depending
01:14:56.340 --> 01:14:57.340
on the event itself.
01:14:59.280 --> 01:15:01.810
Explain to me how that works quantitatively.
01:15:01.810 --> 01:15:04.300
I'm trying to visualize a spreadsheet,
01:15:04.300 --> 01:15:06.790
and I'm not certain that the way Excel,
01:15:06.790 --> 01:15:08.680
for example, works distinguishes
01:15:08.680 --> 01:15:12.110
between cause of a $10 billion hit.
01:15:13.140 --> 01:15:15.750
So would you elaborate on your answer?
01:15:15.750 --> 01:15:18.640
I'll acknowledge that there is an element of subjectivity
01:15:18.640 --> 01:15:23.180
to it, but if I could elaborate for one instance.
01:15:26.800 --> 01:15:29.340
For example, yesterday we received
01:15:29.340 --> 01:15:32.855
a presiding officer's decision that modified
01:15:32.855 --> 01:15:35.860
a settlement that we extensively negotiated.
01:15:37.480 --> 01:15:40.740
I would say the focus there is more
01:15:40.740 --> 01:15:43.940
on, again, the regulatory compact
01:15:43.940 --> 01:15:47.460
and the potential instability that it introduces.
01:15:47.460 --> 01:15:49.920
And so that threshold is different than say
01:15:49.920 --> 01:15:53.130
a catastrophic fire that is covered by AB-1054.
01:15:54.520 --> 01:15:56.160
Okay.
01:15:56.160 --> 01:16:01.160
Focused on the quantitative analysis, once you've sorted
01:16:02.030 --> 01:16:05.960
through all those subjective factors, was there
01:16:05.960 --> 01:16:10.960
a dollar amount of hit that you could absorb of an adverse
01:16:12.250 --> 01:16:14.390
event that you were comfortable?
01:16:15.360 --> 01:16:16.193
Yes.
01:16:16.193 --> 01:16:17.560
And what was that threshold?
01:16:18.620 --> 01:16:23.610
Again, it differs by the type of transaction.
01:16:25.812 --> 01:16:30.480
I can't summarize it in a simple quantitative threshold.
01:16:32.870 --> 01:16:36.620
The analysis doesn't lend itself to a singular number.
01:16:38.430 --> 01:16:39.470
Okay, were there a
01:16:39.470 --> 01:16:43.140
range of numbers that you considered survivable?
01:16:50.820 --> 01:16:53.220
I mean, I think on one end if we calculate
01:16:53.220 --> 01:16:57.410
a lost of 20% of the electric T&E equity
01:16:57.410 --> 01:17:00.930
portion of rate base that is a sizeable
01:17:00.930 --> 01:17:03.230
number that the company could withstand.
01:17:04.290 --> 01:17:05.470
Okay, that's one example.
01:17:05.470 --> 01:17:06.750
Are there others?
01:17:06.750 --> 01:17:09.400
And I think the continuum would kinda go all the way back
01:17:09.400 --> 01:17:13.200
to something just north of zero depending
01:17:13.200 --> 01:17:15.540
on the other qualitative factors.
01:17:15.540 --> 01:17:17.070
But at the higher end
01:17:17.070 --> 01:17:20.170
it would be 20% of the company's D&D (mumbles).
01:17:21.020 --> 01:17:22.410
Did I understand that correctly?
01:17:22.410 --> 01:17:25.170
Under specific conditions, yes.
01:17:25.170 --> 01:17:26.003
Thank you.
01:17:29.180 --> 01:17:31.770
And have you done a similar analysis
01:17:31.770 --> 01:17:35.530
for post-emergence material events?
01:17:35.530 --> 01:17:38.470
Yes, that's, apologies, that's what I was referring to.
01:17:38.470 --> 01:17:39.410
Okay.
01:17:39.410 --> 01:17:41.690
Would your answer be different if it was focused
01:17:41.690 --> 01:17:46.000
on emergence or pre-emergence adverse events?
01:17:56.180 --> 01:17:57.380
Likely not materially.
01:17:58.730 --> 01:17:59.950
Thank you.
01:17:59.950 --> 01:18:03.860
Page two dash 15, lines 18 through 20.
01:18:05.240 --> 01:18:08.670
You described the $6 billion of temporary utility debt.
01:18:11.020 --> 01:18:12.880
What steps does PG&E intend to take
01:18:12.880 --> 01:18:17.670
in terms of accounting separation or otherwise
01:18:17.670 --> 01:18:21.840
to guarantee that this temporary utility debt will remain,
01:18:21.840 --> 01:18:24.390
and I'm quoting your testimony, "Financial
01:18:24.390 --> 01:18:27.300
"responsibility of shareholders, not customers?"
01:18:28.670 --> 01:18:30.930
That specifically it would be addressed
01:18:30.930 --> 01:18:35.330
in the cost of capital proceeding where we identify
01:18:35.330 --> 01:18:39.430
the authorized level of rate based multiplied times
01:18:39.430 --> 01:18:43.830
the authorized level of debt
01:18:43.830 --> 01:18:48.830
to ensure that the cost of financing customers are varying.
01:18:48.930 --> 01:18:50.680
It's only the cost associated
01:18:50.680 --> 01:18:52.850
with financing a rate based, not
01:18:52.850 --> 01:18:55.060
additional debt for other needs.
01:18:55.060 --> 01:18:59.760
So you're not envisioning using a special purpose
01:18:59.760 --> 01:19:03.020
vehicle to segregate these cash flows?
01:19:04.180 --> 01:19:06.380
Not fur purposes of this transaction here.
01:19:07.310 --> 01:19:09.160
Not a separate account either?
01:19:10.130 --> 01:19:11.450
It certainly would be a separate account
01:19:11.450 --> 01:19:13.030
in our financial statements.
01:19:13.030 --> 01:19:15.970
But I think the customers can have confidence
01:19:15.970 --> 01:19:18.740
in the application of our cost of capital
01:19:18.740 --> 01:19:22.000
and what is specifically used to finance rate base.
01:19:22.000 --> 01:19:25.690
So will this temporary utility debt be cost collateralized
01:19:25.690 --> 01:19:27.650
with or subject to cross default
01:19:27.650 --> 01:19:29.610
provisions of other utility debt?
01:19:31.340 --> 01:19:34.330
I would envision it would be issued on similar terms.
01:19:35.530 --> 01:19:37.030
And that's a yes?
Yes.
01:19:38.310 --> 01:19:40.500
And what about cross collateralized
01:19:40.500 --> 01:19:41.710
or subject to cross default
01:19:41.710 --> 01:19:43.460
provisions of holding company debt?
01:19:44.330 --> 01:19:45.163
No I don't...
01:19:48.303 --> 01:19:49.136
I don't believe that would--
01:19:49.136 --> 01:19:50.360
In.
01:19:50.360 --> 01:19:51.760
I'm sorry did I cut you off?
01:19:53.790 --> 01:19:56.630
In the event of another PG&E bankruptcy how would this
01:19:56.630 --> 01:19:59.320
temporary utility debt remain,
01:19:59.320 --> 01:20:02.030
and again quoting your testimony, "The financial
01:20:02.030 --> 01:20:04.820
"responsibility of shareholders, not customers?"
01:20:12.200 --> 01:20:13.250
Again, I'll come back
01:20:13.250 --> 01:20:16.420
to the customer protections that we are only allowed
01:20:18.710 --> 01:20:21.960
to recover the cost of debt associated
01:20:21.960 --> 01:20:23.680
with the financing of rate based.
01:20:25.000 --> 01:20:28.140
So this debt would continue to be satisfied
01:20:28.140 --> 01:20:30.720
with the shareholder net operating
01:20:30.720 --> 01:20:32.720
losses that are proposed here.
01:20:35.670 --> 01:20:37.130
Do you expect the terms of the temporary
01:20:37.130 --> 01:20:40.120
utility debt will include a make-hold
01:20:40.120 --> 01:20:41.600
provision that would be triggered
01:20:41.600 --> 01:20:43.400
in the event of an early redemption?
01:20:46.760 --> 01:20:47.593
Not likely.
01:20:51.150 --> 01:20:53.670
Now if I recall correctly you've not yet--
01:20:53.670 --> 01:20:54.550
Wait, wait.
01:20:55.960 --> 01:20:56.793
I wasn't sure
01:20:56.793 --> 01:20:58.340
the witness was done with his answer.
01:20:58.340 --> 01:21:00.530
I was gonna expand on that not likely,
01:21:00.530 --> 01:21:02.460
because what we're proposing
01:21:02.460 --> 01:21:04.810
here is that the realization of the shareholder
01:21:04.810 --> 01:21:08.320
on NOL's as that cashflow is generated
01:21:08.320 --> 01:21:10.100
it would be used to retire the debt.
01:21:10.100 --> 01:21:12.930
And so we would tranche that temporary debt
01:21:12.930 --> 01:21:17.930
in a way that would minimize any make-hold risk.
01:21:20.080 --> 01:21:25.080
So you would anticipate then that the securities issued
01:21:26.130 --> 01:21:30.340
to finance this temporary utility debt would
01:21:30.340 --> 01:21:32.080
in fact have a make-hold provision,
01:21:32.080 --> 01:21:33.480
but that would be mitigated
01:21:33.480 --> 01:21:36.150
by the availability of the NOL's?
01:21:37.350 --> 01:21:39.420
We're looking at both terms loans
01:21:39.420 --> 01:21:41.740
which would not have any make-hold provision
01:21:41.740 --> 01:21:45.230
or a combination of different maturities
01:21:45.230 --> 01:21:47.450
such that we can manage the maturities' schedule
01:21:47.450 --> 01:21:48.880
to minimize make-hold risk.
01:21:51.990 --> 01:21:54.540
When do you envision deciding whether the temporary
01:21:54.540 --> 01:21:57.530
utility debt will be short-term or longterm?
01:22:01.930 --> 01:22:06.490
I think initially we will pursue shorter term temporary
01:22:06.490 --> 01:22:10.590
debt as the application for securitization is outstanding.
01:22:15.420 --> 01:22:18.380
I'm not certain that I understood what you meant
01:22:18.380 --> 01:22:21.610
by your reference to the application
01:22:22.590 --> 01:22:24.530
for securitization being outstanding.
01:22:24.530 --> 01:22:26.620
Could you elaborate on that?
01:22:26.620 --> 01:22:29.110
Separately in my testimony I referenced
01:22:29.110 --> 01:22:33.720
a separate application for securitization
01:22:33.720 --> 01:22:36.000
which we will be filing in the coming weeks.
01:22:38.390 --> 01:22:40.770
The purpose of that securitization, if approved
01:22:40.770 --> 01:22:42.960
by the Commission, would be in part
01:22:42.960 --> 01:22:44.510
to pay off this temporary debt.
01:22:46.450 --> 01:22:51.450
And so as that separate application is outstanding
01:22:51.460 --> 01:22:54.390
we would likely use shorter term debt
01:22:56.350 --> 01:22:58.410
to minimize any make-hold risk.
01:23:01.040 --> 01:23:06.040
But you will have already made a decision, will you not
01:23:06.280 --> 01:23:09.080
when you issue the $6 billion as
01:23:09.080 --> 01:23:13.040
to whether that is short term or longterm, correct?
01:23:14.050 --> 01:23:14.900
That's correct.
01:23:16.190 --> 01:23:17.480
And you'll have to make that decision
01:23:17.480 --> 01:23:18.490
before you know whether
01:23:18.490 --> 01:23:21.930
the Commission approves your application.
01:23:21.930 --> 01:23:22.763
That's correct.
01:23:22.763 --> 01:23:23.596
Okay.
01:23:27.680 --> 01:23:29.450
You say in footnote 42,
01:23:30.340 --> 01:23:33.270
on page two dash 16, that the temporary utility
01:23:33.270 --> 01:23:38.270
debt will be retired by the realization of shareholder NOL's
01:23:39.490 --> 01:23:43.790
in the event there is no securitization of transaction.
01:23:43.790 --> 01:23:45.590
Can you explain how that would work?
01:23:46.950 --> 01:23:47.783
Yes.
01:23:49.500 --> 01:23:52.427
As a result of the wildfire victims
01:23:56.390 --> 01:23:58.970
claims that are being paid in the bankruptcy proceeding
01:23:58.970 --> 01:24:01.190
as well as the Wildfire Fund contribution
01:24:01.190 --> 01:24:04.290
under AB-1054, there will be tax
01:24:04.290 --> 01:24:05.970
benefits generated that will be
01:24:05.970 --> 01:24:07.380
the property of shareholders,
01:24:07.380 --> 01:24:09.890
since they are funding those underlying costs.
01:24:10.770 --> 01:24:14.070
The realization of the shareholder
01:24:14.070 --> 01:24:15.970
tax benefits will come over time.
01:24:17.840 --> 01:24:22.840
As we minimize what would have
01:24:23.350 --> 01:24:27.180
otherwise been payments, tax payments
01:24:27.180 --> 01:24:30.780
to the IRS, we will take that cashflow and use it
01:24:30.780 --> 01:24:34.670
to satisfy either the securitization that's been proposed
01:24:34.670 --> 01:24:36.870
or the temporary utility debt proposed here.
01:24:37.850 --> 01:24:42.080
And has PG&E done any section 382 studies
01:24:42.080 --> 01:24:45.880
to confirm the availability and timing of those NOL's?
01:24:45.880 --> 01:24:46.713
Yes we have.
01:24:48.760 --> 01:24:50.230
Am I correct in understanding
01:24:50.230 --> 01:24:51.720
those are confidential?
01:24:51.720 --> 01:24:52.553
Yes.
01:24:56.190 --> 01:24:59.480
With respect to the securitization transaction,
01:25:00.740 --> 01:25:03.030
you indicated that you'll be filing that application
01:25:03.030 --> 01:25:04.450
in the coming weeks.
01:25:04.450 --> 01:25:05.350
That is correct.
01:25:06.416 --> 01:25:08.650
Do you have any anticipation
01:25:08.650 --> 01:25:11.110
when you might sell the securitization bonds?
01:25:13.550 --> 01:25:15.350
Right now what we have modeled
01:25:15.350 --> 01:25:16.650
in our financial projections based
01:25:16.650 --> 01:25:17.970
on our assessment of the procedural
01:25:17.970 --> 01:25:22.970
schedule could be March 31st, 31, 2021.
01:25:27.590 --> 01:25:30.620
I know it's early to do so.
01:25:30.620 --> 01:25:32.530
But have you made any
01:25:32.530 --> 01:25:37.530
projections of likely maturities of those bonds?
01:25:37.570 --> 01:25:38.740
The securitization bonds?
01:25:38.740 --> 01:25:40.350
That's correct.
Yes we have.
01:25:40.350 --> 01:25:42.000
And what do you envision there?
01:25:43.340 --> 01:25:46.450
Likely a waited average maturity of just under 20 years.
01:25:48.830 --> 01:25:53.050
What type of pricing spread to treasuries?
01:25:54.570 --> 01:25:55.810
I don't have that figure in front of me.
01:25:55.810 --> 01:25:58.170
But one of the reasons why we think it is
01:25:58.170 --> 01:26:00.520
in all of the stakeholders' interest is
01:26:00.520 --> 01:26:02.410
because of it's better pricing.
01:26:02.410 --> 01:26:04.220
I just don't have the exact figure.
01:26:04.220 --> 01:26:07.020
But you probably assume some range of spreads?
01:26:07.020 --> 01:26:08.110
Have you not?
01:26:08.110 --> 01:26:09.030
I have.
01:26:09.030 --> 01:26:10.680
And what assumptions (mumbles)?
01:26:12.570 --> 01:26:14.260
I don't have the figures in front of me.
01:26:14.260 --> 01:26:17.260
What occurs to your mind as you sit here today?
01:26:17.260 --> 01:26:18.093
Low 3%.
01:26:19.140 --> 01:26:20.190
Spread to treasure.
01:26:21.957 --> 01:26:24.000
I don't know where treasures are trading this week?
01:26:25.020 --> 01:26:28.750
Is it likely to be a very representative week.
01:26:28.750 --> 01:26:32.280
But assume your treasury is trading at 1.5
01:26:34.211 --> 01:26:35.044
on the 10 year.
01:26:36.920 --> 01:26:38.860
Well, over the weighted average
01:26:38.860 --> 01:26:42.140
maturity of those securities likely
01:26:42.140 --> 01:26:44.830
100 basis points, 125 basis points.
01:26:49.266 --> 01:26:51.900
You say at page two dash 15, lines 24
01:26:54.690 --> 01:26:58.770
through 26, "That PG&E will use the proceeds
01:26:58.770 --> 01:27:00.780
"from the shareholders' certain
01:27:00.780 --> 01:27:04.610
"tax benefits, including NOL's and other credits
01:27:04.610 --> 01:27:06.260
"to provide rate reductions."
01:27:07.390 --> 01:27:11.520
Are there any other specific accounting mechanisms
01:27:11.520 --> 01:27:13.810
than those in your cost of capital
01:27:13.810 --> 01:27:17.472
proceeding that you anticipate using
01:27:17.472 --> 01:27:20.670
to assure that those revenues are available?
01:27:23.770 --> 01:27:25.330
As I mentioned, we will track
01:27:25.330 --> 01:27:28.310
in our underlying financial records these items separately.
01:27:30.370 --> 01:27:31.497
But ultimately I think
01:27:31.497 --> 01:27:35.840
the confidence that we are not pursuing
01:27:35.840 --> 01:27:38.040
a recovery will be
01:27:38.040 --> 01:27:40.730
in the application of our cost of capital.
01:27:40.730 --> 01:27:42.270
But you don't envision any
01:27:42.270 --> 01:27:44.580
form of accounting firewall
01:27:44.580 --> 01:27:47.440
or rink fencing to segregate those revenues?
01:27:47.440 --> 01:27:48.790
Do you?
01:27:48.790 --> 01:27:50.940
We will have separate accounts for those.
01:27:54.310 --> 01:27:56.260
Separate accounts within the same company?
01:27:56.260 --> 01:27:57.093
Correct.
01:28:00.420 --> 01:28:03.460
What other shareholder certain tax benefits,
01:28:03.460 --> 01:28:04.970
besides NOL's, do you intend
01:28:04.970 --> 01:28:07.260
to utilize for the rate
01:28:07.260 --> 01:28:09.820
reductions that's contemplated by your testimony?
01:28:11.040 --> 01:28:15.250
We're still on a process of finalizing that application.
01:28:15.250 --> 01:28:17.030
And so right now it's largely based
01:28:17.030 --> 01:28:19.980
on the utilization of net operating losses.
01:28:19.980 --> 01:28:24.980
We're still evaluating if there's any other opportunities.
01:28:26.200 --> 01:28:29.020
And just conceptually, what
01:28:29.020 --> 01:28:30.770
other opportunities might there be?
01:28:42.190 --> 01:28:45.810
Largely I think it's gonna lead to really be
01:28:45.810 --> 01:28:48.760
reflective of the use of the net operating losses.
01:28:50.080 --> 01:28:54.100
Also mentioned other credits besides the shareholder
01:28:54.100 --> 01:28:56.440
certain tax benefits that you intend
01:28:56.440 --> 01:28:58.680
to utilize for these rate reductions.
01:28:58.680 --> 01:29:01.300
What other credits are you talking about?
01:29:02.350 --> 01:29:05.430
Could be a credit from shareholders.
01:29:07.700 --> 01:29:11.300
One transaction that we are contemplating as part of this is
01:29:11.300 --> 01:29:16.140
a securitization that relies
01:29:16.140 --> 01:29:20.250
on a concept of present value for rate neutraLity,
01:29:22.430 --> 01:29:25.300
because the timing of these shareholder
01:29:25.300 --> 01:29:30.300
NOL's will likely happen up front
01:29:31.330 --> 01:29:33.750
and will exceed the cost of the debt.
01:29:35.340 --> 01:29:38.570
And so we may propose a transaction that relies
01:29:38.570 --> 01:29:41.860
on present value, and to the extent that we do,
01:29:41.860 --> 01:29:45.490
and we would need to make additional contributions
01:29:45.490 --> 01:29:50.070
to continue to keep our customers' rate into on average.
01:29:50.070 --> 01:29:53.200
We would, in that circumstance, propose to do so.
01:29:54.610 --> 01:29:57.200
And you would anticipate describing that in
01:29:57.200 --> 01:29:58.400
your application?
01:29:58.400 --> 01:29:59.500
That's correct, yes.
01:30:02.850 --> 01:30:05.100
Page two dash 19, lines 12
01:30:05.100 --> 01:30:08.240
to 13, you say that "the plan will yield
01:30:08.240 --> 01:30:10.930
"significant savings associated
01:30:10.930 --> 01:30:14.360
"with lower interest expenses of utility."
01:30:16.000 --> 01:30:20.160
What's the lower band or bound of what you would consider
01:30:20.160 --> 01:30:22.020
to be significance savings?
01:30:26.080 --> 01:30:28.290
I think what we proposed here...
01:30:30.870 --> 01:30:33.300
I revised my testimony off our discounting rates
01:30:33.300 --> 01:30:36.300
but on a discounted basis, 700 million is significant.
01:30:38.960 --> 01:30:39.810
Let's go lower.
01:30:40.970 --> 01:30:42.800
When does it stop being significant?
01:30:45.240 --> 01:30:48.280
I think a rate reduction in any case is a benefit,
01:30:48.280 --> 01:30:53.280
and I think that that is positive for customers.
01:30:54.210 --> 01:30:56.590
So as long as it's above zero it's neutral.
01:30:56.590 --> 01:30:57.423
Is that correct?
01:31:03.410 --> 01:31:05.230
As long as it's above zero I would say it's
01:31:05.230 --> 01:31:07.770
in the benefit of customers.
01:31:07.770 --> 01:31:10.310
And that would satisfy the rate neutrality test,
01:31:10.310 --> 01:31:12.030
if I understand you correctly?
01:31:12.030 --> 01:31:13.880
Am I understanding you right?
01:31:16.470 --> 01:31:18.420
As it relates to this item here, yes.
01:31:20.410 --> 01:31:23.810
Page two dash 24, lines 11
01:31:23.810 --> 01:31:28.300
through 15, you speak positively of the significant
01:31:28.300 --> 01:31:33.300
flexibility PG&E gained from the terms of its $12 billion
01:31:33.360 --> 01:31:35.210
in equity backstop commitments.
01:31:36.290 --> 01:31:39.680
Why does the PG&E plan of reorganization contemplate
01:31:39.680 --> 01:31:43.210
a capital structure of only nine billion in common equity?
01:31:49.490 --> 01:31:53.440
I think the capital structure we proposed
01:31:57.760 --> 01:31:59.290
really reflects shareholder
01:31:59.290 --> 01:32:02.405
contributions of a total of $16 billion.
01:32:02.405 --> 01:32:06.330
It's reflective of nine billion in common equity up front.
01:32:07.770 --> 01:32:11.880
And over time the contribution of over $7 billion
01:32:11.880 --> 01:32:13.680
in shareholder net operating losses.
01:32:14.870 --> 01:32:18.580
So the proposal is actually higher than what
01:32:18.580 --> 01:32:21.190
we have included in the original commitment letters.
01:32:23.820 --> 01:32:27.937
And does that $16 billion number include
01:32:29.110 --> 01:32:34.110
the infusion of equity that will come
01:32:34.550 --> 01:32:39.300
from the holding company's sale of unsecured debt?
01:32:40.691 --> 01:32:43.170
I did not include that amount in my calculation.
01:32:43.170 --> 01:32:47.010
So that would be even on top of the 16, would it not?
01:32:47.010 --> 01:32:47.940
That's correct.
01:32:47.940 --> 01:32:50.630
Why don't you include that when you describe
01:32:50.630 --> 01:32:53.190
the contribution from shareholders?
01:32:53.190 --> 01:32:54.023
I could have.
01:33:00.300 --> 01:33:05.300
At footnote 50 on page 26, you say that PG&E
01:33:05.770 --> 01:33:09.570
also anticipates filing a separate request
01:33:09.570 --> 01:33:12.400
for longterm financing authorization
01:33:12.400 --> 01:33:17.400
to address PG&E's post-emergence longterm financing needs.
01:33:18.620 --> 01:33:19.690
I take it that's separate
01:33:19.690 --> 01:33:22.020
from the securitization application?
01:33:24.190 --> 01:33:26.330
Do you mind referencing the line?
01:33:27.190 --> 01:33:28.430
It's footnote 50.
01:33:28.430 --> 01:33:29.830
It's on page 26.
01:33:39.270 --> 01:33:42.170
Yes this is separate from the securitization transaction.
01:33:42.170 --> 01:33:43.210
These are the longterm debt
01:33:43.210 --> 01:33:46.030
authorizations that I had referenced previously
01:33:46.030 --> 01:33:47.380
in, I think, cross.
01:33:47.380 --> 01:33:49.580
When do you anticipate making that filing?
01:33:50.570 --> 01:33:52.280
I've asked for the authorizations
01:33:52.280 --> 01:33:53.460
as part of my testimony here.
01:33:53.460 --> 01:33:55.380
Okay, okay, I'm clear now.
01:33:58.460 --> 01:33:59.720
Last subject I wanted to touch
01:33:59.720 --> 01:34:01.470
on are the pollution control bonds.
01:34:02.570 --> 01:34:05.310
And I wonder if you would explain what
01:34:05.310 --> 01:34:08.810
the company's intent is with respect
01:34:08.810 --> 01:34:10.930
to the existing pollution controls.
01:34:13.590 --> 01:34:16.340
May I correct my previous answer?
01:34:16.340 --> 01:34:17.173
Yes.
01:34:18.540 --> 01:34:19.373
Apologies.
01:34:22.390 --> 01:34:24.650
The short term authorizations that I referenced
01:34:24.650 --> 01:34:27.200
in my testimony are for the exit.
01:34:27.200 --> 01:34:32.200
Given the $40 billion or nearly $40 billion that we plan
01:34:33.720 --> 01:34:37.020
to invest in our rate base,
01:34:37.020 --> 01:34:39.850
we will need additional post-emergence longterm
01:34:39.850 --> 01:34:42.670
debt authorization to fund that growth.
01:34:42.670 --> 01:34:44.892
That was what I was referring to here.
01:34:44.892 --> 01:34:47.810
And those would come post-emergence as
01:34:47.810 --> 01:34:49.360
the rate base is growing.
01:34:49.360 --> 01:34:50.193
Okay.
01:34:50.193 --> 01:34:51.360
As new application.
01:34:51.360 --> 01:34:52.780
Yes.
01:34:52.780 --> 01:34:53.613
And when would
01:34:53.613 --> 01:34:56.030
you anticipate making that new application?
01:34:59.800 --> 01:35:03.220
Well before the financing authorization is needed.
01:35:04.750 --> 01:35:08.650
But in your five year projection have you made
01:35:08.650 --> 01:35:10.730
any assumption as to when
01:35:10.730 --> 01:35:12.620
you would be filing that application
01:35:12.620 --> 01:35:15.050
or when that financing would be needed?
01:35:15.050 --> 01:35:16.880
Given the growth we would likely have
01:35:16.880 --> 01:35:18.630
new financing needs in 2021.
01:35:20.160 --> 01:35:21.270
So you'd anticipate
01:35:21.270 --> 01:35:23.000
the application coming before then?
01:35:23.000 --> 01:35:24.100
Yes.
01:35:24.100 --> 01:35:27.000
And based on your five year projections,
01:35:27.000 --> 01:35:30.540
what amounts are likely to be involved?
01:35:33.120 --> 01:35:34.150
I don't have the exact figure.
01:35:34.150 --> 01:35:37.985
It would be the growth in rate base attributable to debt.
01:35:37.985 --> 01:35:40.620
(mumbles) I just don't have that figure top of my mind.
01:35:42.270 --> 01:35:44.330
General range in mind?
01:35:57.440 --> 01:35:59.290
Probably on an order of...
01:36:03.680 --> 01:36:06.070
Rate base is growing at a roughly three billion a year,
01:36:06.070 --> 01:36:08.580
half of that funded, not exactly with debt.
01:36:08.580 --> 01:36:09.870
So maybe a billion and a half
01:36:09.870 --> 01:36:11.950
kind of annually, sort of roughly.
01:36:14.199 --> 01:36:15.710
It will obviously be dependent
01:36:15.710 --> 01:36:17.710
on the specific financial needs at that time,
01:36:17.710 --> 01:36:20.060
but on average over the life of the five years.
01:36:21.220 --> 01:36:22.710
Thank you.
01:36:22.710 --> 01:36:25.250
And now I wonder if you would describe
01:36:25.250 --> 01:36:26.320
for me what's going on
01:36:26.320 --> 01:36:27.830
with the pollution control
01:36:27.830 --> 01:36:30.560
bonds you currently have outstanding?
01:36:30.560 --> 01:36:32.410
What are your future plans for those?
01:36:33.350 --> 01:36:35.590
Are plan is to refinance those upon exit.
01:36:35.590 --> 01:36:36.423
All of them?
01:36:36.423 --> 01:36:37.390
Yes.
01:36:37.390 --> 01:36:39.400
I believe your testimony makes reference
01:36:39.400 --> 01:36:40.530
or rather a discovery
01:36:40.530 --> 01:36:45.530
response that you provided indicated that you
01:36:45.880 --> 01:36:48.180
would be foregoing the tax exempt
01:36:48.180 --> 01:36:51.740
benefit of about 800 million.
01:36:51.740 --> 01:36:53.700
Is that correct?
01:36:55.900 --> 01:36:57.300
I believe that is correct.
01:36:58.550 --> 01:37:01.730
So if you were foregoing that tax exempt benefit
01:37:01.730 --> 01:37:05.240
you'd be refinancing them with taxable bonds?
01:37:05.240 --> 01:37:06.073
That's correct.
01:37:06.073 --> 01:37:07.700
Why would you do that?
01:37:07.700 --> 01:37:10.180
The spreads between the tax exempt
01:37:10.180 --> 01:37:11.400
and the taxable pollution control
01:37:11.400 --> 01:37:13.850
bonds have narrowed significantly over the years.
01:37:14.880 --> 01:37:16.380
And those bonds would still be secured
01:37:16.380 --> 01:37:18.470
by direct pay letters of credit?
01:37:24.650 --> 01:37:25.483
I don't know.
01:37:28.030 --> 01:37:29.630
Those are all of my questions.
01:37:30.690 --> 01:37:31.860
I wanna thank you very much.
01:37:31.860 --> 01:37:32.693
Thank you.
01:37:32.693 --> 01:37:34.510
Thank you Mr. Geesman.
01:37:34.510 --> 01:37:35.690
I think this would be a good time
01:37:35.690 --> 01:37:38.740
for a brief 10 minute break.
01:37:38.740 --> 01:37:43.500
So everybody please be back by 10, 22 on your phones.
01:37:44.600 --> 01:37:45.433
Off the record.
01:38:37.350 --> 01:38:38.183
On the record.
01:38:39.820 --> 01:38:41.530
Ms. Sheriff for CLECA
01:38:41.530 --> 01:38:42.363
Thank you.
01:38:42.363 --> 01:38:43.196
Good morning your Honor.
01:38:43.196 --> 01:38:44.029
Good morning Mr. Wells.
01:38:44.029 --> 01:38:44.862
Good morning.
01:38:44.862 --> 01:38:45.900
My name is Nora Sheriff.
01:38:45.900 --> 01:38:47.860
I represent the California Large Energy
01:38:47.860 --> 01:38:51.320
Consumers Association or CLECA.
01:38:51.320 --> 01:38:54.100
At page two dash 14 of what's been marked
01:38:54.100 --> 01:38:57.970
for identification as exhibit PG&E one you talk
01:38:57.970 --> 01:38:59.470
about conditions precedent
01:38:59.470 --> 01:39:02.390
to plan confirmation and effectiveness.
01:39:02.390 --> 01:39:04.680
What do you mean by conditions precedent?
01:39:10.173 --> 01:39:13.550
Conditions that would be needed for planned confirmation.
01:39:14.810 --> 01:39:17.060
So for example you state at lines 24
01:39:17.060 --> 01:39:20.960
to 28 that PG&E requests that the Commission rule
01:39:20.960 --> 01:39:25.960
in investigation 1508019 that PG&E will not be forced
01:39:26.040 --> 01:39:28.030
to and then you list several
01:39:28.030 --> 01:39:31.030
options that have been proposed in that proceeding.
01:39:31.030 --> 01:39:33.230
Is the company asking judge Allen
01:39:33.230 --> 01:39:34.940
to draft a proposed decision
01:39:34.940 --> 01:39:38.190
in the safety culture proceeding granting this request
01:39:38.190 --> 01:39:41.090
and for the Commission to adopt it in the next few months?
01:39:42.490 --> 01:39:43.990
We think that that is in customers' interest
01:39:43.990 --> 01:39:47.500
as part of this proceeding here, yes.
01:39:47.500 --> 01:39:49.650
So you are asking the Commission to do that?
01:39:49.650 --> 01:39:51.150
Yes.
01:39:51.150 --> 01:39:53.220
Let me, could interject here.
01:39:55.340 --> 01:39:57.610
Are you then saying that if such
01:39:57.610 --> 01:40:00.320
a decision is not forthcoming between now
01:40:00.320 --> 01:40:05.320
and June 30th, that you will not be able to emerge?
01:40:08.760 --> 01:40:10.160
It's a complicated answer.
01:40:13.544 --> 01:40:15.390
A short answer is no.
01:40:15.390 --> 01:40:18.670
The longer answer is this will be
01:40:18.670 --> 01:40:20.730
the largest capital raise in the utility industry
01:40:20.730 --> 01:40:22.680
and one of the largest in corporate history.
01:40:22.680 --> 01:40:24.670
The more that we can provide stability
01:40:24.670 --> 01:40:27.200
the more effective this capital raise will be.
01:40:27.200 --> 01:40:28.310
Thank you.
01:40:28.310 --> 01:40:30.720
You asked the next question your Honor.
01:40:30.720 --> 01:40:31.820
I thought I might.
01:40:32.750 --> 01:40:35.250
At page two dash 15 and two dash 16
01:40:35.250 --> 01:40:37.730
and two dash 17 Mr. Wells you talk
01:40:37.730 --> 01:40:41.840
about temporary utility debt and net operating losses
01:40:41.840 --> 01:40:44.430
and a proposed post-emergence
01:40:44.430 --> 01:40:48.190
rate neutral $7 billion securitization transaction.
01:40:49.080 --> 01:40:53.480
Is that proposed securitization of the $7 billion
01:40:53.480 --> 01:40:57.290
necessary to enable PG&E to exit bankruptcy?
01:40:58.380 --> 01:40:59.730
No, it's not necessary.
01:40:59.730 --> 01:41:00.901
Thank you.
01:41:00.901 --> 01:41:04.250
If the Commission were to deny PG&E's request
01:41:04.250 --> 01:41:08.370
to secure ties the $7 billion of debt post-bankruptcy
01:41:08.370 --> 01:41:13.370
would PG&E be unable to refinance the $6 billion
01:41:13.390 --> 01:41:15.910
in short term debt currently targeted
01:41:15.910 --> 01:41:18.020
for repaying the wildfire victims?
01:41:20.010 --> 01:41:21.840
We would be able to refinance.
01:41:21.840 --> 01:41:22.720
Thank you.
01:41:22.720 --> 01:41:25.000
Could PG&E use cash flows
01:41:25.000 --> 01:41:27.430
from the net operating losses you reference
01:41:27.430 --> 01:41:31.100
in your testimony directly to support the six billion
01:41:31.100 --> 01:41:35.620
in utility debt which is needed to pay the wildfire victims?
01:41:36.670 --> 01:41:39.070
That's the intention if unapproved.
01:41:39.070 --> 01:41:39.903
Thank you.
01:41:42.220 --> 01:41:44.840
And in terms of net operating losses,
01:41:46.360 --> 01:41:51.100
you've also referenced another investigation, I1906015
01:41:51.100 --> 01:41:55.430
in your testimony in the discussion of conditions precedent.
01:41:55.430 --> 01:41:58.290
Between that proceeding and the plan of reorganization
01:41:58.290 --> 01:41:59.810
and the bankruptcy there are
01:42:00.870 --> 01:42:03.800
two sets of net operating losses right,
01:42:03.800 --> 01:42:07.340
because you have two different sets of losses there,
01:42:07.340 --> 01:42:12.340
a much larger one here about 27 billion
01:42:12.440 --> 01:42:15.653
and then a smaller one in that I1906015,
01:42:18.690 --> 01:42:21.310
about two billion, a little over two billion?
01:42:21.310 --> 01:42:22.143
That is correct.
01:42:22.143 --> 01:42:22.976
Okay.
01:42:24.020 --> 01:42:27.510
So my question to you now is,
01:42:27.510 --> 01:42:30.720
because you have those distinct, separate
01:42:30.720 --> 01:42:35.720
sets of net operating losses, how will PG&E apportion
01:42:40.610 --> 01:42:43.570
or attribute the different net operating losses, right.
01:42:43.570 --> 01:42:46.527
If you attribute the 2.137 billion
01:42:49.780 --> 01:42:54.780
from I1906015 to rate payers
01:42:56.010 --> 01:43:00.260
and then the much larger chunk for the 27 billion
01:43:00.260 --> 01:43:04.700
to go to the short term utility debt,
01:43:06.080 --> 01:43:07.700
how will you track that?
01:43:09.810 --> 01:43:14.070
We track all of these underlying tax benefits separately.
01:43:14.070 --> 01:43:16.470
And if I may correct my previous statement,
01:43:16.470 --> 01:43:20.950
we actually have a third group of net operating losses.
01:43:20.950 --> 01:43:23.060
When the company filed for bankruptcy
01:43:23.060 --> 01:43:25.110
the company had net operating losses that were
01:43:25.110 --> 01:43:27.770
not referenced in the two that you mentioned.
01:43:27.770 --> 01:43:29.357
We track all of that separately.
01:43:29.357 --> 01:43:30.950
Okay.
01:43:30.950 --> 01:43:31.783
Just a moment.
01:43:31.783 --> 01:43:32.616
I would just like to note
01:43:32.616 --> 01:43:33.750
for the record that Commissioner
01:43:33.750 --> 01:43:36.290
Rechtschaffen has joined me on the dais.
01:43:36.290 --> 01:43:37.260
Go head Ms. Sheriff.
01:43:37.260 --> 01:43:39.090
Thank you, good morning Commissioner.
01:43:44.180 --> 01:43:45.410
Will it take you a long time
01:43:45.410 --> 01:43:47.220
to write-off the $27 billion
01:43:47.220 --> 01:43:50.210
in net operating losses that are contemplating
01:43:50.210 --> 01:43:51.680
here in this bankruptcy?
01:43:54.070 --> 01:43:56.900
We haven't quantified the exact timeline.
01:43:56.900 --> 01:43:58.650
But yes, it will be multiple years.
01:44:04.920 --> 01:44:09.920
So will the rate payers be reimbursed
01:44:09.940 --> 01:44:13.290
in the first couple of years worth of the net operating
01:44:13.290 --> 01:44:17.227
losses for the 2.137 billion in I1906015
01:44:22.050 --> 01:44:25.940
or will you do it as sort of a 3.7%
01:44:25.940 --> 01:44:30.770
in each year of the longer term writing-off of the NOL's?
01:44:32.360 --> 01:44:34.480
Apologies, can you help clarify that question?
01:44:37.680 --> 01:44:39.500
So you've got, I'm not gonna worry
01:44:39.500 --> 01:44:40.760
about the third set of NOL's.
01:44:40.760 --> 01:44:42.200
Okay, yeah, all right.
01:44:42.200 --> 01:44:44.810
I'm just looking at the two that I have
01:44:44.810 --> 01:44:49.810
in my head, the 2.137 from the investigation I1906015
01:44:55.880 --> 01:45:00.880
and then 27.137 billion from the plan of reorganization.
01:45:08.500 --> 01:45:13.500
I'm looking to understand how will the rate payers see
01:45:15.400 --> 01:45:20.400
the 2.137 billion of NOL's from I1906015.
01:45:22.620 --> 01:45:27.620
Will it be refunded in years one, two, and three entirely
01:45:29.590 --> 01:45:33.580
or will you do sort of a pro-rata treatment
01:45:33.580 --> 01:45:35.830
over a longer term,
01:45:35.830 --> 01:45:38.760
because as you said it will take you a while
01:45:38.760 --> 01:45:43.350
to write-off the entire amount of the NOL's?
01:45:43.350 --> 01:45:45.220
Thank you for the clarification.
01:45:45.220 --> 01:45:46.290
In short I don't know.
01:45:46.290 --> 01:45:49.670
We are currently evaluating the presiding officer's
01:45:49.670 --> 01:45:51.570
decision that was released last night.
01:45:53.080 --> 01:45:54.810
And I don't have an answer this morning.
01:45:54.810 --> 01:45:55.643
Okay.
01:45:55.643 --> 01:45:56.620
One more minute.
01:45:59.850 --> 01:46:03.820
At page two dash 23, lines three
01:46:03.820 --> 01:46:05.770
to five, you state that you have confidence
01:46:05.770 --> 01:46:06.800
in the company's ability
01:46:06.800 --> 01:46:08.330
to raise both equity and debt.
01:46:08.330 --> 01:46:10.390
Do you still have that confidence today?
01:46:14.580 --> 01:46:15.980
I do.
01:46:15.980 --> 01:46:17.570
Okay, and then--
01:46:17.570 --> 01:46:19.680
I'm sorry, were you done with your answer?
01:46:19.680 --> 01:46:22.750
May he please expand on redirect your Honor.
01:46:22.750 --> 01:46:23.583
Yes.
01:46:24.470 --> 01:46:27.530
You also say at lines nine to 10
01:46:30.907 --> 01:46:32.270
you talk about a clear path to further improving
01:46:32.270 --> 01:46:33.950
the company's credit metrics.
01:46:33.950 --> 01:46:36.600
Does that involve participation in the Wildfire Fund?
01:46:39.260 --> 01:46:40.380
That is credit positive,
01:46:40.380 --> 01:46:43.300
but this sentence here was referring to the improvement
01:46:43.300 --> 01:46:44.907
in the quantitative credit metrics according
01:46:44.907 --> 01:46:48.530
to our financial plan.
01:46:48.530 --> 01:46:51.700
Does PG&E's projection of an ability
01:46:51.700 --> 01:46:54.750
to obtain investment grade debt depend
01:46:54.750 --> 01:46:57.470
on its participation in the Wildfire Fund?
01:46:57.470 --> 01:46:58.303
Yes.
01:46:59.330 --> 01:47:02.090
Do you know what the unsecured credit
01:47:02.090 --> 01:47:04.280
ratings of Southern California Edison
01:47:04.280 --> 01:47:06.430
and San Diego Gas and Electric Company are?
01:47:11.250 --> 01:47:12.640
Generally, yes.
01:47:12.640 --> 01:47:13.970
What are they?
01:47:13.970 --> 01:47:17.430
I believe Southern California Edison is Triple B.
01:47:17.430 --> 01:47:21.970
And I believe SDG&E is either Triple B plus or A minus.
01:47:23.840 --> 01:47:24.673
Okay.
01:47:24.673 --> 01:47:27.090
And you say you're still digesting
01:47:27.090 --> 01:47:31.693
the proposed decision that came out last night in I1906015.
01:47:34.070 --> 01:47:38.540
Have you studied various possibilities in your,
01:47:38.540 --> 01:47:41.930
you reference section 302 studies with Mr. Geesman?
01:47:41.930 --> 01:47:43.720
Have you studied various timings
01:47:43.720 --> 01:47:48.720
and how streams of tax benefits would be achieved?
01:47:49.170 --> 01:47:50.003
Yes.
01:47:50.003 --> 01:47:50.836
Okay.
01:47:56.100 --> 01:47:57.070
Thank you your Honor.
01:47:57.070 --> 01:47:58.990
I have nothing further.
01:47:58.990 --> 01:48:00.660
All right, thank you.
01:48:00.660 --> 01:48:01.493
Mr. Abrams.
01:48:10.060 --> 01:48:11.680
Thank you your Honor.
01:48:11.680 --> 01:48:12.850
Thank you Mr. Wells.
01:48:18.870 --> 01:48:23.800
I am just by way of background a wildfire survivor.
01:48:23.800 --> 01:48:26.570
In bankruptcy they call us victims.
01:48:26.570 --> 01:48:27.670
And as part of that
01:48:27.670 --> 01:48:28.580
and through this bankruptcy
01:48:28.580 --> 01:48:30.470
proceeding that means that we are going
01:48:30.470 --> 01:48:35.470
to be apparently in a trust that holds 21% of shares.
01:48:39.760 --> 01:48:41.310
So from that perspective,
01:48:41.310 --> 01:48:44.320
I'll be asking you questions today.
01:48:46.940 --> 01:48:51.090
I feel an extra duty to talk as a victim,
01:48:51.090 --> 01:48:53.130
because the attorneys who are not,
01:48:55.240 --> 01:48:57.270
the DCC attorneys are precluded
01:48:57.270 --> 01:49:00.640
from doing so because of the RSA which is unfortunate.
01:49:04.140 --> 01:49:09.140
Taking a looK first I'm trying to understand the degree
01:49:13.680 --> 01:49:18.680
to which you see the actions of PG&E tied
01:49:20.460 --> 01:49:24.510
to the financials of the victims.
01:49:24.510 --> 01:49:29.510
Are you aware that 50% of the settlement
01:49:30.630 --> 01:49:35.460
for victims will be paid in shares as opposed to cash?
01:49:35.460 --> 01:49:36.293
Yes I am.
01:49:38.210 --> 01:49:42.040
Are you aware that many of these victims are rebuilding
01:49:42.040 --> 01:49:46.780
homes and reliant upon that money to be able
01:49:46.780 --> 01:49:49.370
to rebuild their homes and their lives?
01:49:49.370 --> 01:49:50.203
I am aware.
01:49:51.631 --> 01:49:54.380
Do you take that responsibility very seriously?
01:49:54.380 --> 01:49:55.213
Absolutely.
01:49:57.628 --> 01:49:59.750
Do you also understand that there is a link
01:49:59.750 --> 01:50:04.750
between PG&E's actions and these very same folks
01:50:04.850 --> 01:50:07.010
in terms of being able to afford insurance
01:50:07.010 --> 01:50:09.280
and being able to have insurance
01:50:09.280 --> 01:50:13.220
in their homes that are next to the PG&E lines?
01:50:13.220 --> 01:50:14.930
Objection, beyond the scope.
01:50:15.840 --> 01:50:18.800
It's directly related to safety and security.
01:50:18.800 --> 01:50:20.540
I'll let him respond.
01:50:20.540 --> 01:50:22.290
Please answer to the best of your ability.
01:50:22.290 --> 01:50:24.780
I understand there are a number of challenges
01:50:24.780 --> 01:50:28.530
and factors that are impacting the ability
01:50:28.530 --> 01:50:31.200
to procure residential home insurance
01:50:31.200 --> 01:50:32.460
in fire prone areas, yes.
01:50:33.700 --> 01:50:36.730
Would you say that the PG&E wildfires are
01:50:36.730 --> 01:50:40.160
a significant contributor to those insurance rates?
01:50:41.880 --> 01:50:42.713
I'm not aware.
01:50:44.520 --> 01:50:45.470
You're not aware.
01:50:46.310 --> 01:50:48.440
Do you have active communications
01:50:48.440 --> 01:50:50.170
with the insurance industry
01:50:50.170 --> 01:50:51.890
to understand those implications?
01:50:52.730 --> 01:50:54.180
Yes we do.
01:50:54.180 --> 01:50:56.827
And from that dialogue what is
01:50:56.827 --> 01:50:59.677
your understanding regarding your impacts on those rates?
01:51:09.080 --> 01:51:11.140
We regularly engage with the insurance markets.
01:51:11.140 --> 01:51:14.040
I think the focus the insurance markets have had
01:51:14.040 --> 01:51:18.000
sort of more broadly is fire risk generally.
01:51:18.000 --> 01:51:23.000
Obviously, given the 2015, '17, and '18 wildfires,
01:51:23.770 --> 01:51:26.380
insurers want to understand the programs we're undertaking
01:51:26.380 --> 01:51:27.870
to mitigate fire risk.
01:51:27.870 --> 01:51:32.150
But they point to a multitude of factors that are impacting
01:51:32.150 --> 01:51:35.300
the availability of insurance.
01:51:35.300 --> 01:51:36.270
Is it your understanding
01:51:36.270 --> 01:51:39.910
from those discussions that they base their rating
01:51:39.910 --> 01:51:44.470
on subjective measures of how well things are going,
01:51:44.470 --> 01:51:47.180
and is that typically how they do rates
01:51:47.180 --> 01:51:49.100
or do they sort of measure the risk?
01:51:52.740 --> 01:51:53.700
I don't exactly know how
01:51:53.700 --> 01:51:56.140
they price residential homeowners' insurance.
01:51:57.810 --> 01:51:58.720
That wasn't my question.
01:51:58.720 --> 01:52:02.080
Do you consider that they measure the risk
01:52:02.080 --> 01:52:02.913
or do you think they go
01:52:02.913 --> 01:52:07.800
on subjective measures like other factors?
01:52:08.790 --> 01:52:11.400
Do you think they measure risk?
01:52:11.400 --> 01:52:13.790
Objection lacks foundation.
01:52:13.790 --> 01:52:16.230
He's asking him how insurance companies price.
01:52:16.230 --> 01:52:19.230
Let me have you repeat the question Mr. Abrams.
01:52:20.500 --> 01:52:22.930
Your understanding from the discussions
01:52:22.930 --> 01:52:25.010
with the insurance carriers.
01:52:25.010 --> 01:52:28.220
Do they measure risk?
01:52:31.920 --> 01:52:33.970
I think they try to quantify risk, yes.
01:52:35.310 --> 01:52:36.143
Thank you.
01:52:38.070 --> 01:52:41.250
If they are trying to quantify risk, does
01:52:41.250 --> 01:52:45.710
your quantification of risk and risk mitigation, are
01:52:45.710 --> 01:52:47.100
you providing those figures
01:52:47.100 --> 01:52:51.310
to them so that they can provide better
01:52:51.310 --> 01:52:54.150
homeowners insurance for your customers?
01:52:55.330 --> 01:52:58.760
They have not asked nor have we provided our calculations.
01:53:00.140 --> 01:53:00.973
Okay.
01:53:01.840 --> 01:53:04.110
Who have you provided your calculations to?
01:53:05.630 --> 01:53:09.740
Liability insurance companies that provide that company
01:53:09.740 --> 01:53:12.610
insurance for future events, as opposed
01:53:12.610 --> 01:53:14.270
to insurance companies that underwrite
01:53:14.270 --> 01:53:16.070
insurance for homeowners themselves.
01:53:17.090 --> 01:53:19.220
Are those publicly available numbers?
01:53:23.470 --> 01:53:26.170
The quantification of our wildfire risk is included
01:53:26.170 --> 01:53:29.840
as part of our enterprise risk management program
01:53:33.210 --> 01:53:37.330
and part of the test map process here at the Commission.
01:53:37.330 --> 01:53:40.080
Are those the same numbers or are they different numbers
01:53:40.080 --> 01:53:43.000
or different level of detail that you provide
01:53:43.000 --> 01:53:44.960
to those insurance companies versus
01:53:44.960 --> 01:53:46.410
what you provide to the Commission?
01:53:46.410 --> 01:53:47.470
It's the same.
01:53:47.470 --> 01:53:48.303
Same numbers.
01:53:49.400 --> 01:53:52.680
Thank you.
01:53:52.680 --> 01:53:55.250
I'd like to now turn to the exhibit,
01:53:55.250 --> 01:53:59.450
I think it was X nine, that I submitted.
01:53:59.450 --> 01:54:01.710
It's Abrams dash X nine,
01:54:01.710 --> 01:54:04.100
a better way out of PG&E bankruptcy.
01:54:04.100 --> 01:54:05.320
Is that what you are referring to?
01:54:05.320 --> 01:54:06.180
Yes your Honor.
01:54:06.180 --> 01:54:08.100
Do you have a copy of that Mr. Wells?
01:54:08.100 --> 01:54:09.000
I do, thank you.
01:54:12.618 --> 01:54:14.270
Okay.
01:54:14.270 --> 01:54:17.730
I'd like to be able to walk
01:54:17.730 --> 01:54:20.510
through the particular points associated with this.
01:54:22.810 --> 01:54:26.330
This is a op-ed that was put
01:54:26.330 --> 01:54:29.420
forward by Sam Liccardo who I understand is
01:54:29.420 --> 01:54:31.250
the mayor of San Jose.
01:54:32.150 --> 01:54:33.150
Correct, yeah.
01:54:33.150 --> 01:54:34.700
That's correct.
01:54:34.700 --> 01:54:37.750
So on the first page,
01:54:37.750 --> 01:54:41.730
one of his statements is that masterfully sprinkling
01:54:41.730 --> 01:54:43.930
billions among the company's most powerful
01:54:43.930 --> 01:54:46.840
stakeholders, hedge funds, shareholders,
01:54:46.840 --> 01:54:51.840
and bondholders, along with perhaps one billion
01:54:52.820 --> 01:54:56.970
in fees to consultants, banks, and attorneys.
01:54:56.970 --> 01:54:58.940
Is your understanding that that is a true
01:54:58.940 --> 01:55:01.450
and accurate statement of what you've done?
01:55:01.450 --> 01:55:03.400
Objection, lacks foundation.
01:55:04.450 --> 01:55:07.930
This is directly related to what the finances are
01:55:07.930 --> 01:55:09.320
and where the dollars go.
01:55:10.260 --> 01:55:11.500
That wasn't my objection.
01:55:11.500 --> 01:55:13.990
My objection is he didn't write this document,
01:55:13.990 --> 01:55:17.560
and he lacks foundation about the statements made here.
01:55:17.560 --> 01:55:19.560
You can ask him about his exhibits
01:55:20.620 --> 01:55:22.060
which he goes into great detail
01:55:22.060 --> 01:55:24.780
about the fees that are sought to be recovered.
01:55:24.780 --> 01:55:25.830
But I don't think it's correct
01:55:25.830 --> 01:55:27.620
or fair to ask him to comment
01:55:27.620 --> 01:55:31.170
on adjectives that this author has chosen to use.
01:55:31.170 --> 01:55:34.740
Mr. Wells would
01:55:34.740 --> 01:55:39.190
you agree that the places that this article states that
01:55:41.120 --> 01:55:44.550
funds will be going to is accurate,
01:55:44.550 --> 01:55:45.700
regardless of whether you agree
01:55:45.700 --> 01:55:50.387
with the characterization of the purpose of that effort.
01:55:51.620 --> 01:55:52.950
I disagree with the characterization,
01:55:52.950 --> 01:55:55.770
but the figures are generally accurate.
01:55:55.770 --> 01:55:57.220
Okay, thank you.
01:56:02.940 --> 01:56:04.890
In the next sentence of the document,
01:56:06.420 --> 01:56:11.420
it indicates that the bankruptcy is being put
01:56:16.100 --> 01:56:20.860
forward over the California Public Utilities
01:56:20.860 --> 01:56:23.260
Commission again and again.
01:56:24.910 --> 01:56:26.340
This is similar to
01:56:26.340 --> 01:56:29.500
Governor Newsom's objection that he raised
01:56:29.500 --> 01:56:32.880
in the bankruptcy proceeding that PG&E's objective
01:56:32.880 --> 01:56:35.360
through putting this bankruptcy forward is
01:56:35.360 --> 01:56:38.930
to hurry up the California Public Utilities Commission
01:56:38.930 --> 01:56:40.860
to make a hasty decision.
01:56:40.860 --> 01:56:44.660
Is that your characterization and understanding?
01:56:44.660 --> 01:56:46.450
Objection, lacks foundation.
01:56:49.140 --> 01:56:51.410
Let's just start out with he can ask him
01:56:51.410 --> 01:56:53.560
his understanding of the words on the paper,
01:56:53.560 --> 01:56:56.700
and let's see dispense with the objections.
01:56:56.700 --> 01:56:59.060
I'm gonna let him answer those questions.
01:56:59.060 --> 01:56:59.893
Thank you your Honor.
01:56:59.893 --> 01:57:01.040
Do you have the question in mind?
01:57:01.040 --> 01:57:02.990
I disagree with the characterization.
01:57:06.750 --> 01:57:11.750
On the next page it states that "This bankruptcy tethers
01:57:13.410 --> 01:57:15.880
"the victims' financial's futures
01:57:15.880 --> 01:57:18.090
"to the performance of the company."
01:57:19.021 --> 01:57:20.530
Do you agree with that statement?
01:57:23.770 --> 01:57:25.280
Yes.
01:57:25.280 --> 01:57:26.113
Thank you.
01:57:27.470 --> 01:57:31.520
In the next sentence it states, "It also saddles
01:57:31.520 --> 01:57:35.320
"those families with the risks of any future
01:57:35.320 --> 01:57:40.000
"wildfires started by PG&E's failing equipment."
01:57:40.000 --> 01:57:41.800
Would you agree with that statement?
01:57:46.090 --> 01:57:48.010
I don't agree with the characterization.
01:57:49.691 --> 01:57:51.341
Do you agree with the families,
01:57:52.240 --> 01:57:57.240
the victims who are relying upon this money that they have
01:57:57.760 --> 01:58:00.040
risks associated with that investment?
01:58:01.710 --> 01:58:02.900
I would agree that there is
01:58:02.900 --> 01:58:05.000
some risk associated with that investment.
01:58:08.890 --> 01:58:11.810
Would you say that those risks would increase
01:58:11.810 --> 01:58:14.000
if PG&E started another wildfire?
01:58:20.560 --> 01:58:21.810
It's hard to speculate.
01:58:24.120 --> 01:58:27.290
Obviously a fire would be catastrophic.
01:58:27.290 --> 01:58:32.290
But under what conditions?
01:58:34.250 --> 01:58:36.150
There are many questions I would have.
01:58:39.060 --> 01:58:41.360
Try to understand this a little bit further.
01:58:44.130 --> 01:58:47.450
If PG&E starts a catastrophic wildfire do
01:58:51.200 --> 01:58:53.640
you expect that the risks
01:58:55.020 --> 01:58:59.730
to these victims' investment will be adversely effected?
01:59:01.830 --> 01:59:05.150
I think there is risk, yes.
01:59:05.150 --> 01:59:07.470
I'm asking if the risk increases.
01:59:07.470 --> 01:59:08.620
So there's a wildfire.
01:59:10.440 --> 01:59:12.130
The risk increases, yes.
01:59:12.130 --> 01:59:12.963
Thank you.
01:59:14.830 --> 01:59:16.430
I thought that would be obvious.
01:59:18.000 --> 01:59:20.290
Object to the statement.
01:59:20.290 --> 01:59:22.060
Let's just stick to the questions.
01:59:22.060 --> 01:59:22.893
I will your Honor.
01:59:22.893 --> 01:59:23.726
Thank you.
01:59:27.253 --> 01:59:29.890
Do you understand that as a victim these are difficult
01:59:29.890 --> 01:59:31.390
questions for me to be asking?
01:59:32.710 --> 01:59:33.543
I do.
01:59:33.543 --> 01:59:34.550
And I apologize for what you've gone
01:59:34.550 --> 01:59:36.070
through as well as the other victims.
01:59:36.070 --> 01:59:36.903
ThanK you.
01:59:38.920 --> 01:59:43.920
In the next paragraph, oh sorry, let me take this back.
01:59:46.750 --> 01:59:50.930
Do you agree that part of what this bankruptcy does
01:59:50.930 --> 01:59:54.920
and this bankruptcy agreement is it transfers risk
01:59:56.400 --> 02:00:01.340
from some of your entrenched investors to victims?
02:00:03.830 --> 02:00:05.880
I would not agree with that assessment.
02:00:13.540 --> 02:00:15.240
Moving on to the next paragraph.
02:00:17.810 --> 02:00:22.100
The second sentence, "In the 23 month span
02:00:22.100 --> 02:00:24.320
"over which the company's wires ignited
02:00:24.320 --> 02:00:27.830
"18 wildfires, killing 107 people
02:00:27.830 --> 02:00:31.670
"and destroying 15,700 homes
02:00:31.670 --> 02:00:35.580
"the company's shares plummeted 90%."
02:00:36.880 --> 02:00:38.130
Is that a true statement?
02:00:46.150 --> 02:00:46.983
I believe it is.
02:00:46.983 --> 02:00:48.300
I haven't calculated
02:00:48.300 --> 02:00:52.480
the stock decline, but yes directionally.
02:00:52.480 --> 02:00:53.990
Okay.
02:00:53.990 --> 02:00:55.080
So I guess this goes back
02:00:55.080 --> 02:00:56.480
to the earlier question when
02:00:56.480 --> 02:01:01.020
I asked you would a wildfire affect the shares associated
02:01:01.020 --> 02:01:04.320
with victims I guess the answer is categorically yes.
02:01:04.320 --> 02:01:05.153
Is that correct?
02:01:09.650 --> 02:01:10.800
A wildfire would increase
02:01:10.800 --> 02:01:14.220
risk of financial results, yes, yes.
02:01:14.220 --> 02:01:15.053
Thank you.
02:01:18.230 --> 02:01:23.230
In the next paragraph, it states "That a federal court
02:01:24.290 --> 02:01:28.010
"monitor found that PG&E falsified documents."
02:01:28.850 --> 02:01:30.760
Is that a true statement?
02:01:30.760 --> 02:01:31.593
Yes it is.
02:01:35.610 --> 02:01:39.150
Given that would you say that there's
02:01:39.150 --> 02:01:41.150
a significant trust gap
02:01:41.150 --> 02:01:44.760
between what victims have experienced first hand,
02:01:46.890 --> 02:01:50.320
these additional illegal
02:01:50.320 --> 02:01:54.830
transgressions that must be overcome by PG&E?
02:01:58.800 --> 02:02:01.510
I recognize that we need to rebuild trust
02:02:01.510 --> 02:02:04.090
with the communities we serve, wildfire victims,
02:02:04.090 --> 02:02:06.040
and all of the stakeholders we support.
02:02:11.020 --> 02:02:12.260
In the next paragraph
02:02:16.630 --> 02:02:20.980
it states that "All cash payments as part of this agreement
02:02:22.790 --> 02:02:24.850
"were provided to insurance companies."
02:02:24.850 --> 02:02:26.250
Is that a correct statement?
02:02:28.330 --> 02:02:29.730
That is a correct statement.
02:02:32.280 --> 02:02:36.160
In the next sentence it says, "Hedge funds gobbled
02:02:36.160 --> 02:02:40.390
"up insurance claims at steep discounts
02:02:40.390 --> 02:02:42.770
"and will reap steep profits
02:02:42.770 --> 02:02:47.660
"in their 11 billion payout in cash, not in stock."
02:02:47.660 --> 02:02:48.910
Is that a true statement?
02:02:50.420 --> 02:02:52.730
I can't speak specifically to what they paid.
02:02:52.730 --> 02:02:54.880
I don't know what they paid for those claims.
02:03:07.010 --> 02:03:12.010
So is it safe to state that the savvy, entrenched
02:03:19.891 --> 02:03:24.470
investors have more protection
02:03:24.470 --> 02:03:29.050
for their investment than the new, less savvy,
02:03:29.050 --> 02:03:33.220
by-and-large victims associated with your fires?
02:03:35.780 --> 02:03:37.710
I don't agree with the characterization.
02:03:42.180 --> 02:03:43.990
Were there asset liens provided
02:03:43.990 --> 02:03:46.190
through this bankruptcy process?
02:03:46.190 --> 02:03:47.150
Yes.
02:03:47.150 --> 02:03:51.870
Are asset liens providing security for those investments?
02:03:51.870 --> 02:03:54.060
We're requesting security
02:03:54.060 --> 02:03:56.630
for the debt that we're issuing at exit, yes.
02:03:57.670 --> 02:04:00.750
So yes they provide security for those investments?
02:04:04.840 --> 02:04:06.020
I apologize.
02:04:06.020 --> 02:04:07.220
It's not our investment.
02:04:08.530 --> 02:04:10.320
They're providing security for
02:04:10.320 --> 02:04:12.260
the debt that we intend to issue.
02:04:15.990 --> 02:04:19.450
Are their investments more secure,
02:04:19.450 --> 02:04:21.310
because they have asset liens?
02:04:23.880 --> 02:04:24.713
Compared to?
02:04:26.370 --> 02:04:27.480
Compared to where they were
02:04:27.480 --> 02:04:29.620
before they got the asset liens?
02:04:29.620 --> 02:04:30.453
Yes.
02:04:30.453 --> 02:04:31.286
Okay.
02:04:33.700 --> 02:04:38.700
So if they get asset liens and have more security, would
02:04:39.890 --> 02:04:42.750
the converse not also be true, that because
02:04:42.750 --> 02:04:47.750
the victims do not have asset liens they are less secure?
02:04:54.990 --> 02:04:56.280
I think that's a factual
02:04:56.280 --> 02:04:58.760
statement that equity is subordinate to debt
02:04:59.710 --> 02:05:02.870
and debt that is securer than asset lien, yes.
02:05:04.350 --> 02:05:05.183
Thank you.
02:05:08.030 --> 02:05:12.610
In the next paragraph it states, "PG&E's plan
02:05:12.610 --> 02:05:16.460
"also unfairly dilutes the victims' claims
02:05:16.460 --> 02:05:19.690
"by committing to secure bondholder claims."
02:05:22.390 --> 02:05:26.870
So does it dilute victims' claims,
02:05:26.870 --> 02:05:30.390
the fact that the bondholders' claims have been secured?
02:05:30.390 --> 02:05:31.970
I don't agree with that statement.
02:05:41.110 --> 02:05:44.140
From your understanding of the bankruptcy process,
02:05:45.500 --> 02:05:50.500
what came first the TCC RSA deal or the bondholder deal?
02:05:53.480 --> 02:05:56.670
Objection, beyond the scope.
02:05:56.670 --> 02:05:58.910
Could you repeat the question?
02:05:58.910 --> 02:06:03.250
Is your understanding as the chief financial officer
02:06:06.570 --> 02:06:11.200
which came first the bondholder RSA
02:06:11.200 --> 02:06:16.200
or the TCC RSA in terms of the timeline.
02:06:17.870 --> 02:06:21.880
We executed the TCC RSA settlement
02:06:21.880 --> 02:06:24.960
before the note holder RSA settlement.
02:06:24.960 --> 02:06:25.793
Thank you.
02:06:28.520 --> 02:06:33.520
Given that order would you say that the implications
02:06:35.410 --> 02:06:40.410
to the note holder RSA could not have been incorporated
02:06:41.160 --> 02:06:45.890
into the TCC RSA, because what transpired
02:06:46.960 --> 02:06:49.770
and the agreement came after they agreed
02:06:49.770 --> 02:06:52.350
to the TCC RSA?
02:06:52.350 --> 02:06:53.930
Objection, beyond the scope.
02:06:55.870 --> 02:06:57.610
Can you repeat the question again?
02:06:59.870 --> 02:07:03.220
The note holder RSA as you have stated came
02:07:03.220 --> 02:07:05.370
after the TCC RSA.
02:07:06.420 --> 02:07:09.720
So they signed, executed the agreement
02:07:09.720 --> 02:07:14.720
for the TCC RSA first, then came the note holder RSA.
02:07:17.650 --> 02:07:19.940
So the implications to the note holder
02:07:21.341 --> 02:07:25.690
RSA were not incorporated into or accounted
02:07:25.690 --> 02:07:30.690
for before the signatures and the commitment
02:07:31.650 --> 02:07:33.600
to the TCC RSA.
02:07:33.600 --> 02:07:34.630
Is that not correct?
02:07:34.630 --> 02:07:35.710
Objection your Honor.
02:07:35.710 --> 02:07:38.240
We're seeking to re-litigate matters that are
02:07:38.240 --> 02:07:39.980
within the jurisdiction of the bankruptcy court.
02:07:39.980 --> 02:07:40.813
I am not.
02:07:40.813 --> 02:07:42.850
I'm trying to get underneath the financials.
02:07:42.850 --> 02:07:45.370
I'm going to allow the witness
02:07:45.370 --> 02:07:47.220
to answer to the best of his ability.
02:07:56.320 --> 02:07:57.570
Do you mind rephrasing the question again?
02:07:57.570 --> 02:07:58.403
I apologize.
02:08:00.360 --> 02:08:02.080
Let me ask the question I think.
02:08:05.670 --> 02:08:09.850
Given that the note holder agreement was entered
02:08:09.850 --> 02:08:12.680
into after the TCC agreement was entered
02:08:12.680 --> 02:08:17.150
into, do you believe that the TCC agreement does
02:08:17.150 --> 02:08:20.830
or does not include or reflect
02:08:20.830 --> 02:08:23.730
on how it would be impacted based
02:08:23.730 --> 02:08:26.760
on the note holder agreement?
02:08:28.790 --> 02:08:32.560
I think the execution the note holder RSA is a benefit
02:08:32.560 --> 02:08:35.140
to the TCC RSA.
02:08:35.140 --> 02:08:37.170
That's not my question.
02:08:37.170 --> 02:08:39.300
That's the question that is before him
02:08:41.420 --> 02:08:44.010
I think, yes, I think it is a benefit
02:08:44.010 --> 02:08:46.730
to the TCC RSA that we were able
02:08:46.730 --> 02:08:50.550
to negotiate the note holder RSA afterwards.
02:08:50.550 --> 02:08:55.000
And do you believe that the...
02:08:59.160 --> 02:09:01.010
Or do you have any knowledge as to whether
02:09:01.010 --> 02:09:03.740
or not the entities that entered
02:09:03.740 --> 02:09:08.740
into the TCC agreement were aware of the terms of the RSA
02:09:11.220 --> 02:09:14.680
at the point at which they entered into the TCC agreement?
02:09:21.219 --> 02:09:23.463
The individuals that executed the TCC did
02:09:24.370 --> 02:09:25.203
so at a time
02:09:25.203 --> 02:09:28.720
with an understanding of the terms of the note holder RSA.
02:09:28.720 --> 02:09:30.210
It was done well before.
02:09:30.210 --> 02:09:31.410
Okay, thank you.
02:09:32.320 --> 02:09:33.153
Thank you.
02:09:35.520 --> 02:09:40.520
Given that the TCC represents the victims who are
02:09:41.140 --> 02:09:43.300
part of this shareholder class,
02:09:44.480 --> 02:09:45.880
wouldn't you say that that put them
02:09:45.880 --> 02:09:49.750
at a significant disadvantage to being able
02:09:49.750 --> 02:09:52.860
to assess the financial implications
02:09:52.860 --> 02:09:53.693
for which the deal
02:09:53.693 --> 02:09:58.693
they signed, given that the note holder RSA came after?
02:09:58.820 --> 02:10:00.750
Objection, beyond the scope.
02:10:00.750 --> 02:10:02.990
I'll allow the witness to answer.
02:10:03.860 --> 02:10:04.940
Not necessarily.
02:10:13.160 --> 02:10:18.160
The resolution of the note holder RSA is a benefit
02:10:19.860 --> 02:10:22.180
for all stakeholders in a bankruptcy case.
02:10:22.180 --> 02:10:23.770
It creates stability.
02:10:25.110 --> 02:10:27.350
Is that your opinion or fact?
02:10:27.350 --> 02:10:28.183
It's a fact.
02:10:35.726 --> 02:10:40.726
Do you understand as part of the TCC RSA that there were
02:10:40.850 --> 02:10:45.850
provisions within that agreement that would prevent
02:10:46.170 --> 02:10:50.470
the TCC attorneys to be able to talk
02:10:50.470 --> 02:10:54.670
about the benefits and about perhaps some of the detrimental
02:10:54.670 --> 02:10:57.640
effects of what transpired after,
02:10:57.640 --> 02:11:01.340
because they already executed their agreement,
02:11:02.620 --> 02:11:05.390
and so are not free to be able to speak
02:11:05.390 --> 02:11:08.940
to the impacts that came after that were
02:11:10.410 --> 02:11:11.670
in the note holder RSA?
02:11:14.820 --> 02:11:16.190
Are you aware of those provisions?
02:11:16.190 --> 02:11:17.210
I'm aware of those provisions,
02:11:17.210 --> 02:11:19.210
but I don't agree with the characterization.
02:11:23.130 --> 02:11:26.990
How would you characterize the silence of the TCC
02:11:28.550 --> 02:11:32.690
after the signatures on the TCC RSA?
02:11:32.690 --> 02:11:34.940
I think the note holder RSA is a benefit
02:11:34.940 --> 02:11:36.860
for all stakeholders as part of this case.
02:11:36.860 --> 02:11:39.300
First it eliminates any litigation risk.
02:11:39.300 --> 02:11:43.440
It creates support by all claimants in the bankruptcy
02:11:43.440 --> 02:11:45.420
for the plan of reorganization that we face.
02:11:45.420 --> 02:11:46.570
That creates stability.
02:11:48.370 --> 02:11:50.160
It helps improve the exit financing.
02:11:50.160 --> 02:11:54.260
In addition, the note holder RSA allows
02:11:54.260 --> 02:11:56.380
for the reduction in customer rates as it relates
02:11:56.380 --> 02:11:58.960
to interest expense which is a benefit for customers.
02:11:58.960 --> 02:12:02.965
And so I think it's actually a benefit to all.
02:12:02.965 --> 02:12:04.540
Okay.
02:12:04.540 --> 02:12:07.340
My next questions will challenge those assumptions.
02:12:14.230 --> 02:12:18.743
It was indicated on the next paragraph of the same
02:12:22.530 --> 02:12:26.090
exhibit that the expectation is
02:12:28.610 --> 02:12:32.750
from Mayor Liccardo is that the company will receive
02:12:33.950 --> 02:12:38.250
a junk level credit rating upon exit from bankruptcy.
02:12:38.250 --> 02:12:40.150
Is that your understanding, yes or no?
02:12:43.210 --> 02:12:47.880
I anticipate the issuer rating to be sub-investment grade.
02:12:47.880 --> 02:12:52.020
I anticipate the bond rating to be investment grade.
02:12:52.890 --> 02:12:55.720
So when you say sub-investment, help
02:12:55.720 --> 02:12:58.130
me understand sub versus junk.
02:13:01.540 --> 02:13:03.430
One in the same.
02:13:03.430 --> 02:13:05.230
So it is a correct statement then?
02:13:06.440 --> 02:13:09.880
The bonds themselves will be investment grade.
02:13:09.880 --> 02:13:13.870
The issuer rating will be as phrased
02:13:13.870 --> 02:13:16.180
here, sub-investment grade or junk.
02:13:17.340 --> 02:13:18.173
Thank you.
02:13:20.570 --> 02:13:23.650
At the bottom of that paragraph, it states,
02:13:25.820 --> 02:13:29.630
"38 billion in debt and pay billions of dollars
02:13:29.630 --> 02:13:30.900
"a year in interest."
02:13:33.530 --> 02:13:36.520
So this debt increased, correct me if I'm wrong,
02:13:36.520 --> 02:13:40.710
generally from 34 billion to 38 billion through this deal.
02:13:40.710 --> 02:13:41.543
Is that correct?
02:13:41.543 --> 02:13:42.760
So it increased the debt.
02:13:47.310 --> 02:13:49.810
This deal didn't specifically increase the debt.
02:13:51.640 --> 02:13:54.090
This deal debt with pre-petition debt that was outstanding
02:13:54.090 --> 02:13:56.620
at the time of the bankruptcy and did not address
02:13:57.630 --> 02:13:59.930
debt that we anticipated on issuing upon exit.
02:14:02.670 --> 02:14:06.790
Did it contribute to the increase of the debt?
02:14:06.790 --> 02:14:09.090
It did not increase the level of total debt.
02:14:11.110 --> 02:14:12.410
Did it contribute to it?
02:14:13.580 --> 02:14:15.080
It did not contribute to it.
02:14:18.330 --> 02:14:22.650
Is it a correct statement that billions of dollars
02:14:22.650 --> 02:14:26.260
a year in interest will need to be paid?
02:14:28.430 --> 02:14:30.060
It is a correct statement, yes.
02:14:33.400 --> 02:14:36.420
In the next paragraph it states,
02:14:36.420 --> 02:14:39.870
"The results would be hefty rate hikes."
02:14:41.360 --> 02:14:46.360
Do you believe that the results will be hefty rate hikes?
02:14:46.420 --> 02:14:48.190
No, I disagree with that statement.
02:14:49.060 --> 02:14:53.080
Do you believe that the result will be any rate hikes?
02:14:53.930 --> 02:14:55.390
No, the plan that we're proposing
02:14:55.390 --> 02:14:58.340
actually reduces customer rates as it relates to this plan.
02:15:02.570 --> 02:15:05.580
I'm gonna move to the last sentence of this paragraph.
02:15:08.360 --> 02:15:11.120
"Company executives have little to fear.
02:15:12.210 --> 02:15:16.380
"However, by turning wildfire victims
02:15:16.380 --> 02:15:20.080
"into shareholders they will have created
02:15:20.080 --> 02:15:24.960
"a sympathetic bulwark against customer objections."
02:15:26.790 --> 02:15:28.690
I'd like to explore that a little bit.
02:15:30.450 --> 02:15:33.270
If PG&E needed to hike rates
02:15:33.270 --> 02:15:38.270
because say, you had another wildfire, would you say that it
02:15:41.010 --> 02:15:42.530
would be more difficult
02:15:43.980 --> 02:15:48.520
for the California Public Utilities Commission to be able
02:15:48.520 --> 02:15:53.520
to not grant rate hikes if victims were counting
02:15:53.850 --> 02:15:56.820
on it to rebuild half their homes and half their lives?
02:15:59.840 --> 02:16:01.440
I don't agree with that statement.
02:16:04.000 --> 02:16:09.000
So victims being made shareholders
02:16:10.560 --> 02:16:15.210
through this agreement would have a vested interest
02:16:16.080 --> 02:16:19.990
in seeing a greater return on that investment.
02:16:19.990 --> 02:16:21.120
Is that correct?
02:16:21.120 --> 02:16:22.250
That would be correct.
02:16:25.256 --> 02:16:28.330
Do higher rates lead
02:16:28.330 --> 02:16:33.330
to oftentimes greater return for investors?
02:16:34.930 --> 02:16:35.763
No.
02:16:36.660 --> 02:16:37.790
They don't.
02:16:37.790 --> 02:16:40.990
There is no relationship between the rates you pay
02:16:40.990 --> 02:16:43.150
and what return goes to investors.
02:16:47.427 --> 02:16:48.840
Our business model is cost of service.
02:16:48.840 --> 02:16:52.170
And so our rates are adjusted the cost
02:16:52.170 --> 02:16:54.560
to provide our electric and gas customers.
02:16:55.610 --> 02:16:58.980
Separate and apart from that we set.
02:17:01.230 --> 02:17:04.220
The authorized levels of the financing cost
02:17:04.220 --> 02:17:05.450
to finance the business.
02:17:06.830 --> 02:17:08.680
If the Commission decides
02:17:08.680 --> 02:17:12.150
to adjust those authorized financing levels, they can impact
02:17:12.150 --> 02:17:14.670
rates, but what we have seen
02:17:14.670 --> 02:17:18.180
over the last decade is that rates have been more driven
02:17:18.180 --> 02:17:21.130
by the level of investment in our system which has nothing
02:17:21.130 --> 02:17:25.247
to do with profits for shareholders.
02:17:27.970 --> 02:17:31.080
So I'm not familiar with all the things you just said,
02:17:31.080 --> 02:17:33.640
so if you could help me boil it down.
02:17:33.640 --> 02:17:35.540
So it sounds to me from what you've said,
02:17:35.540 --> 02:17:39.020
and correct me if I'm wrong, that there is some relationship
02:17:39.020 --> 02:17:44.020
between rates and what investors get paid.
02:17:45.570 --> 02:17:46.620
Is that correct?
02:17:46.620 --> 02:17:48.090
There is a relationship, yes.
02:17:48.090 --> 02:17:48.923
Thank you.
02:17:51.580 --> 02:17:55.570
Given that relationship, victims who are now
02:17:55.570 --> 02:17:58.840
investors will wanna make sure
02:17:58.840 --> 02:18:01.370
to the best of their ability, just like
02:18:01.370 --> 02:18:04.810
any investor would, would wanna see
02:18:04.810 --> 02:18:07.110
a greater return on their investment.
02:18:07.110 --> 02:18:08.680
Is that a correct statement?
02:18:08.680 --> 02:18:10.160
I think that's a correct statement.
02:18:11.830 --> 02:18:15.180
Given that, would you expect that a victim
02:18:16.260 --> 02:18:21.260
who is also a customer, like other investors, would have
02:18:23.050 --> 02:18:28.050
sort of a conflict, if you will, or a difficult decision,
02:18:28.990 --> 02:18:32.350
because on the one hand, they wanna keep rates low
02:18:32.350 --> 02:18:34.110
so that they have lower energy bills,
02:18:34.110 --> 02:18:36.670
but on the other hand, there may be
02:18:36.670 --> 02:18:40.380
through increased rates ability
02:18:40.380 --> 02:18:42.040
for them to get a greater return?
02:18:43.770 --> 02:18:48.160
Is that sort of a natural assumption?
02:18:49.920 --> 02:18:51.970
I think it overstates the relationship.
02:18:55.240 --> 02:19:00.240
So if I'm a victim and I want the stock price
02:19:01.340 --> 02:19:03.540
to go up, 'cause now I'm a shareholder,
02:19:04.740 --> 02:19:06.560
and I live next to somebody
02:19:06.560 --> 02:19:09.710
in my community who's not a victim.
02:19:09.710 --> 02:19:12.150
Their home was spared from the PG&E fires.
02:19:13.940 --> 02:19:18.210
My neighbor would like to keep rates as low as possible,
02:19:18.210 --> 02:19:20.630
'cause he's got no upside associated
02:19:20.630 --> 02:19:23.350
with increasing rates, only downside.
02:19:23.350 --> 02:19:28.260
The victim on the other hand has this difficulty,
02:19:29.550 --> 02:19:32.300
'cause he'd like to see great return on his investment.
02:19:34.200 --> 02:19:38.740
Given that, do you see that this discontentment
02:19:38.740 --> 02:19:43.413
amongst neighbors helps the customers
02:19:45.560 --> 02:19:49.400
and helps the Commission and helps the public?
02:19:49.400 --> 02:19:52.090
I still would just disagree with this characterization.
02:19:52.090 --> 02:19:54.370
I do think it's in shareholders' interest
02:19:54.370 --> 02:19:58.570
to keep rates affordable, providing
02:20:01.730 --> 02:20:03.060
what is an essential service
02:20:03.060 --> 02:20:05.560
to the communities of northern and central California.
02:20:07.130 --> 02:20:10.070
I think shareholders reward, actually, affordable service
02:20:10.070 --> 02:20:13.680
as opposed to looking for rate increases.
02:20:13.680 --> 02:20:16.770
And so I just fundamentally disagree with the assertion.
02:20:19.430 --> 02:20:20.263
Would you agree with
02:20:20.263 --> 02:20:23.130
the assertion that affordable is not a fixed number?
02:20:23.130 --> 02:20:24.700
Affordable is not a fixed number
02:20:24.700 --> 02:20:26.310
and that there's some range there.
02:20:26.310 --> 02:20:28.620
I would agree with that.
Okay.
02:20:28.620 --> 02:20:32.165
So it could be something that you would consider affordable
02:20:32.165 --> 02:20:35.540
or the public would consider affordable, that there might be
02:20:35.540 --> 02:20:38.470
a disagreement along the lines of what I just described.
02:20:38.470 --> 02:20:39.303
Is that correct?
02:20:41.270 --> 02:20:42.103
Possibly.
02:20:48.610 --> 02:20:50.860
I'm done with that exhibit.
02:20:50.860 --> 02:20:53.860
Moving on to a few more questions, if I may.
02:21:00.150 --> 02:21:04.690
So Beth Kelly in her cross
02:21:04.690 --> 02:21:09.590
and in her questions asked if there was
02:21:10.520 --> 02:21:14.690
confidentiality associated with corporate financials.
02:21:17.550 --> 02:21:21.330
And you indicated that there was confidentiality.
02:21:21.330 --> 02:21:22.163
Is that correct?
02:21:23.080 --> 02:21:24.680
On specific transactions, yes.
02:21:28.810 --> 02:21:33.470
Understanding that of course confidentiality is required
02:21:33.470 --> 02:21:38.110
in certain circumstances, would you say that to build trust
02:21:38.110 --> 02:21:40.640
particularly for a company that has had
02:21:40.640 --> 02:21:45.640
the let's call it troubles that PG&E has had, that providing
02:21:47.410 --> 02:21:52.410
as much transparency is an important way to build trust.
02:21:54.810 --> 02:21:57.960
I do and as a public company
02:21:57.960 --> 02:22:00.850
and as a company in bankruptcy, we submit
02:22:00.850 --> 02:22:03.180
financial information monthly to the court
02:22:03.180 --> 02:22:07.350
and quarterly to the financial community.
02:22:13.300 --> 02:22:14.280
Given that you're looking
02:22:14.280 --> 02:22:19.280
to build trust, would you say that you are bound
02:22:20.770 --> 02:22:24.490
by what is legally required
02:22:24.490 --> 02:22:27.190
or that you have the opportunity
02:22:27.190 --> 02:22:30.760
to go above and beyond what is legally required
02:22:30.760 --> 02:22:33.280
in terms of financial transparency
02:22:33.280 --> 02:22:36.860
in disclosing things to the public, to the victims,
02:22:37.910 --> 02:22:40.960
so that they get a better sense of their investment
02:22:40.960 --> 02:22:42.360
to help build trust?
02:22:43.610 --> 02:22:46.480
I believe transparency is important in any relationship,
02:22:46.480 --> 02:22:49.570
critically those in which we're trying to rebuild trust.
02:22:49.570 --> 02:22:52.790
That being said, full transparency is not
02:22:52.790 --> 02:22:54.430
necessarily in stakeholders' interest.
02:22:54.430 --> 02:22:56.160
There are transactions that have market
02:22:56.160 --> 02:22:59.290
consequences that we need to maintain as confidential.
02:23:02.890 --> 02:23:06.920
What's the extent of the asset liens currently with PG&E?
02:23:06.920 --> 02:23:07.950
What percentage?
02:23:09.590 --> 02:23:12.260
We have very few asset liens currently.
02:23:13.130 --> 02:23:15.690
Can you give me a sense of percentage of what that--
02:23:15.690 --> 02:23:17.640
It's a very low percentage.
02:23:17.640 --> 02:23:22.640
We, prior to the bankruptcy, issued unsecured borrowings.
02:23:22.990 --> 02:23:24.290
Prior to the bankruptcy?
02:23:29.420 --> 02:23:33.530
Is it a fair statement that what got the bondholders
02:23:33.530 --> 02:23:36.460
to drop their competing plan was they went
02:23:36.460 --> 02:23:41.360
from unsecured investment to secured investment?
02:23:45.610 --> 02:23:49.850
That was likely an element of their agreement
02:23:49.850 --> 02:23:50.790
with a note holder RSA.
02:23:50.790 --> 02:23:55.790
But I think there were a number of other reasons as well.
02:23:58.200 --> 02:24:03.200
Was that type of security part of the TCC RSA for victims?
02:24:05.430 --> 02:24:06.830
No we did not offer...
02:24:08.900 --> 02:24:12.280
Sorry, the TCC RSA does not include debt.
02:24:12.280 --> 02:24:14.280
And therefore does not include security.
02:24:15.410 --> 02:24:19.520
So in Mr. Johnson's statement, it's on the record,
02:24:21.220 --> 02:24:24.760
he said that part of this bankruptcy
02:24:24.760 --> 02:24:28.830
first priority was victims.
02:24:30.020 --> 02:24:33.323
Given what you've described that the note holders
02:24:38.480 --> 02:24:43.350
who I imagine have been with PG&E a long time got security.
02:24:43.350 --> 02:24:45.830
I'd sort of feel security is a good thing.
02:24:47.210 --> 02:24:49.500
And the TCC RSA and the victims
02:24:49.500 --> 02:24:51.870
through that didn't get security.
02:24:51.870 --> 02:24:54.030
How is that putting the victims first?
02:24:56.730 --> 02:24:57.670
I think what's important
02:24:57.670 --> 02:25:02.290
about the TCC RSA is it was negotiated extensively
02:25:02.290 --> 02:25:07.290
over months, and attorneys representing
02:25:07.710 --> 02:25:12.320
70% of the victims felt that this was
02:25:12.320 --> 02:25:14.020
in the interests of their clients.
02:25:15.440 --> 02:25:18.050
It reflected what they thought was necessary
02:25:18.050 --> 02:25:20.680
to satisfy their needs.
02:25:20.680 --> 02:25:24.240
This was not a unilateral decision by the company.
02:25:25.810 --> 02:25:30.810
And so I think the TCC RSA to the company was able
02:25:32.880 --> 02:25:37.880
to strike with allow for more cash
02:25:37.910 --> 02:25:42.910
to be available for victims at closing than the alternative.
02:25:45.770 --> 02:25:48.700
And as a result of those extensive negotiations, yes,
02:25:48.700 --> 02:25:51.610
I think that this is a fair outcome.
02:25:55.220 --> 02:25:57.560
Just as a time check, Mr. Abrams you have
02:25:57.560 --> 02:25:59.240
about five more minutes.
02:25:59.240 --> 02:26:00.690
I'll do my best your Honor.
02:26:02.695 --> 02:26:04.110
It might be seven minutes.
02:26:09.120 --> 02:26:13.550
Earlier you stipulated that the TCC RSA came first
02:26:15.070 --> 02:26:17.570
before the note holder RSA.
02:26:17.570 --> 02:26:20.150
So the implications that you just described
02:26:21.380 --> 02:26:26.380
about that security wasn't something they could move on,
02:26:26.880 --> 02:26:28.980
because they already inked their agreement
02:26:28.980 --> 02:26:30.420
before the note holder RSA.
02:26:30.420 --> 02:26:31.290
Is that correct?
02:26:31.290 --> 02:26:32.990
Objection, asked and answered.
02:26:33.930 --> 02:26:35.480
Agreed, sustained.
02:26:36.730 --> 02:26:37.563
I'll move on.
02:26:43.450 --> 02:26:45.400
What do you know about how the victims'
02:26:46.310 --> 02:26:50.127
trust will be managed as holding this 21% shares?
02:26:54.610 --> 02:26:56.770
I think that the details are being worked
02:26:56.770 --> 02:26:58.710
out specifically, but as we disclosed
02:26:58.710 --> 02:27:01.170
as part of the disclosure statement,
02:27:01.170 --> 02:27:03.310
it's the intention of the trust
02:27:04.456 --> 02:27:09.080
to sell the stock of the company over time
02:27:09.080 --> 02:27:11.290
in order to generate additional cash
02:27:11.290 --> 02:27:12.720
to help victims rebuild.
02:27:14.080 --> 02:27:15.260
So over time.
02:27:17.580 --> 02:27:18.420
So...
02:27:22.760 --> 02:27:27.760
If, when there's another catastrophic wildfire, let's say
02:27:28.730 --> 02:27:33.730
the summer, would the management of this trust preclude
02:27:35.780 --> 02:27:40.780
them from selling off all the shares in the trust?
02:27:47.400 --> 02:27:49.610
The management of that trust agreement
02:27:51.196 --> 02:27:53.896
to the best of my knowledge is still being negotiated.
02:27:55.930 --> 02:27:59.560
So do you stipulate that this is what we're all working
02:27:59.560 --> 02:28:03.550
with, right, is being able to provide cross examination
02:28:03.550 --> 02:28:05.470
on a moving plan.
02:28:05.470 --> 02:28:08.040
So the degree to which you can provide
02:28:08.040 --> 02:28:10.570
solid answer would really help.
02:28:10.570 --> 02:28:11.403
Objection to
02:28:11.403 --> 02:28:12.330
the characterization, your Honor.
02:28:12.330 --> 02:28:13.990
He's doing his best to answer the question
02:28:13.990 --> 02:28:15.340
to the best of his ability.
02:28:18.190 --> 02:28:19.730
I'm not sure there's a question out there,
02:28:19.730 --> 02:28:24.190
but do you agree that terms of various
02:28:24.190 --> 02:28:27.530
parts of the emergence are
02:28:27.530 --> 02:28:29.680
from bankruptcy are still being negotiated?
02:28:30.580 --> 02:28:31.413
Yes.
02:28:33.480 --> 02:28:38.003
Is your understanding that the TCC RSA
02:28:39.870 --> 02:28:43.000
and how this trust is going to be managed.
02:28:44.250 --> 02:28:45.690
Give me your best guess.
02:28:47.020 --> 02:28:50.740
As the negotiations are ongoing, will
02:28:50.740 --> 02:28:54.000
these negotiations provide the opportunity
02:28:54.000 --> 02:28:57.550
for the manager of that trust to sell those shares
02:28:58.600 --> 02:29:01.190
with the next wildfire if it's this summer?
02:29:03.590 --> 02:29:05.880
These are confidential negotiations that are
02:29:05.880 --> 02:29:07.160
still continuing to be worked out.
02:29:07.160 --> 02:29:09.680
The intention here is to sell that stock
02:29:09.680 --> 02:29:11.840
over time in a way that maximizes value
02:29:11.840 --> 02:29:14.780
and recovery for wildfire victims.
02:29:15.630 --> 02:29:18.040
It's still being discussed what that looks like.
02:29:18.040 --> 02:29:19.290
Thank you.
02:29:19.290 --> 02:29:24.290
Would you say that the degree to which there is flexibility
02:29:26.450 --> 02:29:28.820
for that trust manager to do what they want
02:29:28.820 --> 02:29:31.690
and sell when they want and buy when they want
02:29:31.690 --> 02:29:35.720
and increase the investment is to the advantage of victims
02:29:36.940 --> 02:29:41.940
and constraints on when those sell most likely would be
02:29:42.090 --> 02:29:45.700
to the benefit of the other investors?
02:29:46.640 --> 02:29:48.520
I would disagree with that statement.
02:29:51.450 --> 02:29:53.590
I think in part the reason why it is taking
02:29:53.590 --> 02:29:58.370
so long to negotiate is because it is a complicated issue.
02:29:58.370 --> 02:30:01.740
The intention of that trust agreement is
02:30:01.740 --> 02:30:04.570
to maximize the value, maximize the recovery.
02:30:05.630 --> 02:30:07.900
To the extent that the trust was going
02:30:07.900 --> 02:30:12.630
to sell in any one day, 21% of the company that would have
02:30:12.630 --> 02:30:17.430
a significant impact on share price, providing the market
02:30:17.430 --> 02:30:20.080
with some stability as to when
02:30:20.080 --> 02:30:24.640
and how those shares will be disposed helps support
02:30:24.640 --> 02:30:26.310
a better stock value
02:30:26.310 --> 02:30:28.510
and therefore a higher recovery for victims.
02:30:30.540 --> 02:30:32.850
Given all these requirements that may be
02:30:32.850 --> 02:30:35.273
in this trust, do you
02:30:40.180 --> 02:30:44.850
really feel that a company that burned
02:30:44.850 --> 02:30:48.340
down your home, that affected the people who are
02:30:53.060 --> 02:30:58.060
in your community, having them own the stock
02:31:00.180 --> 02:31:02.430
and then precluding them
02:31:02.430 --> 02:31:04.880
from selling the stock of the company
02:31:04.880 --> 02:31:09.500
who burned their house down, does that strike
02:31:09.500 --> 02:31:11.940
you as a bit unfair?
02:31:13.110 --> 02:31:14.750
I don't agree with the characterization,
02:31:14.750 --> 02:31:18.760
and I also don't agree that that's the underlying intent.
02:31:19.810 --> 02:31:22.890
The victims themselves will not hold the stock.
02:31:22.890 --> 02:31:25.920
The stock is being held by a trust that is trying
02:31:25.920 --> 02:31:29.230
to maximize recovery and will sell that stock over time
02:31:29.230 --> 02:31:31.480
so that victims can receive cash
02:31:31.480 --> 02:31:35.160
in order to help rebuild for losses they've incurred.
02:31:35.160 --> 02:31:37.320
But it's a victim trust, right.
02:31:37.320 --> 02:31:38.650
So it's the victims.
02:31:38.650 --> 02:31:39.850
It's their trust, right?
02:31:41.000 --> 02:31:43.800
It's set up to maximize recovery for the victims, yes.
02:31:49.310 --> 02:31:54.310
Given this large shareholder class, I wanna understand
02:31:54.420 --> 02:31:56.590
the rights of that shareholder class.
02:31:56.590 --> 02:32:00.330
Will they be able to vote based on their 21%?
02:32:03.350 --> 02:32:07.180
That's an element that is continuing to be discussed.
02:32:07.180 --> 02:32:10.260
The underlying stock that will be held will have
02:32:10.260 --> 02:32:13.120
the same rights as all other stock issued by PG&E.
02:32:13.120 --> 02:32:16.240
It'll be common stock of the PG&E corporation.
02:32:16.240 --> 02:32:20.500
So they will be able to vote as a 21% class?
02:32:22.110 --> 02:32:25.480
Subject to potential capital markets limitations, but yes.
02:32:27.990 --> 02:32:29.990
Two minutes Mr. Abrams.
02:32:29.990 --> 02:32:30.823
Thank you.
02:32:35.460 --> 02:32:38.150
What was the settlement associated
02:32:38.150 --> 02:32:40.770
with the Tubbs Fire, the dollar value?
02:32:44.008 --> 02:32:45.758
It was a confidential settlement.
02:32:50.220 --> 02:32:54.420
So if I'm a victim of the fires,
02:32:54.420 --> 02:32:56.320
and I'm being asked to vote on a plan
02:32:56.320 --> 02:32:57.850
for my financial future,
02:33:02.150 --> 02:33:05.380
I don't know the settlement associated
02:33:05.380 --> 02:33:10.380
with the Tubbs Fire, don't know the value of the shares.
02:33:16.620 --> 02:33:20.350
Those are unknown variables for the victims.
02:33:20.350 --> 02:33:21.230
Is that correct?
02:33:24.310 --> 02:33:26.640
The value of the shares wilL be known, given
02:33:26.640 --> 02:33:29.290
the fact that we currently have a traded stock price.
02:33:30.190 --> 02:33:32.990
The settlement of the Tubbs, it's a confidential settlement.
02:33:32.990 --> 02:33:36.240
The degree to which they can understand what that means
02:33:36.240 --> 02:33:39.350
for cash in their wallet is an unknown.
02:33:39.350 --> 02:33:40.183
Is that correct?
02:33:41.800 --> 02:33:44.590
I believe that the plaintiffs' attorneys representing
02:33:44.590 --> 02:33:47.070
the victims have and we'll continue
02:33:47.070 --> 02:33:49.460
to provide perspective on what that means
02:33:49.460 --> 02:33:51.510
for cash in hands of the victims, yes.
02:33:53.330 --> 02:33:55.650
When you say continue to provide perspective,
02:33:55.650 --> 02:33:57.840
the TCC RSA precludes them
02:33:57.840 --> 02:34:01.150
from providing that perspective to victims.
02:34:01.150 --> 02:34:03.790
So who are they providing that perspective to?
02:34:03.790 --> 02:34:07.510
They have to advise their clients on the decision
02:34:07.510 --> 02:34:09.070
to vote for the plan or not.
02:34:09.070 --> 02:34:11.090
How can they advise their clients, given
02:34:11.090 --> 02:34:13.870
the TCC RSA precludes them from doing so?
02:34:15.380 --> 02:34:19.220
I don't think it precludes discussing
02:34:19.220 --> 02:34:22.200
the terms of the plan of reorganization.
02:34:22.200 --> 02:34:25.080
And in the opinion of their attorney lie they should
02:34:25.080 --> 02:34:26.910
or shouldn't vote for the plan itself.
02:34:29.300 --> 02:34:31.350
That's an interesting opinion given the clauses that are
02:34:31.350 --> 02:34:34.280
in the TCC RSA, but I'll leave that there.
02:34:50.590 --> 02:34:54.140
After all that we've, I guess discussed is the wrong word,
02:34:54.140 --> 02:34:58.270
after all that we've been mentioning to date
02:35:03.580 --> 02:35:06.320
I'd like to you think about this
02:35:06.320 --> 02:35:11.320
and answer this question if you would as a neighbor,
02:35:13.100 --> 02:35:18.030
as someone who would wanna provide advice to their neighbor.
02:35:21.820 --> 02:35:22.653
Is this fair?
02:35:24.860 --> 02:35:25.760
I believe it is.
02:35:28.660 --> 02:35:30.030
That's all.
02:35:30.030 --> 02:35:31.820
Thank you Mr. Abrams.
02:35:31.820 --> 02:35:32.653
Mr. Finkelstein.
02:35:37.760 --> 02:35:39.100
Thank you your Honor.
02:35:39.100 --> 02:35:39.933
Good morning Mr. Wells.
02:35:39.933 --> 02:35:41.730
I'm Bob Finkelstein representing TURN.
02:35:44.090 --> 02:35:47.120
A question that came to mind as Mr. Abrams was asking
02:35:47.120 --> 02:35:50.570
you questions, the TCC RSA
02:35:51.440 --> 02:35:53.160
at the time that it was negotiated,
02:35:53.160 --> 02:35:57.260
it's correct, is it not, that the TCC was not sponsoring
02:35:58.150 --> 02:36:01.010
its own proposed plan of reorganization.
02:36:05.760 --> 02:36:10.760
Prior to the current TCC RSA, the TCC
02:36:13.300 --> 02:36:17.390
and certain ad hoc note holders were sponsoring
02:36:17.390 --> 02:36:19.090
a separate plan of reorganization.
02:36:20.402 --> 02:36:22.760
Okay, thank you.
02:36:22.760 --> 02:36:23.840
First of all, do you have
02:36:23.840 --> 02:36:27.870
before you what's been marked as TURN x five
02:36:27.870 --> 02:36:32.870
and TURN x six which were two cross examination exhibits?
02:36:33.020 --> 02:36:35.330
Your Honor I provided you with copies of these earlier,
02:36:35.330 --> 02:36:37.800
and we'd sent them to the service list via email
02:36:39.600 --> 02:36:41.110
at some point in the last week.
02:36:41.110 --> 02:36:41.943
I have it.
02:36:41.943 --> 02:36:43.640
Thank you.
02:36:43.640 --> 02:36:45.470
Let me start with TURN x five.
02:36:45.470 --> 02:36:48.960
Do you recognize this as a PG&E response
02:36:48.960 --> 02:36:50.160
to a TURN data request?
02:36:54.790 --> 02:36:56.200
Yes I do.
02:36:56.200 --> 02:36:58.790
And then turning to what's been marked as TURN x six.
02:36:58.790 --> 02:37:03.050
Do you recognize this as the first few pages are
02:37:03.050 --> 02:37:07.580
the data request itself from EPOC followed
02:37:07.580 --> 02:37:12.580
by, starting at page nine and 19 as it's designated
02:37:14.030 --> 02:37:16.590
in the bottom right-hand corner was
02:37:16.590 --> 02:37:18.900
the start of PG&E's response to that data request?
02:37:18.900 --> 02:37:20.960
I see that, yes.
Okay.
02:37:20.960 --> 02:37:23.580
And then it continues on with a response
02:37:23.580 --> 02:37:25.490
to a TURN data request, starting
02:37:25.490 --> 02:37:28.590
at page 16 and 19 of that document.
02:37:29.850 --> 02:37:30.683
I see that, yes.
02:37:30.683 --> 02:37:31.516
Okay thank you.
02:37:34.450 --> 02:37:38.470
Let me get you to turn in your direct testimony
02:37:38.470 --> 02:37:42.250
in PG&E one to page two dash 22.
02:37:48.086 --> 02:37:48.919
Do you have that?
02:37:48.919 --> 02:37:50.170
I'm there yes.
02:37:50.170 --> 02:37:54.430
And on line nine there's the beginning of a
02:37:54.430 --> 02:37:57.390
paragraph that starts with, "Under PG&E's plan."
02:37:57.390 --> 02:37:58.290
Do you see that?
02:38:05.890 --> 02:38:06.910
I'm sorry--
02:38:06.910 --> 02:38:08.090
Two dash 23.
02:38:08.090 --> 02:38:09.300
Two dash 23.
02:38:10.590 --> 02:38:11.440
Yes I see that.
02:38:14.993 --> 02:38:15.826
I need to make sure I can get
02:38:15.826 --> 02:38:17.110
my bearings when I read the transcript.
02:38:17.110 --> 02:38:21.630
So on page two dash 23, starting at line nine, do you see
02:38:21.630 --> 02:38:24.750
the paragraph that begins "Under PG&E's plan?"
02:38:26.650 --> 02:38:27.870
Yes.
Okay.
02:38:27.870 --> 02:38:30.730
And the first sentence of that paragraph describes
02:38:30.730 --> 02:38:34.220
PG&E's expectation of achieving investment
02:38:34.220 --> 02:38:36.490
grade ratings upon emergence.
02:38:36.490 --> 02:38:38.010
Do you see that?
That's right.
02:38:38.010 --> 02:38:40.100
And that's sort of a snapshot
02:38:40.100 --> 02:38:44.180
at the time that the plan has been confirmed.
02:38:44.180 --> 02:38:49.180
PG&E has pursued and successfully obtained the financing,
02:38:49.670 --> 02:38:51.290
and at that moment
02:38:51.290 --> 02:38:53.270
it will have achieved investment grade ratings.
02:38:53.270 --> 02:38:54.110
Is that correct?
02:38:54.110 --> 02:38:56.760
For the secured bonds the company intends to issue.
02:39:00.150 --> 02:39:01.930
And at this point, PG&E's not intending
02:39:01.930 --> 02:39:03.680
to issue any unsecured bonds.
02:39:03.680 --> 02:39:04.513
Is it?
02:39:04.513 --> 02:39:06.020
That's correct.
02:39:06.020 --> 02:39:07.820
And then the sentence that follows beginning
02:39:07.820 --> 02:39:10.850
on line 10 describes a clear path
02:39:10.850 --> 02:39:12.900
towards further improving its credit rating.
02:39:12.900 --> 02:39:13.930
Do you see that?
02:39:13.930 --> 02:39:14.763
I do.
02:39:14.763 --> 02:39:18.050
So for PG&E it's not just a matter of the credit ratings
02:39:18.050 --> 02:39:21.170
and it's financial health at the moment of emergence
02:39:21.170 --> 02:39:23.500
but on an ongoing basis thereafter?
02:39:23.500 --> 02:39:24.731
That's correct.
02:39:24.731 --> 02:39:29.390
Okay.
02:39:30.342 --> 02:39:34.373
Let me get you to turn I hope to page two dash 15,
02:39:37.530 --> 02:39:39.100
still in PG&E one.
02:39:44.970 --> 02:39:48.550
And it's the material that starts on line 18.
02:39:50.400 --> 02:39:53.130
Again, paragraph starting under PG&E's plan.
02:39:53.130 --> 02:39:54.010
Do you see that?
02:39:54.010 --> 02:39:54.843
I do.
02:40:07.030 --> 02:40:09.720
So as I understand your testimony here
02:40:09.720 --> 02:40:13.010
there is no doubt that the $6 billion of temporary
02:40:13.010 --> 02:40:15.500
utility debt is going to be used
02:40:15.500 --> 02:40:17.370
to pay wildfire claims at exit.
02:40:17.370 --> 02:40:18.450
Is that correct?
02:40:18.450 --> 02:40:19.350
That is correct.
02:40:20.740 --> 02:40:25.740
And you go on to say on line 19 to 20,
02:40:27.440 --> 02:40:30.050
therefore that debt will be
02:40:30.050 --> 02:40:33.580
the financial responsibility of shareholders, not customers.
02:40:33.580 --> 02:40:34.660
That is correct.
02:40:34.660 --> 02:40:36.850
And the therefore is
02:40:36.850 --> 02:40:39.270
because it's financing wildfire claims.
02:40:42.240 --> 02:40:44.860
The therefore is because it's debt that does not
02:40:44.860 --> 02:40:48.880
directly finance the company's rate base, that it goes
02:40:48.880 --> 02:40:51.960
to financing wildfire claims, and so is the obligation
02:40:51.960 --> 02:40:54.100
and responsibility of the shareholder to pay.
02:40:55.210 --> 02:40:58.680
And so while it is temporary utility debt
02:40:58.680 --> 02:41:01.640
as you're describing it here, it would be solely
02:41:01.640 --> 02:41:03.370
the responsibility of shareholders.
02:41:03.370 --> 02:41:04.620
Is that a fair statement?
02:41:07.560 --> 02:41:11.060
It would be secured debt of the utility.
02:41:12.520 --> 02:41:15.880
The obligation to pay the associated debt service
02:41:15.880 --> 02:41:17.380
would be that of shareholders.
02:41:25.340 --> 02:41:26.870
Well not to put too fine a point
02:41:26.870 --> 02:41:29.900
on it, if shareholders aren't paying it,
02:41:29.900 --> 02:41:32.660
the financial cost of the debt, nobody's paying it.
02:41:32.660 --> 02:41:33.910
Is that a fair statement?
02:41:38.560 --> 02:41:40.690
It's a fair statement, but I think it mischaracterizes it.
02:41:40.690 --> 02:41:42.194
I think what's important to look at--
02:41:42.194 --> 02:41:45.250
Your Honor I'm gonna ask that we save this
02:41:45.250 --> 02:41:47.180
for redirect, given the time constraints.
02:41:47.180 --> 02:41:48.013
I agree.
02:41:48.013 --> 02:41:48.846
Thank you.
02:41:51.021 --> 02:41:52.270
Well let me ask it this way Mr. Wallace.
02:41:52.270 --> 02:41:54.610
If the utility were to default
02:41:54.610 --> 02:41:57.010
on the temporary utility debt,
02:41:57.870 --> 02:41:59.270
the debt holders recourse would be
02:41:59.270 --> 02:42:01.760
against the utility, not PG&E's rate payers.
02:42:01.760 --> 02:42:03.080
Is that a fair statement?
02:42:03.080 --> 02:42:03.930
That's correct.
02:42:05.720 --> 02:42:10.720
And then on line 20 you describe
02:42:12.240 --> 02:42:14.830
the securitization that's been a topic earlier
02:42:15.670 --> 02:42:19.090
and describe also that securitization as being rate neutral.
02:42:19.090 --> 02:42:20.510
Do you see that?
02:42:20.510 --> 02:42:21.410
I see that, yes.
02:42:24.040 --> 02:42:26.200
And then this, there is a direct linkage is there not,
02:42:26.200 --> 02:42:28.350
between that securitization that you're describing
02:42:28.350 --> 02:42:30.859
and the temporary utility debt?
02:42:30.859 --> 02:42:34.610
Yes.
02:42:34.610 --> 02:42:37.940
And the proceeds of the securitization would be used
02:42:37.940 --> 02:42:40.300
to retire the temporary utility debt.
02:42:40.300 --> 02:42:41.240
Is that correct?
02:42:41.240 --> 02:42:42.073
That's correct.
02:42:42.073 --> 02:42:46.340
And once the temporary utility debt is retired it's fair
02:42:46.340 --> 02:42:49.070
to understand that shareholders are no longer obligated
02:42:49.070 --> 02:42:53.070
for its repayment or any financing cost associated
02:42:53.070 --> 02:42:54.720
with that temporary utility debt.
02:42:57.540 --> 02:42:58.490
Yes it's retired.
02:42:59.550 --> 02:43:00.480
And from that point
02:43:00.480 --> 02:43:02.530
forward the wildfire costs that had been
02:43:02.530 --> 02:43:04.940
the subject of the temporary utility debt would now be
02:43:04.940 --> 02:43:07.740
the subject of the securitization transaction.
02:43:07.740 --> 02:43:08.573
Yes.
02:43:12.030 --> 02:43:13.410
And as you're contemplating it
02:43:13.410 --> 02:43:18.410
under the securitization the cost would be collected
02:43:18.460 --> 02:43:21.540
from rate payers through a dedicated rate component.
02:43:21.540 --> 02:43:23.580
That is how we're currently contemplating it.
02:43:28.150 --> 02:43:29.760
And would you agree
02:43:29.760 --> 02:43:32.070
with the characterization that a dedicated rate
02:43:32.070 --> 02:43:35.360
component is structured in a way so as
02:43:35.360 --> 02:43:39.150
to be bankruptcy proof for any future bankruptcies?
02:43:39.150 --> 02:43:40.200
That is the intent.
02:43:47.520 --> 02:43:52.520
And then at lines 24 through 27 of two dash 15 of your
02:43:54.540 --> 02:43:57.360
direct testimony, you describe
02:44:00.740 --> 02:44:03.640
how PG&E intends to use certain tax benefits
02:44:03.640 --> 02:44:06.650
and other credits to provide rate reductions.
02:44:06.650 --> 02:44:07.520
Oo you see that?
02:44:07.520 --> 02:44:08.353
I do.
02:44:09.760 --> 02:44:13.350
Is it PG&E's intention to structure those benefits
02:44:13.350 --> 02:44:15.800
in a way so they would also be bankruptcy proof
02:44:15.800 --> 02:44:17.500
in terms of any future bankruptcy?
02:44:21.840 --> 02:44:24.500
We're currently finalizing that application.
02:44:24.500 --> 02:44:28.150
Our intention though is to put
02:44:28.150 --> 02:44:31.000
forward an application that would be customer protective.
02:44:32.350 --> 02:44:33.550
How it's specifically structured
02:44:33.550 --> 02:44:36.090
we're still working through those details.
02:44:36.090 --> 02:44:38.520
I have a question related to this.
02:44:38.520 --> 02:44:42.580
When you responded to Mr. Finkelstein's question
02:44:42.580 --> 02:44:45.480
and the term bankruptcy proof, what does that mean to you?
02:44:46.600 --> 02:44:48.700
That is a special purpose entity that is
02:44:48.700 --> 02:44:52.177
outside of the legal entity of PG&E.
02:44:56.970 --> 02:44:58.990
Since it has dedicated rate component,
02:45:06.500 --> 02:45:08.450
legally or functionally it would be separate
02:45:08.450 --> 02:45:10.020
from the utility itself.
02:45:10.020 --> 02:45:12.820
And if PG&E were granted
02:45:12.820 --> 02:45:16.320
the securitization that it will be seeking
02:45:16.320 --> 02:45:17.620
at some point in the future
02:45:17.620 --> 02:45:21.650
and PG&E declared bankruptcy again, would rate payers
02:45:21.650 --> 02:45:22.950
still be responsible for paying
02:45:22.950 --> 02:45:26.960
the non-bypassable charge as contemplated?
02:45:26.960 --> 02:45:28.440
As contemplated currently, yes.
02:45:28.440 --> 02:45:29.390
But that's why we're still working
02:45:29.390 --> 02:45:32.050
through the details of the customer protection
02:45:32.050 --> 02:45:33.780
for the offsetting credits.
02:45:33.780 --> 02:45:34.613
Thank you.
02:45:36.250 --> 02:45:37.570
Thank you your Honor.
02:45:37.570 --> 02:45:39.110
Mr. Wells let me get you to now turn
02:45:39.110 --> 02:45:42.760
to what I understand has been marked as PG&E eight
02:45:42.760 --> 02:45:46.630
which I think were the clarifications.
02:45:50.500 --> 02:45:51.582
I have that.
02:45:51.582 --> 02:45:53.400
Okay.
02:45:58.180 --> 02:46:00.310
If I can get you to turn to page three.
02:46:03.210 --> 02:46:04.530
And at the start you have heading
02:46:04.530 --> 02:46:06.740
two recovery of wildfire claims cost.
02:46:06.740 --> 02:46:07.573
Do you see that?
02:46:09.250 --> 02:46:10.210
Yes.
02:46:10.210 --> 02:46:13.220
And the last sentence of this paragraph states,
02:46:13.220 --> 02:46:17.720
"If the Commission approves PG&E's proposed securitization,
02:46:18.630 --> 02:46:21.960
"PG&E will not seek any other recovery of 2017
02:46:21.960 --> 02:46:23.880
"or 2018 in wildfire claims cost."
02:46:23.880 --> 02:46:24.713
Do you see that?
02:46:24.713 --> 02:46:25.546
That's correct.
02:46:25.546 --> 02:46:26.970
And is it fair to understand that seek
02:46:26.970 --> 02:46:30.690
any other recovery, meaning, seek any other rate recovery?
02:46:31.680 --> 02:46:32.530
That's correct.
02:46:33.700 --> 02:46:37.610
Is it reasonable to interpret this sentence as
02:46:37.610 --> 02:46:41.490
at least implying that if the Commission does not approve
02:46:41.490 --> 02:46:44.500
the securitization, PG&E may seek
02:46:44.500 --> 02:46:47.790
rate recover of 2017, 2018 wildfire claims cost.
02:46:47.790 --> 02:46:48.690
That is correct.
02:46:58.580 --> 02:47:02.220
Prior to submitting this clarification document on Monday,
02:47:02.220 --> 02:47:06.313
I'm sorry, maybe Tuesday, this week, had
02:47:09.050 --> 02:47:11.420
PG&E ever taken this position in public?
02:47:13.370 --> 02:47:15.150
Not to my recollection which is why we wanted
02:47:15.150 --> 02:47:17.480
to clarify it for the record here.
02:47:17.480 --> 02:47:22.380
But is it something that had been understood
02:47:22.380 --> 02:47:24.630
within the company at the time that you served
02:47:24.630 --> 02:47:26.870
the testimony January 31st?
02:47:27.940 --> 02:47:28.773
Yes.
02:47:33.650 --> 02:47:35.240
Mr. Wells could you point me
02:47:35.240 --> 02:47:37.410
to the place in your testimony
02:47:37.410 --> 02:47:42.410
where the fires covered are listed that are
02:47:43.380 --> 02:47:47.720
part of that 2017 and 2018 fires?
02:47:49.320 --> 02:47:51.920
Apologies, what specifically?
02:47:51.920 --> 02:47:56.620
Sorry, on page three of exhibit of PG&E eight
02:47:57.650 --> 02:47:59.762
where Mr. Finkelstein was referring you
02:47:59.762 --> 02:48:04.680
to, PG&E's plan does not address rate recovery of 2017
02:48:04.680 --> 02:48:08.330
and 2018 wildfire claims and costs.
02:48:09.180 --> 02:48:10.500
Is there a list somewhere
02:48:10.500 --> 02:48:15.500
in your testimony that the specific fire events
02:48:16.310 --> 02:48:18.950
for 2017 and 2018 are identified?
02:48:20.090 --> 02:48:22.440
If I can have just very quickly?
02:48:22.440 --> 02:48:23.810
Let's be off the record.
02:48:30.753 --> 02:48:33.670
(faintly speaking)
02:48:38.910 --> 02:48:39.743
Your Honor.
02:48:41.190 --> 02:48:43.010
Let's be back on the record.
02:48:43.010 --> 02:48:46.940
On page two dash 16 of my original testimony
02:48:52.020 --> 02:48:55.230
there is a table, table 2.3 uses.
02:48:56.300 --> 02:48:58.440
We have not broken it out, but the fire claims
02:48:58.440 --> 02:49:01.960
at the top of that table, the 24.15 billion plus
02:49:01.960 --> 02:49:05.940
as footnoted the 1.35 billion in deferred payments.
02:49:05.940 --> 02:49:10.140
That's the total fire claims that is referenced
02:49:11.100 --> 02:49:13.970
on page three of the clarification testimony.
02:49:15.080 --> 02:49:16.720
We don't have a more
02:49:16.720 --> 02:49:19.020
granular breakdown of the '17 and '18 fires.
02:49:21.538 --> 02:49:22.620
Can I interject?
02:49:22.620 --> 02:49:23.550
Mr. Weisman.
02:49:23.550 --> 02:49:25.070
In the plan of reorganization
02:49:25.070 --> 02:49:27.240
which has been filed with the Commission,
02:49:27.240 --> 02:49:28.390
those fires are listed.
02:49:29.250 --> 02:49:32.440
I can give you a particular page if that would be helpful.
02:49:32.440 --> 02:49:33.360
Thank you.
02:49:34.460 --> 02:49:36.110
Why don't we do that after lunch?
02:49:42.550 --> 02:49:43.970
Your Honor, is it back to me?
02:49:43.970 --> 02:49:46.430
Yes sorry.
Thank you.
02:49:46.430 --> 02:49:48.120
Mr. Wells let me get you to turn
02:49:48.120 --> 02:49:52.320
in your direct testimony in PG&E one, page two dash 22.
02:49:57.085 --> 02:49:59.460
It's the sentence that starts on line 21.
02:50:00.522 --> 02:50:01.430
Do you see that?
02:50:01.430 --> 02:50:02.363
I do.
02:50:02.363 --> 02:50:03.820
And you see that it states "PG&E is
02:50:03.820 --> 02:50:06.880
"not requesting that the wildfire claims be recovered
02:50:06.880 --> 02:50:09.360
"from customers, and those amounts would
02:50:09.360 --> 02:50:11.900
"ultimately be paid by shareholders,
02:50:11.900 --> 02:50:15.000
"even if initially financed with debt in whole or in part."
02:50:15.000 --> 02:50:16.650
Do you see that?
02:50:16.650 --> 02:50:17.483
I do.
02:50:17.483 --> 02:50:20.060
Would you agree that that's no longer true given
02:50:20.060 --> 02:50:23.930
PG&E's position taken in the clarification, that if
02:50:23.930 --> 02:50:25.700
it does not obtain securitization,
02:50:25.700 --> 02:50:28.890
it may seek rate recovery of the cost of those claims?
02:50:32.410 --> 02:50:34.210
No, not exactly.
02:50:34.210 --> 02:50:35.590
We haven't taken a position one way
02:50:35.590 --> 02:50:38.240
or the other, if securitization is denied.
02:50:39.370 --> 02:50:43.960
We're withholding that evaluation.
02:50:45.890 --> 02:50:46.800
But you are holding on
02:50:46.800 --> 02:50:49.520
to the possibility that you might seek rate recovery
02:50:49.520 --> 02:50:51.120
should securitization be denied.
02:50:52.030 --> 02:50:53.830
But we are currently as part of this application
02:50:53.830 --> 02:50:58.830
not seeking recovery for those claims costs from customers.
02:51:07.750 --> 02:51:11.300
So based on this investigation
02:51:11.300 --> 02:51:14.430
and PG&E's testimony submitted to date
02:51:14.430 --> 02:51:16.880
and the clarifications and things of that nature,
02:51:16.880 --> 02:51:19.870
the Commission can conclude safely that PG&E is not
02:51:19.870 --> 02:51:21.820
at this time seeking rate recovery
02:51:21.820 --> 02:51:24.040
for 2017 and 2018 wildfire costs.
02:51:24.040 --> 02:51:24.950
Is that correct?
02:51:24.950 --> 02:51:27.280
I'm sorry wildfire claims cost.
02:51:27.280 --> 02:51:28.670
Is that correct?
02:51:28.670 --> 02:51:32.400
As part of this plan we are not seeking recovery
02:51:32.400 --> 02:51:36.270
for 2017, 2018 wildfires claims cost.
02:51:36.270 --> 02:51:38.370
But at some point going forward that may change
02:51:38.370 --> 02:51:40.930
and PG&E could then seek
02:51:40.930 --> 02:51:43.410
rate recovery of claims cost associated
02:51:43.410 --> 02:51:46.370
with 2017 and 2018 wildfires.
02:51:46.370 --> 02:51:47.220
That's correct.
02:51:57.280 --> 02:52:01.560
And Mr. Wells just for clarification
02:52:01.560 --> 02:52:03.370
we keep talking about 2017
02:52:03.370 --> 02:52:07.170
and 2018 wildfires, does that figure also include
02:52:07.170 --> 02:52:11.830
costs associated with the 2015 Butte, b-u-t-t-e fire?
02:52:11.830 --> 02:52:13.180
It does include a little bit related
02:52:13.180 --> 02:52:14.890
to the Butte fire in 2015.
02:52:15.850 --> 02:52:17.250
And when you say a little bit, do you have
02:52:17.250 --> 02:52:20.100
order of magnitude, what a little bit is in this context?
02:52:20.940 --> 02:52:22.140
A few hundred million.
02:52:27.320 --> 02:52:29.540
And for the Butte wildfire, if you know
02:52:29.540 --> 02:52:33.040
would that be the amount of wildfire
02:52:33.040 --> 02:52:36.250
claims, cost that exceeded
02:52:36.250 --> 02:52:40.050
the available liability insurance proceeds?
02:52:44.180 --> 02:52:45.030
If you know.
02:52:45.870 --> 02:52:47.100
The agreement wasn't structured
02:52:47.100 --> 02:52:50.440
in a way to resolve each of those individual fires.
02:52:50.440 --> 02:52:53.390
It was resolving a collection of fires.
02:52:53.390 --> 02:52:56.530
So I don't have the ability to answer that directly.
02:53:10.520 --> 02:53:13.190
And could you, hopefully very briefly, describe
02:53:13.190 --> 02:53:17.580
how 2019 wildfire claims cost are treated
02:53:17.580 --> 02:53:20.740
in your bankruptcy claim, your plan of reorganization?
02:53:20.740 --> 02:53:23.033
They're currently not addressed here.
02:53:31.776 --> 02:53:33.000
It's correct to understand those claims
02:53:33.000 --> 02:53:35.950
would not be discharged if your proposed
02:53:35.950 --> 02:53:38.050
plan of reorganization gets confirmed?
02:53:39.670 --> 02:53:41.920
Currently we don't know the cause
02:53:41.920 --> 02:53:45.240
and origin of the 2019 fires.
02:53:45.240 --> 02:53:49.670
So we're not proposing any payment of claim as
02:53:49.670 --> 02:53:51.430
part of this plan of reorganization.
02:53:55.620 --> 02:53:57.380
But you are, are you not, proposing
02:53:57.380 --> 02:53:59.830
payment of claims associated with the Tubbs Fire?
02:54:01.280 --> 02:54:03.310
Sorry, I thought you said 2019.
02:54:03.310 --> 02:54:06.160
I'm sorry, I'm switching now from your previous response
02:54:06.160 --> 02:54:08.350
to the treatment of the Tubbs Fire
02:54:08.350 --> 02:54:10.670
under the proposed plan of reorganization.
02:54:10.670 --> 02:54:14.120
Does the proposed plan of reorganization include
02:54:14.120 --> 02:54:16.950
cost of claims associated with the Tubbs Fire?
02:54:16.950 --> 02:54:17.783
No.
02:54:27.929 --> 02:54:32.012
Let me get you to turn to what's been marked as
02:54:36.890 --> 02:54:41.220
PG&E 13 which is a document that was financial projections.
02:54:45.390 --> 02:54:46.540
I have that document.
02:54:49.080 --> 02:54:49.913
And well, I don't.
02:54:49.913 --> 02:54:51.190
So hold on a second Mr. Wells.
02:54:52.176 --> 02:54:53.807
Are we off the record?
02:54:53.807 --> 02:54:56.144
Off the record.
02:54:56.144 --> 02:55:01.144
Now I got it.
02:55:05.020 --> 02:55:06.810
Thank you your Honor.
02:55:06.810 --> 02:55:08.130
Back on the record.
02:55:09.810 --> 02:55:14.810
So Mr. Wells PG&E 13 the first page of text
02:55:15.170 --> 02:55:18.330
simply has the heading "Exhibit B, Financial Projections."
02:55:18.330 --> 02:55:19.163
Do you see that?
02:55:19.163 --> 02:55:19.996
I see that.
02:55:19.996 --> 02:55:22.060
Can you briefly describe what this document is?
02:55:22.060 --> 02:55:25.130
There are financial projections for what purpose?
02:55:26.810 --> 02:55:27.920
Under the bankruptcy court
02:55:27.920 --> 02:55:29.925
as part of the required disclosures
02:55:29.925 --> 02:55:34.330
statement that is used to evaluate
02:55:34.330 --> 02:55:36.530
and vote on the plan of reorganization,
02:55:36.530 --> 02:55:37.460
the company is required
02:55:37.460 --> 02:55:40.650
to put together financial projections supporting its ability
02:55:40.650 --> 02:55:43.220
to maintain financial health post-emergence.
02:55:45.110 --> 02:55:47.000
This document addresses that.
02:55:47.000 --> 02:55:48.720
And this document was issued
02:55:48.720 --> 02:55:52.570
on February 18th of this year.
02:55:52.570 --> 02:55:53.770
Is that correct?
02:55:53.770 --> 02:55:55.170
I believe that's the case.
02:56:06.120 --> 02:56:09.030
On page five of this document
02:56:13.050 --> 02:56:15.450
there is several bullet points towards the top of the page.
02:56:15.450 --> 02:56:16.283
Do you see that?
02:56:16.283 --> 02:56:17.116
I do.
02:56:22.620 --> 02:56:24.560
And the last bullet point
02:56:24.560 --> 02:56:26.390
before the heading financing
02:56:26.390 --> 02:56:28.700
considerations, starts off wildfires OII.
02:56:28.700 --> 02:56:29.533
Do you see that?
02:56:31.940 --> 02:56:33.260
Yes.
02:56:33.260 --> 02:56:34.920
And the last sentence states,
02:56:34.920 --> 02:56:37.970
"The consolidated financial projections assume that these
02:56:37.970 --> 02:56:39.480
"costs will not be recovered."
02:56:39.480 --> 02:56:40.540
Do you see that?
02:56:40.540 --> 02:56:41.373
I do.
02:56:41.373 --> 02:56:44.580
And when PG&E says will not be recovered
02:56:44.580 --> 02:56:49.120
in this context is it will not be recovered in rates?
02:56:49.120 --> 02:56:49.970
That's correct.
02:57:15.530 --> 02:57:19.370
And then on page six of the same document Mr. Wells,
02:57:24.460 --> 02:57:27.300
the second to the last bullet point on this page
02:57:27.300 --> 02:57:30.010
about restoring common dividends.
02:57:30.010 --> 02:57:30.850
Do you see this?
02:57:30.850 --> 02:57:31.770
I do.
02:57:31.770 --> 02:57:33.370
And it seems to be tied
02:57:33.370 --> 02:57:37.030
to achieving a certain equity ratio,
02:57:37.030 --> 02:57:38.900
and then you use the phrase
02:57:38.900 --> 02:57:42.423
or PG&E uses the phrase "on a regulatory basis."
02:57:42.423 --> 02:57:43.256
Do you see that?
02:57:43.256 --> 02:57:44.089
I do.
02:57:44.089 --> 02:57:47.010
In this context does on a regulatory basis mean
02:57:47.010 --> 02:57:48.980
with the various adjustments that you've described
02:57:48.980 --> 02:57:51.060
in your direct testimony here?
02:57:51.060 --> 02:57:51.960
That is correct.
02:57:53.210 --> 02:57:56.190
Are there any adjustments being made
02:57:56.190 --> 02:58:01.190
to the calculation of the equity ratio
02:58:01.530 --> 02:58:02.880
other than the ones that you've described
02:58:02.880 --> 02:58:05.540
in your testimony here to your knowledge?
02:58:05.540 --> 02:58:06.740
Not that I'm aware of.
02:58:20.314 --> 02:58:21.410
Let me get you to turn please
02:58:21.410 --> 02:58:23.910
to what's been marked as PG&E 12.
02:58:27.800 --> 02:58:31.140
No I'm sorry, still on PG&E 13, the consolidated,
02:58:34.480 --> 02:58:37.400
the financial projections document in PG&E 13.
02:58:38.680 --> 02:58:40.280
On page nine of that document,
02:58:42.910 --> 02:58:45.790
there's a consolidated cashflow table.
02:58:45.790 --> 02:58:46.623
Yes.
02:58:46.623 --> 02:58:47.456
I'm sorry.
02:58:48.390 --> 02:58:51.110
The first line of the table itself says cashflow statement.
02:58:51.110 --> 02:58:52.060
Do you see that?
02:58:52.060 --> 02:58:52.893
I do.
02:58:52.893 --> 02:58:56.020
And then the bottom of the first section has
02:58:56.020 --> 02:58:58.100
a net cash from operations figure.
02:58:58.100 --> 02:58:58.933
Is that correct?
02:59:01.250 --> 02:59:02.140
Yes.
02:59:02.140 --> 02:59:05.840
And it reflects, if I'm reading it correctly, an increase
02:59:05.840 --> 02:59:10.710
from $5.8 billion in 2022
02:59:10.710 --> 02:59:14.760
to approximately $7.9 billion in 2024.
02:59:16.490 --> 02:59:17.323
Yes.
02:59:20.680 --> 02:59:22.440
Then now let me get you to turn please
02:59:22.440 --> 02:59:26.340
to what's been marked as PG&E 12.
02:59:29.470 --> 02:59:32.040
And that's a set of slides
02:59:32.040 --> 02:59:34.560
the first page of which says PG&E business outlook.
02:59:34.560 --> 02:59:35.450
Do you have that?
02:59:35.450 --> 02:59:36.890
I have that document.
02:59:38.146 --> 02:59:41.450
Let me get you to turn to slide 34 of this document.
02:59:47.215 --> 02:59:48.048
Do you have that?
02:59:48.048 --> 02:59:48.881
I have it.
02:59:51.320 --> 02:59:54.360
And at the very top of the page it says, "Sustainable
02:59:54.360 --> 02:59:55.940
"financials" as part of the heading.
02:59:55.940 --> 02:59:56.860
Do you see that?
02:59:56.860 --> 02:59:57.693
Yes.
03:00:04.470 --> 03:00:07.570
So in the left hand column there is
03:00:09.910 --> 03:00:10.743
what looks to be
03:00:10.743 --> 03:00:13.590
a label of sorts of non-core earnings factors.
03:00:13.590 --> 03:00:14.830
Do you see that?
03:00:14.830 --> 03:00:15.770
I do.
03:00:15.770 --> 03:00:16.603
And then...
03:00:19.470 --> 03:00:24.220
There are appears to me the five listed here on this slide.
03:00:24.220 --> 03:00:26.740
Is that the correct way to interpret this slide?
03:00:26.740 --> 03:00:27.573
Yes.
03:00:27.573 --> 03:00:32.570
And just in general what are the non-core earning
03:00:32.570 --> 03:00:36.560
factors trying to identify in this context?
03:00:36.560 --> 03:00:38.020
Is there transactions that are flowing
03:00:38.020 --> 03:00:40.590
through our financial projections that we don't think are
03:00:40.590 --> 03:00:43.380
reflective of the ongoing earnings power of the company.
03:00:43.380 --> 03:00:44.213
And so we're trying
03:00:44.213 --> 03:00:46.440
to highlight them separately for investors.
03:00:46.440 --> 03:00:48.810
And in each of the five cases that you've listed here
03:00:48.810 --> 03:00:52.320
or the five examples you've listed here, are they
03:00:53.510 --> 03:00:57.790
costs that the utility anticipates incurring
03:00:59.810 --> 03:01:01.560
sort of as a one-off basis
03:01:01.560 --> 03:01:04.750
and doesn't expect to reflect what cost
03:01:04.750 --> 03:01:07.150
the utility will incur in a going forward basis?
03:01:10.490 --> 03:01:13.010
That's basically the, yes.
03:01:19.760 --> 03:01:21.270
On the next page is
03:01:21.270 --> 03:01:26.130
slide 35 of what's been marked as PG&E 12.
03:01:26.130 --> 03:01:27.140
Do you have that?
03:01:27.140 --> 03:01:28.220
I have it.
03:01:28.220 --> 03:01:33.220
And the title here is cost savings areas of focus.
03:01:33.250 --> 03:01:34.180
Is that correct?
03:01:34.180 --> 03:01:35.230
Yes.
03:01:35.230 --> 03:01:38.250
And am I correct in understanding, well,
03:01:38.250 --> 03:01:40.850
it says it at the very top, identified
03:01:40.850 --> 03:01:43.550
an average of $1 billion per year
03:01:43.550 --> 03:01:46.140
in operational cost through 2025.
03:01:46.140 --> 03:01:47.320
Do you see that?
03:01:47.320 --> 03:01:48.153
I do.
03:01:48.153 --> 03:01:49.680
And that's an average of $1 billion per
03:01:49.680 --> 03:01:52.590
year that PG&E expects to be able to cut
03:01:52.590 --> 03:01:54.270
from its operational costs.
03:01:54.270 --> 03:01:56.610
That are reflected in our operating plan, yes.
03:02:02.480 --> 03:02:05.790
And then the next sentence says that it will moderate,
03:02:05.790 --> 03:02:08.220
such savings would moderate the expected increase
03:02:08.220 --> 03:02:11.500
on customer bills to support infrastructure investment.
03:02:11.500 --> 03:02:12.333
Do you see that?
03:02:12.333 --> 03:02:13.166
That's correct.
03:02:13.166 --> 03:02:16.150
And that's increases on the bills, separate
03:02:16.150 --> 03:02:18.940
and apart from any treatment of wildfire claims cost.
03:02:18.940 --> 03:02:21.660
These are the costs of infrastructure
03:02:21.660 --> 03:02:23.180
for the wildfire mitigation plan
03:02:23.180 --> 03:02:24.330
and things of that nature.
03:02:24.330 --> 03:02:25.230
That is correct.
03:02:29.330 --> 03:02:32.030
Would you agree with me that the savings
03:02:32.030 --> 03:02:34.450
would only serve that purpose to the extent they show
03:02:34.450 --> 03:02:36.500
up in the authorized revenue requirement?
03:02:38.800 --> 03:02:40.400
Not necessarily.
03:02:40.400 --> 03:02:42.550
Until they show up in the authorized revenue requirement
03:02:42.550 --> 03:02:45.690
how do they moderate
03:02:45.690 --> 03:02:47.690
the expected increase on customer bills?
03:02:48.998 --> 03:02:52.450
In some cases this is a void cost that would have
03:02:52.450 --> 03:02:55.930
otherwise flown into the authorized revenue requirement.
03:02:57.940 --> 03:03:00.540
So where the authorized revenue requirement is set
03:03:00.540 --> 03:03:03.580
on a recorded cost basis, you're suggesting that there be
03:03:03.580 --> 03:03:08.580
a lower amount of recorded cost that PG&E would
03:03:08.900 --> 03:03:11.492
ultimately seek rate recovery of.
03:03:11.492 --> 03:03:12.325
Is that correct?
03:03:12.325 --> 03:03:14.700
May I briefly expand?
03:03:14.700 --> 03:03:16.350
If it's really brief Mr. Wells.
03:03:18.980 --> 03:03:21.450
The time that we put together our rate cases
03:03:23.670 --> 03:03:26.060
we have seen additional costs come
03:03:26.060 --> 03:03:27.420
into our forecast for things like
03:03:27.420 --> 03:03:31.190
the passage of senate bill 247.
03:03:33.210 --> 03:03:35.920
We want to minimize your impact of PSP events.
03:03:35.920 --> 03:03:38.840
Anyway, we've seen cost increases that were otherwise
03:03:38.840 --> 03:03:43.220
eligible to track in either memorandum accounts
03:03:43.220 --> 03:03:46.585
or balance accounts to seek recovery at a later date.
03:03:46.585 --> 03:03:49.640
These cost savings are intended
03:03:49.640 --> 03:03:52.260
to execute that work more efficiently
03:03:52.260 --> 03:03:54.250
so we can reduce what would be
03:03:54.250 --> 03:03:56.180
a forecasted impact on future rates.
03:03:57.850 --> 03:03:59.510
And to your knowledge as you sit here today
03:03:59.510 --> 03:04:01.800
would these cost savings be entirely
03:04:03.328 --> 03:04:04.620
in programs that are subject
03:04:04.620 --> 03:04:07.550
to rate recovery on a recorded cost basis
03:04:07.550 --> 03:04:10.520
or would any of them be in programs that are subject
03:04:10.520 --> 03:04:12.370
to rate recovery on a forecast basis?
03:04:14.770 --> 03:04:16.840
Some of them are gonna, both.
03:04:16.840 --> 03:04:17.673
Okay.
03:04:17.673 --> 03:04:19.670
Would you agree with me that to the extent they are
03:04:19.670 --> 03:04:21.190
for programs that are recovered
03:04:21.190 --> 03:04:25.390
on a forecast basis that cost savings until there's
03:04:25.390 --> 03:04:27.790
an adjustment in the revenue requirement flow
03:04:27.790 --> 03:04:30.090
to the utility rather than to its rate payers?
03:04:31.040 --> 03:04:31.873
Yes.
03:04:33.790 --> 03:04:34.980
Let me get you to turn back
03:04:34.980 --> 03:04:37.930
to what's been marked as PG&E 13
03:04:37.930 --> 03:04:41.840
which is the financial projections document.
03:04:41.840 --> 03:04:43.660
Remember we were talking about a second ago.
03:04:43.660 --> 03:04:44.530
I have it.
03:04:44.530 --> 03:04:45.800
In the very last page.
03:04:46.810 --> 03:04:47.643
Yes.
03:04:48.520 --> 03:04:53.010
So on this table the net cash
03:04:54.380 --> 03:04:58.380
from operations that's listed here,
03:04:58.380 --> 03:05:01.020
would these figures reflect the cost savings
03:05:01.020 --> 03:05:02.490
we were just talking about a second ago
03:05:02.490 --> 03:05:04.220
from attachment, I'm sorry,
03:05:04.220 --> 03:05:09.220
from what's been marked as PG&E 12?
03:05:09.630 --> 03:05:10.463
They do.
03:05:22.528 --> 03:05:23.361
And then...
03:05:25.750 --> 03:05:27.590
I'm sorry to keep asking you to bounce
03:05:27.590 --> 03:05:28.590
and forth Mr. Wells.
03:05:28.590 --> 03:05:30.480
Back to exhibit 12.
03:05:30.480 --> 03:05:32.100
I've got it.
03:05:32.100 --> 03:05:36.250
And slide 29.
03:05:39.965 --> 03:05:44.965
I'm there.
03:05:48.630 --> 03:05:50.410
I think Ms. Kelly asked you some questions
03:05:50.410 --> 03:05:55.340
about the PG&E forecast for rate case growth of 8% per year.
03:05:57.915 --> 03:05:58.870
Do you recall those questions?
03:05:58.870 --> 03:05:59.703
I do.
03:06:01.281 --> 03:06:02.960
For these historical figures that are shown
03:06:02.960 --> 03:06:05.920
in the first column on this graph.
03:06:09.589 --> 03:06:10.422
I'm sorry.
03:06:10.422 --> 03:06:11.255
Let me ask for both.
03:06:11.255 --> 03:06:13.300
Is this just electric operations
03:06:13.300 --> 03:06:15.110
or does it include all operations?
03:06:15.110 --> 03:06:16.010
All operations.
03:06:16.010 --> 03:06:16.843
Okay.
03:06:16.843 --> 03:06:18.950
And for the historical figures would
03:06:18.950 --> 03:06:22.670
it include disallowed capital expenditures
03:06:22.670 --> 03:06:24.240
or are those excluded from this?
03:06:24.240 --> 03:06:25.870
That would be excluded from this.
03:06:43.290 --> 03:06:44.260
Let me ask you...
03:07:04.002 --> 03:07:07.460
Let me ask you to look at what's been marked as TURN x five
03:07:07.460 --> 03:07:11.100
which is the response to TURN data request question five.
03:07:12.154 --> 03:07:12.987
Do you see that?
03:07:15.060 --> 03:07:15.893
I'm turning to it.
03:07:15.893 --> 03:07:16.726
I have it.
03:07:17.860 --> 03:07:19.820
And this was a debtor request that asked
03:07:19.820 --> 03:07:23.900
PG&E to provide its best
03:07:23.900 --> 03:07:28.900
current estimate of the cost of financing
03:07:29.150 --> 03:07:30.650
and financial advisor fees.
03:07:30.650 --> 03:07:31.483
Do you see that?
03:07:32.631 --> 03:07:33.730
It's the second page of text.
03:07:33.730 --> 03:07:36.790
It's designated page four on the bottom right-hand corner.
03:07:39.770 --> 03:07:40.920
Which question is that?
03:07:40.920 --> 03:07:42.420
I'm sorry, it's question five,
03:07:42.420 --> 03:07:44.430
would have been a good start.
03:07:44.430 --> 03:07:45.263
I'm there.
03:07:46.570 --> 03:07:48.820
And then part of what PG&E provided
03:07:48.820 --> 03:07:51.590
in response is this table that is attached as
03:07:51.590 --> 03:07:52.950
the last page of the document.
03:07:52.950 --> 03:07:53.783
Is that correct?
03:07:53.783 --> 03:07:54.750
That's correct.
03:07:54.750 --> 03:07:56.290
And this is a by the heading
03:07:56.290 --> 03:07:58.900
a summary of professional fees and expenses.
03:07:58.900 --> 03:08:00.380
Do you see that?
03:08:00.380 --> 03:08:01.213
I do.
03:08:01.213 --> 03:08:03.960
And it states at the top that it's
03:08:03.960 --> 03:08:06.660
a summary as of January 29th, 2020.
03:08:06.660 --> 03:08:07.650
Do you see that?
03:08:07.650 --> 03:08:08.483
I do.
03:08:08.483 --> 03:08:11.790
But would you agree with me that for a number of these
03:08:11.790 --> 03:08:16.620
firms that are listed here, they're submissions
03:08:18.360 --> 03:08:23.360
for compensation or reimbursement had not been kept current
03:08:23.570 --> 03:08:25.280
for lack of a more precise term?
03:08:26.970 --> 03:08:28.070
It's possible.
03:08:28.070 --> 03:08:29.640
Well, so the first one is
03:08:29.640 --> 03:08:34.630
Crabath, c-r-a-b-a-t-h, Swaine, s-w-a-i-n-e.
03:08:34.630 --> 03:08:36.430
Do you see that firm?
Yep.
03:08:36.430 --> 03:08:39.680
And that would be one of the outside attorney
03:08:39.680 --> 03:08:42.860
firms that PG&E holding company's relying on?
03:08:45.000 --> 03:08:45.860
That's correct, yes.
03:08:45.860 --> 03:08:48.770
Okay, and it shows that the figure that's listed here was
03:08:48.770 --> 03:08:53.340
only for submissions through September 30th, 2019?
03:08:53.340 --> 03:08:54.173
Yes.
03:08:54.173 --> 03:08:55.006
Okay.
03:08:55.868 --> 03:08:58.510
So it'd be reasonable to conclude that the actual
03:08:58.510 --> 03:09:03.510
amounts of professional fees through January 29th, is likely
03:09:03.690 --> 03:09:05.370
to be somewhat higher than
03:09:05.370 --> 03:09:06.950
the figures that are listed on this table.
03:09:06.950 --> 03:09:07.800
That's correct.
03:09:08.990 --> 03:09:13.990
And then for financing fees and such is it correct
03:09:14.380 --> 03:09:18.700
to understand that those fees will
03:09:18.700 --> 03:09:21.640
for the most part be incurred later
03:09:21.640 --> 03:09:25.190
in the process closer to when PG&E emerges from bankruptcy?
03:09:27.780 --> 03:09:29.330
A large percentage of those
03:09:29.330 --> 03:09:33.500
fees have been incurred have been set,
03:09:34.380 --> 03:09:36.560
not paid as part of the note holder RSA.
03:09:36.560 --> 03:09:39.110
The remainder will be incurred as part of the exit.
03:09:42.670 --> 03:09:44.660
So when you say set, if the Commission were
03:09:44.660 --> 03:09:48.630
to ask you what is the current amount that PG&E has paid
03:09:48.630 --> 03:09:50.810
for such financing fees,
03:09:50.810 --> 03:09:52.730
if they've been set, does that necessarily mean
03:09:52.730 --> 03:09:54.300
they've been paid to this point
03:09:54.300 --> 03:09:55.980
or they will be paid at some point in the future?
03:09:55.980 --> 03:09:58.420
They will be paid at exit but we know the amount.
03:09:58.420 --> 03:09:59.253
Okay.
03:10:00.870 --> 03:10:02.840
So then it sounds to me, Mr. Wells, like
03:10:02.840 --> 03:10:03.960
there are three categories.
03:10:03.960 --> 03:10:08.150
There's a category that have been incurred and paid.
03:10:09.310 --> 03:10:13.120
There's a category that have been set but not yet paid.
03:10:14.060 --> 03:10:15.840
And then there's a third category that has
03:10:15.840 --> 03:10:17.540
not yet been set and not yet paid.
03:10:18.396 --> 03:10:19.940
Is that a fair characterization?
03:10:19.940 --> 03:10:20.830
That's right.
03:10:20.830 --> 03:10:23.340
And is it fair
03:10:23.340 --> 03:10:25.870
to understand that the majority of the financing related
03:10:25.870 --> 03:10:30.150
costs would fall into the latter two categories, that is,
03:10:30.150 --> 03:10:33.740
either set but not yet paid or not yet set and not yet paid?
03:10:33.740 --> 03:10:34.640
That is correct.
03:10:42.470 --> 03:10:46.150
And then as I understand PG&E's position it is that it is
03:10:46.150 --> 03:10:49.850
only seeking recovery of, and I apologize
03:10:49.850 --> 03:10:51.370
for not having the figures at hand Mr. Wells,
03:10:51.370 --> 03:10:54.290
but something in the range of $150
03:10:54.290 --> 03:10:55.970
million of financing fees.
03:10:55.970 --> 03:10:57.431
Just a little more than that yes.
03:10:57.431 --> 03:10:58.430
And--
03:10:58.430 --> 03:10:59.742
154 million.
03:10:59.742 --> 03:11:00.740
Thank you.
03:11:00.740 --> 03:11:05.170
And is PG&E committing at this time that it is that's it.
03:11:05.170 --> 03:11:07.810
For financing fees it'd be $154 million
03:11:07.810 --> 03:11:10.160
and absolutely nothing else, no matter what?
03:11:10.160 --> 03:11:10.993
No.
03:11:10.993 --> 03:11:12.170
That's our current estimate.
03:11:14.070 --> 03:11:14.903
Well.
03:11:17.090 --> 03:11:19.630
For the fees that are covered
03:11:19.630 --> 03:11:24.630
by the current estimate, whatever the final amount turns out
03:11:24.910 --> 03:11:28.470
to be for that subset of the fees, is PG&E committing
03:11:28.470 --> 03:11:30.630
now that it's only that subset,
03:11:30.630 --> 03:11:33.800
the fees that have been identified as now being $154
03:11:33.800 --> 03:11:35.850
million, whatever that figure proves
03:11:35.850 --> 03:11:38.960
to be, that would be the entirety of what PG&E
03:11:38.960 --> 03:11:41.810
ever seeks to recover from rate pairs for financing cost?
03:11:45.420 --> 03:11:46.980
We're seeking to clarify that we intend
03:11:46.980 --> 03:11:50.640
to recover those categories of financing costs.
03:11:53.530 --> 03:11:55.540
Our current estimate is 154 million.
03:11:57.790 --> 03:11:59.600
And that category of financing costs,
03:11:59.600 --> 03:12:03.080
as I understand it, are the financing costs associated
03:12:03.080 --> 03:12:06.390
with a subset of the total financing
03:12:06.390 --> 03:12:08.430
transactions that PG&E contemplates
03:12:08.430 --> 03:12:09.980
for its plan at reorganization.
03:12:12.820 --> 03:12:16.840
The subset related to costs that areused
03:12:16.840 --> 03:12:19.560
to fund the company's rate base, yes.
03:12:19.560 --> 03:12:21.790
It's a subset of the total financing.
03:12:21.790 --> 03:12:22.770
Okay.
03:12:22.770 --> 03:12:25.330
So other than that subset, is PG&E taking
03:12:25.330 --> 03:12:26.820
the position now that for all
03:12:26.820 --> 03:12:28.970
the other categories of financing,
03:12:28.970 --> 03:12:31.570
it's never gonna seek rate recovery for those costs?
03:12:34.097 --> 03:12:36.770
Yes, we are trying to clarify that we are not intending
03:12:36.770 --> 03:12:39.170
to seek rate recovery for the professional fees,
03:12:40.690 --> 03:12:43.380
the financing costs that are not associated
03:12:43.380 --> 03:12:44.850
with the funding rate base.
03:12:44.850 --> 03:12:46.740
And your use of the term intending gives me
03:12:46.740 --> 03:12:49.440
the heebie-jeebies, to use a technical term Mr. Wells.
03:12:51.390 --> 03:12:53.150
Can the Commission take that to the bank
03:12:53.150 --> 03:12:55.250
and say the utility's never gonna seek it
03:12:55.250 --> 03:12:57.730
or is it based on what PG&E knows today
03:12:57.730 --> 03:12:59.400
it doesn't intend to seek it,
03:12:59.400 --> 03:13:01.830
but things could change and we might seek it later.
03:13:04.390 --> 03:13:07.860
We're not seeking recovery for these costs.
03:13:08.920 --> 03:13:11.810
At this time as part of the material that you've submitted
03:13:11.810 --> 03:13:13.760
in this investigation, is that correct?
03:13:17.890 --> 03:13:20.880
It would be easier if we went line by line.
03:13:23.460 --> 03:13:25.510
We're not going to seek recovery
03:13:25.510 --> 03:13:27.480
for the professional cost associated
03:13:27.480 --> 03:13:29.190
with the bankruptcy except
03:13:29.190 --> 03:13:31.770
for the professional cost that were associated
03:13:31.770 --> 03:13:33.280
with a note holder RSA.
03:13:33.280 --> 03:13:36.520
We're not going to seek recovery now
03:13:36.520 --> 03:13:39.470
or in the future for the financing cost associated
03:13:39.470 --> 03:13:42.870
with the financing that does not fund rate base.
03:13:44.380 --> 03:13:47.070
We do intend to seek recovery
03:13:47.070 --> 03:13:50.200
for the financing cost that areused
03:13:50.200 --> 03:13:52.160
to support funding a rate base.
03:13:52.160 --> 03:13:55.060
And those are the amounts that you've been characterizing
03:13:55.060 --> 03:13:58.040
as being offset by interest rate savings
03:13:58.040 --> 03:13:59.760
in your testimony and other places.
03:13:59.760 --> 03:14:00.620
Is that correct?
03:14:01.590 --> 03:14:02.860
That last category yes.
03:14:02.860 --> 03:14:03.693
All right.
03:14:10.882 --> 03:14:11.990
Can I have one second off the record.
03:14:11.990 --> 03:14:13.120
Off the record.
03:14:19.423 --> 03:14:21.710
(faintly speaking) time check, you've used 40 minutes.
03:14:25.246 --> 03:14:26.079
Okay.
03:14:26.963 --> 03:14:28.410
Thank you your Honor.
03:14:28.410 --> 03:14:29.243
Back on (faintly speaking).
03:14:29.243 --> 03:14:30.270
Back on the record.
03:14:32.720 --> 03:14:33.580
Mr. Wells that's all I have.
03:14:33.580 --> 03:14:34.413
Thank you for your patience.
03:14:34.413 --> 03:14:35.710
Thank you your Honor.
03:14:35.710 --> 03:14:36.760
Thank you.
03:14:36.760 --> 03:14:38.500
Let's be off the record.
03:14:38.500 --> 03:14:41.534
Do you have an estimate of your amount of time?
03:14:41.534 --> 03:14:43.043
(faintly speaking)
03:14:43.043 --> 03:14:44.410
I'm gonna be same category of time,
03:14:44.410 --> 03:14:47.120
but it's gotten much shorter given some of the last
03:14:47.120 --> 03:14:49.500
statements from Mr. Wells to (mumbles) helpful.
03:14:49.500 --> 03:14:52.811
So I'm certain I'll be within that timeframe.
03:14:52.811 --> 03:14:55.760
Okay.
03:14:55.760 --> 03:14:58.090
And Mr. Miley can you please come forward
03:14:58.090 --> 03:15:01.550
and speak into a microphone for this conversation?
03:15:01.550 --> 03:15:03.990
You don't need to speak until you're on a microphone.
03:15:03.990 --> 03:15:06.750
We're webcasting so you need to speak into a microphone.
03:15:10.250 --> 03:15:11.960
Your Honor, Matt Miley with the Public Advocates.
03:15:11.960 --> 03:15:15.110
We do have I believe it should be only five minutes
03:15:15.110 --> 03:15:17.290
or less of questions for Mr. Wells.
03:15:17.290 --> 03:15:21.040
Okay, then at this time I think we'll continue
03:15:21.040 --> 03:15:23.320
to move forward with the goal of trying
03:15:23.320 --> 03:15:26.860
to wrap up no later than one o'clock with this witness.
03:15:28.110 --> 03:15:32.140
So be as brief as possible, much shorter
03:15:32.140 --> 03:15:35.820
than your target as much as possible.
03:15:35.820 --> 03:15:38.100
And this also means that you're gonna have
03:15:38.100 --> 03:15:41.450
to be very brief on your redirect as well.
03:15:41.450 --> 03:15:43.330
In addition Commissioner Rechtschaffen
03:15:43.330 --> 03:15:45.980
and I both have some questions for this witness, so.
03:15:45.980 --> 03:15:48.440
At this time we'll turn to Mr. Algontar
03:15:48.440 --> 03:15:50.040
once we go back on the record.
03:15:50.040 --> 03:15:53.440
We'll be back on the record at Mr. Algontar EPUC.
03:15:54.997 --> 03:15:56.950
Mr. Wells good afternoon.
03:15:56.950 --> 03:15:58.130
It's early.
03:15:58.130 --> 03:16:00.530
My name is Michael Algontar as I think you know.
03:16:00.530 --> 03:16:04.270
I represent the energy producers and users Olish
03:16:04.270 --> 03:16:06.570
and the indicated shippers in this proceeding.
03:16:07.490 --> 03:16:12.490
Let me start with exactly who you work for.
03:16:13.240 --> 03:16:16.400
Is it the utility corporation,
03:16:16.400 --> 03:16:18.860
the holding company corporation or both?
03:16:18.860 --> 03:16:20.050
I work for the corporation.
03:16:20.050 --> 03:16:20.883
Okay.
03:16:23.430 --> 03:16:28.220
There is in your estimation a direct link, is there not,
03:16:28.220 --> 03:16:32.370
between the debt status if
03:16:32.370 --> 03:16:35.210
you will of the corporation and the utility?
03:16:37.130 --> 03:16:38.330
Yes.
03:16:38.330 --> 03:16:42.190
So in that event if the corporation were
03:16:42.190 --> 03:16:46.400
to take on greater debt that would have an impact
03:16:46.400 --> 03:16:50.770
upon the utility's capacity and rate
03:16:50.770 --> 03:16:52.950
with respect to other debt?
03:16:52.950 --> 03:16:54.420
It could at certain thresholds.
03:16:54.420 --> 03:16:55.253
Okay.
03:17:04.680 --> 03:17:07.710
I wanna go through a hopefully a quick
03:17:08.870 --> 03:17:12.860
process of chronological check of where credit ratings were
03:17:12.860 --> 03:17:15.900
and where they've come.
03:17:15.900 --> 03:17:18.420
Is it correct that PG&E's credit rating
03:17:18.420 --> 03:17:22.310
progressively declined from A minus rating
03:17:22.310 --> 03:17:27.180
at the end of 2017 to Triple B through 2018?
03:17:27.180 --> 03:17:28.030
That's correct.
03:17:29.010 --> 03:17:31.040
The Triple B rating is below investor
03:17:31.040 --> 03:17:32.840
grade as we've established, correct?
03:17:33.960 --> 03:17:37.270
Triple B is investment grade.
03:17:37.270 --> 03:17:38.474
It's not below.
03:17:38.474 --> 03:17:40.560
Okay.
03:17:40.560 --> 03:17:45.560
When PG&E filed for bankruptcy in January 20 of 2019 was it
03:17:48.190 --> 03:17:51.820
at a Triple B rating or lower?
03:17:51.820 --> 03:17:55.710
The rating agency downgraded us to sub-investment grade--
03:17:55.710 --> 03:17:56.910
Which was?
03:17:59.310 --> 03:18:01.070
I don't recall the specific rating,
03:18:01.070 --> 03:18:02.290
but it was below investment grade
03:18:02.290 --> 03:18:03.520
before we filed for bankruptcy.
03:18:03.520 --> 03:18:04.390
Below Triple B.
03:18:04.390 --> 03:18:05.223
Yes.
Okay.
03:18:07.840 --> 03:18:12.840
This credit rating drop in 2018 created financial distress
03:18:12.940 --> 03:18:14.480
for PG during 2018.
03:18:14.480 --> 03:18:15.480
Is that fair to say?
03:18:23.530 --> 03:18:25.110
Apologies.
03:18:25.110 --> 03:18:29.100
We were downgraded from investment grade in 2019.
03:18:29.960 --> 03:18:33.000
We maintained an investment grade rating throughout 2018.
03:18:37.384 --> 03:18:39.490
We experienced the most acute financial challenges
03:18:39.490 --> 03:18:42.530
after the camp fire, late 2018 and early 2019.
03:18:43.440 --> 03:18:45.260
And my question's a little more broad.
03:18:45.260 --> 03:18:47.550
You were on a stressed decline I suppose is
03:18:47.550 --> 03:18:48.600
what I'm trying to get to.
03:18:48.600 --> 03:18:49.433
Is that fair?
03:18:49.433 --> 03:18:50.910
That's fair.
03:18:56.782 --> 03:18:59.520
You would agree would you not that the 2018
03:18:59.520 --> 03:19:02.720
and 2019 credit ratings drop
03:19:02.720 --> 03:19:04.520
and financial distress was caused
03:19:04.520 --> 03:19:06.740
by wildfire damage claims adverse
03:19:06.740 --> 03:19:10.810
to PG&E related to 2017 and 2018 events?
03:19:10.810 --> 03:19:11.643
Largely.
03:19:17.510 --> 03:19:20.360
In PG&E's publicly available announcement
03:19:20.360 --> 03:19:25.360
to investors at the end of 2018, beginning of 2019,
03:19:27.530 --> 03:19:32.530
the stated reason for the January 29 bankruptcy filing was
03:19:32.970 --> 03:19:34.990
a result of wildfire damage claims.
03:19:34.990 --> 03:19:36.440
Is that correct?
03:19:36.440 --> 03:19:37.324
That's correct.
03:19:37.324 --> 03:19:38.157
Yeah.
03:19:45.550 --> 03:19:47.610
In the financial markets, based
03:19:47.610 --> 03:19:49.970
upon your experience, is it fair
03:19:49.970 --> 03:19:52.940
to say that interest rates for utility
03:19:52.940 --> 03:19:57.110
with a Triple B or lower rating will be higher
03:19:57.110 --> 03:19:58.760
than the interest rate for utility
03:19:58.760 --> 03:20:01.260
with an A minus bond rating?
03:20:01.260 --> 03:20:02.093
That's fair.
03:20:18.140 --> 03:20:22.110
In your historical time horizon of reviewing
03:20:22.110 --> 03:20:24.290
credit ratings and bond ratings
03:20:24.290 --> 03:20:27.640
in particular are you aware of an
03:20:27.640 --> 03:20:31.190
interest rate spread reflecting a difference
03:20:31.190 --> 03:20:34.470
in bond ratings that did not exist
03:20:34.470 --> 03:20:36.440
in terms of this kind of correlation
03:20:36.440 --> 03:20:41.440
between credit rating and bond rating?
03:20:41.490 --> 03:20:42.430
I'm not aware.
03:20:46.790 --> 03:20:49.080
You would agree, would you not, that PG&E's
03:20:49.080 --> 03:20:50.750
cost of selling new
03:20:50.750 --> 03:20:54.190
bonds, refinancing existing bonds will be
03:20:54.190 --> 03:20:57.150
at a higher interest rate if PG&E's bond rating is say
03:20:57.150 --> 03:21:00.720
Triple B in comparison to a PG&E bond rating at A minus?
03:21:02.280 --> 03:21:03.113
Yes.
03:21:09.980 --> 03:21:11.420
And I think we've established this,
03:21:11.420 --> 03:21:13.950
but I wanna make sure just in this chronology.
03:21:13.950 --> 03:21:18.950
In 2017 when PG&E had an A minus bond rating,
03:21:19.750 --> 03:21:23.010
PG&E did not issue secured debt.
03:21:23.010 --> 03:21:24.360
Correct?
That's correct.
03:21:25.910 --> 03:21:28.650
Did issue unsecured debt during that period though.
03:21:28.650 --> 03:21:29.700
Is that also correct?
03:21:29.700 --> 03:21:30.533
That's right.
03:21:37.560 --> 03:21:40.500
Is it correct to say, and I'll open this up
03:21:40.500 --> 03:21:42.210
to you if you disagree, but is it correct
03:21:42.210 --> 03:21:47.210
to say that PG&E can only issue secured debt
03:21:47.700 --> 03:21:49.530
in an amount limited
03:21:49.530 --> 03:21:53.600
by the market value of its property that can be mortgaged?
03:21:56.230 --> 03:21:57.160
Generally yes.
03:22:00.320 --> 03:22:03.000
I'd like you to turn with me briefly
03:22:03.000 --> 03:22:07.850
to your one testimony, original testimony
03:22:07.850 --> 03:22:09.900
at page two dash.
03:22:13.850 --> 03:22:14.880
I'm sorry, two dash.
03:22:14.880 --> 03:22:17.720
Yeah, no, sorry about that.
03:22:18.610 --> 03:22:19.610
Two dash 12.
03:22:21.680 --> 03:22:25.100
And I'm focused on lines beginning
03:22:25.100 --> 03:22:29.260
at 15 and extending through 18 for a couple of reasons,
03:22:30.750 --> 03:22:35.220
one is I am very much interested in understanding
03:22:36.300 --> 03:22:38.630
your definition, complete definition,
03:22:38.630 --> 03:22:41.410
in as much detail as possible of the term
03:22:41.410 --> 03:22:46.370
utility contributions as it's used at line 17.
03:22:52.710 --> 03:22:55.330
And for example, just described
03:22:55.330 --> 03:22:57.950
before I started questioning you utility
03:22:57.950 --> 03:23:01.520
contributions associated with bankruptcy fees.
03:23:01.520 --> 03:23:06.290
Those will come from shareholders and not from rate payers.
03:23:06.290 --> 03:23:07.990
Those are the kinds of things I'm interested
03:23:07.990 --> 03:23:12.960
in making sure I understand your full list of what is
03:23:12.960 --> 03:23:16.060
and isn't a utility contribution.
03:23:16.060 --> 03:23:19.100
This testimony here relates specifically
03:23:19.100 --> 03:23:22.590
to the payment to the state's Wildfire Fund.
03:23:23.840 --> 03:23:25.910
So it's not trying
03:23:25.910 --> 03:23:29.126
to refer any broader to (mumbles) contribution.
03:23:29.126 --> 03:23:31.670
It's our payment or contribution
03:23:31.670 --> 03:23:33.570
to the AB1054 Wildfire Funds.
03:23:36.750 --> 03:23:40.170
Also embedded in this passage is
03:23:40.170 --> 03:23:44.800
a reflection of your understanding of obligations
03:23:45.800 --> 03:23:47.400
under AB1054.
03:23:47.400 --> 03:23:48.233
Is that fair?
03:23:48.233 --> 03:23:49.163
That's fair.
03:23:49.163 --> 03:23:50.000
You've studied that carefully.
03:23:50.000 --> 03:23:50.953
Have you not?
03:23:50.953 --> 03:23:52.020
I have.
03:23:52.020 --> 03:23:55.460
As a rate payer, are you a rate payer of PG&E by the way?
03:23:55.460 --> 03:23:56.880
I am.
03:23:56.880 --> 03:23:57.798
I am as well.
03:23:57.798 --> 03:24:01.690
As a rate payer of PG&E you would agree,
03:24:01.690 --> 03:24:03.920
would you not, that every rate payer has an acute
03:24:03.920 --> 03:24:07.260
interest in preserving the protections that they thought
03:24:07.260 --> 03:24:10.590
they had under state law with respect to 1054?
03:24:12.890 --> 03:24:14.490
I'm not sure I understand the question.
03:24:14.490 --> 03:24:18.770
There are protections in AB1054 that accrue
03:24:18.770 --> 03:24:23.650
to rate payers in terms of the amount of cost
03:24:23.650 --> 03:24:26.250
they might bear from the bankruptcy
03:24:26.250 --> 03:24:27.680
or from the wildfires, correct?
03:24:27.680 --> 03:24:29.291
I understand that limitation yes.
03:24:29.291 --> 03:24:30.320
Okay.
03:24:30.320 --> 03:24:31.880
And therefore there's an interest
03:24:31.880 --> 03:24:34.990
in those rate payers knowing with clarity
03:24:34.990 --> 03:24:37.080
and with as much specificity as possible
03:24:37.080 --> 03:24:39.260
exactly what those limitations are.
03:24:39.260 --> 03:24:41.000
Is that a fair statement?
03:24:41.000 --> 03:24:42.510
I think that is yes.
03:24:42.510 --> 03:24:44.710
There's also an interest in this Commission
03:24:44.710 --> 03:24:48.280
who has an obligation to protect rate payers
03:24:48.280 --> 03:24:52.810
and to implement effectively AB1054 protections.
03:24:52.810 --> 03:24:54.250
Would you agree with that statement?
03:24:54.250 --> 03:24:55.083
Yes I do.
03:24:55.990 --> 03:25:00.420
So what is vitally important to me,
03:25:00.420 --> 03:25:02.730
and I'll try and cut to the chase as best we can, see
03:25:02.730 --> 03:25:07.730
if we can cut some of this out, is your plan is a plan.
03:25:09.070 --> 03:25:11.390
It has intentions.
03:25:11.390 --> 03:25:13.330
It has hopes.
03:25:13.330 --> 03:25:15.420
It has some expectations.
03:25:16.320 --> 03:25:17.690
There are places where it's hard
03:25:17.690 --> 03:25:19.810
to find, as I think you were hear
03:25:19.810 --> 03:25:24.050
for Mr. Johnson's testimony, the term commitments
03:25:24.050 --> 03:25:28.390
and assurances and enforceability and if you will process
03:25:28.390 --> 03:25:31.230
or triggers that this Commission could employ
03:25:31.230 --> 03:25:34.350
in a timely way to assure those protections
03:25:34.350 --> 03:25:38.510
under 1054 are both understood and timely enforced.
03:25:39.470 --> 03:25:41.083
Is that a fair
03:25:41.083 --> 03:25:44.460
characterization of your description of the PG&E plan?
03:25:46.870 --> 03:25:49.440
We're seeking to clarify our intentions
03:25:53.440 --> 03:25:55.970
under this plan, because we understand
03:25:57.000 --> 03:25:58.370
the point that you raised which is
03:25:58.370 --> 03:26:01.300
why we've filed that supplemental testimony this week.
03:26:02.500 --> 03:26:04.420
And that's PG&E eight you're referring
03:26:04.420 --> 03:26:05.950
to is the supplemental testimony.
03:26:05.950 --> 03:26:06.880
Well I'm sorry.
03:26:06.880 --> 03:26:09.003
PG&E seven is your supplemental testimony.
03:26:09.003 --> 03:26:11.460
But in PG&E eight, if I can get you
03:26:11.460 --> 03:26:14.380
to refer to that, there are several paragraphs
03:26:15.480 --> 03:26:20.210
there that I think your ceo passed along
03:26:20.210 --> 03:26:23.750
to you as something you'd be responsible for
03:26:23.750 --> 03:26:25.090
and your counsel was careful with me
03:26:25.090 --> 03:26:28.930
to make sure that I didn't exclusive rely
03:26:28.930 --> 03:26:30.550
on Mr. Johnson's testimony,
03:26:30.550 --> 03:26:32.650
but make sure I asked you these questions.
03:26:34.340 --> 03:26:39.340
This is your effort to clarify what is now a different
03:26:40.890 --> 03:26:45.890
position from what was filed by PG&E on the 31st of January
03:26:46.550 --> 03:26:50.110
in terms of issues associated with wildfire cost
03:26:50.110 --> 03:26:55.110
and fees and bankruptcy fees, professional fees
03:26:56.350 --> 03:27:01.247
and debt carrying costs incurred that you will
03:27:03.010 --> 03:27:06.220
not be seeking recovery from rate payers.
03:27:06.220 --> 03:27:07.053
Correct?
03:27:08.230 --> 03:27:10.230
I wouldn't characterize it as a change of position,
03:27:10.230 --> 03:27:14.210
but we're trying to do is provide further clarity,
03:27:14.210 --> 03:27:18.310
because we recognize that the original testimony was unclear
03:27:18.310 --> 03:27:20.130
in some of these areas.
03:27:20.130 --> 03:27:21.160
Fair point, okay.
03:27:30.300 --> 03:27:32.710
Are there standards in the plan
03:27:34.280 --> 03:27:37.890
to assure for the Commission that they will have
03:27:37.890 --> 03:27:40.650
the opportunity, and for rate payers, that they will have
03:27:40.650 --> 03:27:44.040
the opportunity in advance of costs being incurred
03:27:44.040 --> 03:27:49.040
or allocated to them under your plan that preserve
03:27:50.440 --> 03:27:53.140
these protections that we've been alluding to?
03:27:57.030 --> 03:27:57.863
That's what we're seeking
03:27:57.863 --> 03:27:59.700
to support providing this clarity.
03:28:01.170 --> 03:28:04.240
But there isn't, as I've seen,
03:28:04.240 --> 03:28:05.760
and that's what I'm trying to clarify
03:28:05.760 --> 03:28:09.910
with you, there isn't a dear Commission here's
03:28:09.910 --> 03:28:13.100
the process questions or process that you should go
03:28:13.100 --> 03:28:15.620
through tier two, tier three advice
03:28:15.620 --> 03:28:17.420
letter filings that we will submit.
03:28:18.290 --> 03:28:20.930
Here are the areas that you should be sensitive
03:28:20.930 --> 03:28:24.330
to in terms of what standards would trigger
03:28:24.330 --> 03:28:26.960
a different and expected result?
03:28:28.510 --> 03:28:29.630
We're trying to articulate that.
03:28:29.630 --> 03:28:32.430
I mean, I think it's the, we've committed
03:28:32.430 --> 03:28:35.200
to advice on our process to true up our cost of debt
03:28:35.200 --> 03:28:40.200
to be reflective of the savings we've anticipated
03:28:40.530 --> 03:28:43.180
as well as the financing costs that we've forecasted.
03:28:44.480 --> 03:28:48.780
We have identified the separate application
03:28:48.780 --> 03:28:51.370
for securitization which is not a component of this plan,
03:28:51.370 --> 03:28:55.810
but as we referenced if unapproved we will have
03:28:55.810 --> 03:28:57.200
to evaluate at the time, whether
03:28:57.200 --> 03:29:00.440
or not the company will seek going forward
03:29:00.440 --> 03:29:02.592
from there any cost for recovery related
03:29:02.592 --> 03:29:05.780
to 2017 and 2018 fires.
03:29:05.780 --> 03:29:08.680
So what we've tried to do is clarify each of those points.
03:29:09.550 --> 03:29:10.383
Okay.
03:29:20.950 --> 03:29:23.640
In the event the Commission makes
03:29:23.640 --> 03:29:28.320
different assessments of the baseline
03:29:28.320 --> 03:29:33.320
under 1054, AB1054, then your testimony
03:29:34.050 --> 03:29:37.100
on the corrections and supplemental testimony seeks
03:29:40.420 --> 03:29:45.420
to justify will your plan be withdrawn?
03:29:54.090 --> 03:29:55.340
It's hard to speculate as
03:29:55.340 --> 03:29:58.550
to how we would address those issues.
03:29:58.550 --> 03:30:01.310
We've tried to be very forthcoming
03:30:01.310 --> 03:30:04.520
and put forward a plan that on
03:30:04.520 --> 03:30:07.560
our basis of our understanding of the baseline results
03:30:07.560 --> 03:30:09.590
in a net decrease for customer rates.
03:30:12.560 --> 03:30:14.700
Obviously we wanna work with the Commission
03:30:14.700 --> 03:30:17.980
to incorporate feedback, but it's hard
03:30:17.980 --> 03:30:20.020
to speculate until I understand specifically
03:30:20.020 --> 03:30:21.120
what that feedback is.
03:30:23.060 --> 03:30:24.610
There's risk in your plan.
03:30:24.610 --> 03:30:25.443
Is there not?
03:30:28.316 --> 03:30:29.610
I think there's risk in all financial projections, yes.
03:30:29.610 --> 03:30:30.443
Of course.
03:30:31.410 --> 03:30:32.520
That's exactly fair.
03:30:32.520 --> 03:30:33.353
And there's risk
03:30:33.353 --> 03:30:37.980
for rate payers if your projections are wrong.
03:30:37.980 --> 03:30:38.813
Correct?
03:30:38.813 --> 03:30:39.646
Correct.
03:30:39.646 --> 03:30:43.180
And if rate payers sought relief
03:30:43.180 --> 03:30:46.800
from a risk that went awry
03:30:46.800 --> 03:30:51.130
or projection that went awry that resulted in harm
03:30:51.130 --> 03:30:56.130
to them, they would need to seek recovery
03:30:58.530 --> 03:31:00.350
through a Commission process.
03:31:00.350 --> 03:31:02.680
Is that correct, your understanding?
03:31:07.850 --> 03:31:11.200
I don't know the procedural mechanism to seek recovery.
03:31:13.830 --> 03:31:14.700
To seek recovery.
03:31:17.480 --> 03:31:21.160
Would you expect rate payers to have some other action
03:31:21.160 --> 03:31:26.160
against PG&E directly if your plan goes awry?
03:31:30.350 --> 03:31:31.550
I wanna be responsive.
03:31:32.637 --> 03:31:34.490
I'm struggling with plan goes awry.
03:31:36.360 --> 03:31:39.980
I will acknowledge that plans are
03:31:39.980 --> 03:31:41.170
a projection of the future.
03:31:41.170 --> 03:31:43.150
Yes.
There is risk to that.
03:31:43.150 --> 03:31:46.000
But we have taken a number of steps
03:31:46.000 --> 03:31:49.380
to feel confident in this plan.
03:31:49.380 --> 03:31:53.080
And I want to endorse your confidence.
03:31:53.080 --> 03:31:55.380
I want it all to come together.
03:31:55.380 --> 03:31:56.940
Unfortunately we live in a
03:31:56.940 --> 03:32:00.120
world that doesn't accept that as reality.
03:32:00.120 --> 03:32:02.920
So you look at a future that bears risk.
03:32:02.920 --> 03:32:05.310
And you're looking at a Commission that needs
03:32:05.310 --> 03:32:08.910
to try and assess that risk and act upon those risks failing
03:32:08.910 --> 03:32:11.030
to meet standards that are enforceable
03:32:11.030 --> 03:32:13.580
and identified which is as you know akin
03:32:13.580 --> 03:32:17.100
to what the governor seemed to be saying to PG&E as well.
03:32:17.100 --> 03:32:20.750
So I'm trying to explore with you just what process
03:32:20.750 --> 03:32:24.560
you see, what guidance you would suggest
03:32:24.560 --> 03:32:27.770
for this Commission about the standards
03:32:27.770 --> 03:32:29.760
it should be concerned with
03:32:29.760 --> 03:32:31.370
and whether or not there are commitments
03:32:31.370 --> 03:32:35.780
in this plan that if there's a failure of those
03:32:35.780 --> 03:32:38.920
future forecast projections and
03:32:38.920 --> 03:32:40.780
injuries result, harm results,
03:32:41.840 --> 03:32:44.150
what will they do, how will they act,
03:32:44.150 --> 03:32:46.750
and how will they act in a timely way.
03:32:46.750 --> 03:32:47.870
It's a compound question.
03:32:47.870 --> 03:32:50.050
I'm sorry for trying to move along here.
03:32:57.650 --> 03:32:59.520
The basis of the majority of these
03:32:59.520 --> 03:33:01.210
financial projections are rate
03:33:01.210 --> 03:33:04.530
cases that either have been decided or settled.
03:33:06.920 --> 03:33:11.170
So we have a great deal of visibility
03:33:11.170 --> 03:33:13.020
under these financial plans.
03:33:15.010 --> 03:33:17.130
To the extent that adverse actions were
03:33:17.130 --> 03:33:19.300
to occur, I think those adverse
03:33:19.300 --> 03:33:22.640
actions would likely accrue more to shareholders
03:33:22.640 --> 03:33:23.790
than they would customers,
03:33:23.790 --> 03:33:25.910
because these plans are based again
03:33:25.910 --> 03:33:30.910
on either settled rate cases or decided rate cases.
03:33:32.830 --> 03:33:36.890
And again, I accept your hope, and I accept your dream.
03:33:36.890 --> 03:33:39.870
I guess you're being asked to speak into the microphone.
03:33:39.870 --> 03:33:43.180
I accept your hope and I accept your optimism.
03:33:43.180 --> 03:33:44.760
I'm really not challenging that.
03:33:44.760 --> 03:33:48.410
What I'm asking about is unfortunately plans go awry.
03:33:49.710 --> 03:33:51.260
That's really the scenario I'm trying
03:33:51.260 --> 03:33:54.180
to drill down on because--
03:33:54.180 --> 03:33:55.730
Can you ask a more specific question?
03:33:55.730 --> 03:33:58.090
I don't know that he's gonna be able to answer any better.
03:33:58.090 --> 03:33:59.360
That's the third time.
03:33:59.360 --> 03:34:00.193
Fair point.
03:34:03.340 --> 03:34:04.810
And Mr. Wells if you tip
03:34:04.810 --> 03:34:07.818
your microphone up a little, it might be better.
03:34:07.818 --> 03:34:12.818
Thank you.
03:34:14.310 --> 03:34:17.490
There was, as you've alluded to, a change
03:34:17.490 --> 03:34:22.490
in or correction or an updating of views regarding
03:34:23.130 --> 03:34:27.860
the pass through of cost to rate payers concerning
03:34:27.860 --> 03:34:30.060
wild fires 2017 and '18
03:34:30.060 --> 03:34:34.620
and part of 2015 as well as
03:34:34.620 --> 03:34:39.620
the professional fees associated with bankruptcy.
03:34:41.570 --> 03:34:46.570
What was it that caused you to change your earlier expressed
03:34:47.720 --> 03:34:52.670
position that PG&E was not taking a position
03:34:52.670 --> 03:34:55.730
on the treatment of those costs?
03:34:59.380 --> 03:35:02.360
It was an understanding of the lack of clarity,
03:35:02.360 --> 03:35:06.100
how important timeliness of this entire proceeding is
03:35:06.100 --> 03:35:09.220
in wanting to be as clear as possible
03:35:09.220 --> 03:35:10.820
with parties in this proceeding.
03:35:12.120 --> 03:35:13.750
Were there principles involved
03:35:13.750 --> 03:35:16.850
in terms of your interpretation of 1054?
03:35:17.810 --> 03:35:18.720
Yes.
03:35:18.720 --> 03:35:20.510
And what were the changes
03:35:20.510 --> 03:35:23.890
in those principles that might be instructive
03:35:23.890 --> 03:35:27.430
to this Commission about your interpretation?
03:35:28.420 --> 03:35:30.640
I don't think there's ever been a change in principle.
03:35:30.640 --> 03:35:33.070
Our basic premise with respect
03:35:33.070 --> 03:35:35.010
to AB1054 and the customer
03:35:35.010 --> 03:35:39.110
protection is that that protection addressed
03:35:39.110 --> 03:35:41.100
the cost directly associated
03:35:41.100 --> 03:35:42.750
with this plan of reorganization.
03:35:43.770 --> 03:35:45.980
And as a result that's why we tried
03:35:45.980 --> 03:35:49.390
to clarify we're incurring financing costs that we intend
03:35:49.390 --> 03:35:51.510
to seek recovery for that will be offset
03:35:51.510 --> 03:35:53.080
by interest rate savings
03:35:53.080 --> 03:35:56.280
and that the other professional services costs,
03:35:56.280 --> 03:36:00.300
the other financing cost for non-rate based funded debt
03:36:01.160 --> 03:36:05.640
and equity would be covered by shareholders.
03:36:12.410 --> 03:36:16.480
Let me step into the assumption world
03:36:16.480 --> 03:36:19.900
about the securitized debt that you're looking
03:36:19.900 --> 03:36:22.260
for to making an application for.
03:36:22.260 --> 03:36:25.410
And let's assume that those projections
03:36:25.410 --> 03:36:29.050
also don't exactly match expectations
03:36:29.050 --> 03:36:33.880
instead of being a rate reduction actually work adversely
03:36:33.880 --> 03:36:36.100
in terms of rates for rate payers.
03:36:37.930 --> 03:36:40.870
Is there any basis if that event
03:36:40.870 --> 03:36:43.140
would occur that this Commission should
03:36:43.140 --> 03:36:47.910
not assure that PG&E is not issuing any dividends
03:36:47.910 --> 03:36:50.760
to any shareholder during that period of time?
03:36:52.020 --> 03:36:53.860
We intend to offer specificity
03:36:53.860 --> 03:36:57.450
around the customer protections in an upcoming application.
03:36:57.450 --> 03:36:59.280
As it relates to restrictions
03:36:59.280 --> 03:37:04.190
on dividends I think that that would complicate what will be
03:37:06.440 --> 03:37:10.780
a record capital raise post-emergence.
03:37:11.640 --> 03:37:13.580
I don't think that is in any stakeholder's interest,
03:37:13.580 --> 03:37:17.030
customer's, shareholder's, wild fire victim's,
03:37:17.030 --> 03:37:18.640
all stakeholder's as part of this case.
03:37:18.640 --> 03:37:23.340
But you agree that paying off that debt as quickly
03:37:23.340 --> 03:37:27.350
as conceivably possible is in everyone's interest.
03:37:27.350 --> 03:37:28.440
Sorry what debt are you referring?
03:37:28.440 --> 03:37:29.740
The securitization debt.
03:37:35.420 --> 03:37:38.370
Our plan doesn't require securitization.
03:37:39.550 --> 03:37:43.780
So it's hard to directly answer that question.
03:37:43.780 --> 03:37:46.670
Yes I'm looking towards the future you've described
03:37:46.670 --> 03:37:48.400
for us, about, excuse me,
03:37:48.400 --> 03:37:51.560
the securitization plan that's also coming.
03:37:52.830 --> 03:37:57.830
In that plan what are the rate payer protection
03:38:02.020 --> 03:38:06.410
concepts that you're working on for that plan?
03:38:06.410 --> 03:38:10.700
Subject to continued changes, we finalize our application.
03:38:12.300 --> 03:38:17.300
We have considered the opportunity at general rate cases
03:38:18.770 --> 03:38:23.770
to include a review of the customer credits
03:38:23.970 --> 03:38:26.280
to ensure that on a present value basis
03:38:26.280 --> 03:38:29.530
those customer credits still result
03:38:29.530 --> 03:38:33.230
in a rate neutral securitization.
03:38:33.230 --> 03:38:34.410
Okay.
03:38:34.410 --> 03:38:36.720
What about a principle that would,
03:38:36.720 --> 03:38:40.610
if you don't like the idea of withholding dividends,
03:38:40.610 --> 03:38:43.587
what about a principle that would require
03:38:47.920 --> 03:38:52.320
the repayment of that securitization debt till have reached
03:38:56.260 --> 03:39:00.660
a pre-2017 A-1 credit rating?
03:39:03.180 --> 03:39:05.380
I think any additional restrictions are going
03:39:05.380 --> 03:39:09.530
to complicate what is already going
03:39:09.530 --> 03:39:12.100
to be a very complicated capital raise.
03:39:13.270 --> 03:39:17.300
I think it's unfair to look at the credit rating prior
03:39:17.300 --> 03:39:21.650
to 2017, because since then it's not just the company's
03:39:21.650 --> 03:39:24.040
actions that have impacted the company's credit ratings.
03:39:24.040 --> 03:39:26.880
It's also the qualitative concerns
03:39:26.880 --> 03:39:28.670
around the (mumbles) environment.
03:39:38.079 --> 03:39:38.940
I have nothing further your Honor.
03:39:38.940 --> 03:39:39.800
Thank you Mr. Wells.
03:39:39.800 --> 03:39:40.633
Thank you.
03:39:40.633 --> 03:39:42.010
Thank you.
03:39:42.010 --> 03:39:42.843
Mr. Miley.
03:39:45.343 --> 03:39:46.176
Good afternoon your Honor.
03:39:46.176 --> 03:39:47.009
Good afternoon Mr. Wells.
03:39:47.009 --> 03:39:49.750
My name is Matt Miley with the Public Advocates Office.
03:39:49.750 --> 03:39:50.750
Good afternoon.
03:39:50.750 --> 03:39:52.956
Just a short line of questions for you today.
03:39:52.956 --> 03:39:56.170
Do you have access to chapter seven?
03:39:57.130 --> 03:40:00.030
This would be PG&E chapter seven.
03:40:00.030 --> 03:40:02.680
That's the testimony sponsored by John Will.
03:40:02.680 --> 03:40:03.720
Do you have that in front of you?
03:40:03.720 --> 03:40:05.310
I don't have it in front of me.
03:40:05.310 --> 03:40:06.630
Let's be off the record.
03:40:08.780 --> 03:40:09.980
It's in PG&E one.
03:40:10.840 --> 03:40:12.146
Correct, PG&E one.
03:40:12.146 --> 03:40:15.063
(faintly speaking)
03:40:22.920 --> 03:40:24.253
Lowe, l-o-w-e.
03:40:26.015 --> 03:40:27.080
All right, let's be back on the record.
03:40:27.080 --> 03:40:29.850
While we were off the record we clarified that this is
03:40:29.850 --> 03:40:34.850
in PG&E one, chapter seven, Mr. John Lowe's testimony.
03:40:36.810 --> 03:40:38.314
Off the record.
03:40:38.314 --> 03:40:41.231
(faintly speaking)
03:40:49.580 --> 03:40:50.740
Apologies I have it.
03:40:50.740 --> 03:40:51.710
Back on the record.
03:40:51.710 --> 03:40:52.543
Mr. Miley.
03:40:54.010 --> 03:40:55.310
Mr. Wells if you could please turn
03:40:55.310 --> 03:40:58.070
to page seven dash 15.
03:41:03.600 --> 03:41:04.433
PG&E one.
03:41:05.970 --> 03:41:06.890
I've turned there.
03:41:06.890 --> 03:41:07.860
Thank you.
03:41:07.860 --> 03:41:10.680
So for context this section, what we're looking
03:41:10.680 --> 03:41:13.550
at is under the overall
03:41:13.550 --> 03:41:16.370
heading of executive compensation structure.
03:41:17.578 --> 03:41:19.720
So I'd like to point you please to
03:41:19.720 --> 03:41:22.590
about 2/3 of the way down the page
03:41:22.590 --> 03:41:25.500
there's a heading titled "Longterm Incentive Plan."
03:41:25.500 --> 03:41:26.333
Do you see that?
03:41:26.333 --> 03:41:27.166
I see that.
03:41:28.110 --> 03:41:32.690
And beginning on line 23, Mr. Low's testimony states,
03:41:32.690 --> 03:41:34.580
"Longterm incentive plan awards
03:41:34.580 --> 03:41:37.910
"for 2020 post-emergence will consist
03:41:37.910 --> 03:41:40.710
"entirely of performance shares that will be awarded
03:41:40.710 --> 03:41:43.710
"only upon achievement of the objective performance
03:41:43.710 --> 03:41:47.060
"metrics described below, with the proviso that such
03:41:47.060 --> 03:41:49.940
"awards must be held for at least three years
03:41:49.940 --> 03:41:51.040
"from the grant date."
03:41:52.090 --> 03:41:53.990
There's a footnote there, footnote 18.
03:41:54.920 --> 03:41:58.000
That footnote reads, "The ceo's compensation
03:41:58.000 --> 03:42:01.710
"structure currently also includes stock options."
03:42:02.657 --> 03:42:03.540
Do you see that Mr. Wells?
03:42:03.540 --> 03:42:04.373
I do.
03:42:05.770 --> 03:42:09.210
Mr. Wells could you please describe your involvement
03:42:09.210 --> 03:42:13.930
or contribution if any in developing the ceo stock
03:42:13.930 --> 03:42:18.320
option exercise prices, the quantity of stocks
03:42:19.320 --> 03:42:21.650
or the corresponding expiration
03:42:21.650 --> 03:42:24.500
dates associated with those shares?
03:42:24.500 --> 03:42:25.650
I was not involved
03:42:25.650 --> 03:42:27.790
in the development of that compensation package.
03:42:36.160 --> 03:42:38.360
Is the compensation package something you would,
03:42:38.360 --> 03:42:39.660
it would have come across your desk
03:42:39.660 --> 03:42:40.690
or something you would have reviewed
03:42:40.690 --> 03:42:44.870
at all before it was presented, regardless of development?
03:42:46.140 --> 03:42:48.570
I guess what I'm asking is would you say that you have
03:42:48.570 --> 03:42:51.460
any influence over that structure, the development?
03:42:51.460 --> 03:42:53.390
I did not, no, have any influence.
03:43:07.570 --> 03:43:08.470
No further questions.
03:43:08.470 --> 03:43:09.303
Thank you Mr. Wells.
03:43:09.303 --> 03:43:10.136
Thank you your Honor.
03:43:10.136 --> 03:43:11.010
All right thank you.
03:43:11.010 --> 03:43:12.210
Let's be off the record.
03:43:24.308 --> 03:43:27.225
(faintly speaking)
03:44:06.712 --> 03:44:08.470
All right, let's be back on the record.
03:44:08.470 --> 03:44:11.720
At this time, Commissioner Rechtschaffen has some questions.
03:44:11.720 --> 03:44:12.970
Make sure your mic is on.
03:44:14.590 --> 03:44:16.390
Thank you very much.
03:44:16.390 --> 03:44:17.460
Thank you Mr. Wells.
03:44:17.460 --> 03:44:19.210
Sorry I was unable
03:44:19.210 --> 03:44:23.130
to hear your entire testimony this morning.
03:44:23.130 --> 03:44:24.770
I wanna ask you first
03:44:25.640 --> 03:44:30.060
a question that President Batjer asked Mr. Plaster
03:44:30.060 --> 03:44:32.700
two days ago, and I don't know if you were here
03:44:32.700 --> 03:44:33.720
for that or not.
03:44:33.720 --> 03:44:35.440
I was not, but I'd heard.
03:44:35.440 --> 03:44:37.610
And he reserved it for you.
03:44:37.610 --> 03:44:41.100
The question is what happens if it turns
03:44:41.100 --> 03:44:46.100
out that PG&E's under capitalized as a result of the plan?
03:44:47.000 --> 03:44:48.840
What are its options going forward?
03:44:52.580 --> 03:44:54.430
We've worked extensively
03:44:54.430 --> 03:44:56.650
with financial market participants
03:44:56.650 --> 03:44:57.730
to ensure that we're putting
03:44:57.730 --> 03:45:00.470
forward a plan that's not under capitalized.
03:45:00.470 --> 03:45:03.240
To the extent that concerns
03:45:03.240 --> 03:45:05.730
around our capitalization are raised,
03:45:05.730 --> 03:45:07.180
it would be our intention to continue
03:45:07.180 --> 03:45:10.090
to work with all stakeholders on the case
03:45:11.240 --> 03:45:13.730
to address those concerns that we could exit timely.
03:45:13.730 --> 03:45:15.960
We've got a track record as part of this bankruptcy
03:45:15.960 --> 03:45:18.180
to address stakeholder related issues.
03:45:18.180 --> 03:45:20.980
And if that presented itself we would do the same there.
03:45:22.880 --> 03:45:24.300
Do you have any specifics?
03:45:24.300 --> 03:45:29.240
Can you be any more detailed about what other options
03:45:29.240 --> 03:45:33.600
or mechanisms you might consider to raise more equity?
03:45:40.870 --> 03:45:43.527
The only reason I'm pausing to be more specific is
03:45:43.527 --> 03:45:44.420
because I think what we have put
03:45:44.420 --> 03:45:49.420
forward is a plan that is fully capitalized.
03:45:51.450 --> 03:45:56.160
We worked extensively with all capital markets participants
03:45:56.160 --> 03:45:57.960
to develop a plan where we're actually putting
03:45:57.960 --> 03:46:02.880
in $16 billion of equity contribution,
03:46:04.490 --> 03:46:06.080
nine up front, six over time.
03:46:07.350 --> 03:46:09.300
To the extent that concerns were raised,
03:46:09.300 --> 03:46:11.970
I think we would look at a way to continue
03:46:11.970 --> 03:46:14.050
to work with again everybody in the case
03:46:14.050 --> 03:46:16.970
to find a method to address it.
03:46:16.970 --> 03:46:20.480
But until I find specifically what the concern is
03:46:20.480 --> 03:46:23.410
it's hard for me to be any more specific as to the action.
03:46:27.210 --> 03:46:30.190
I understand you think there's enough there.
03:46:32.012 --> 03:46:33.980
And I'll just ask you again, if there's any more
03:46:33.980 --> 03:46:36.100
you wanna say about what
03:46:36.100 --> 03:46:39.670
other mechanisms you might consider.
03:46:41.760 --> 03:46:43.850
We've set up a process
03:46:43.850 --> 03:46:45.970
with our equity backstop letter
03:46:45.970 --> 03:46:50.700
where we are intending to raise the equity
03:46:50.700 --> 03:46:53.080
through a marketed raise as opposed
03:46:53.080 --> 03:46:56.280
to the backstop agreement.
03:46:58.620 --> 03:47:00.750
We could evaluate the opportunity
03:47:00.750 --> 03:47:04.250
at that point in time as we undertake that marketed raise
03:47:04.250 --> 03:47:06.640
whether or not there's more equity available.
03:47:06.640 --> 03:47:09.300
But again, I think like this is sufficiently capitalized.
03:47:11.100 --> 03:47:14.640
I wanted to ask you about securitization.
03:47:14.640 --> 03:47:18.790
I've heard some of the testimony about it.
03:47:18.790 --> 03:47:22.760
I'm not sure I got all of it.
03:47:22.760 --> 03:47:27.760
Your testimony is that securitization will be rate neutral.
03:47:28.200 --> 03:47:33.200
And specifically you said you will provide credits
03:47:34.950 --> 03:47:38.070
so that I can show you where it is,
03:47:38.070 --> 03:47:40.610
but I'm just paraphrasing so that customers
03:47:40.610 --> 03:47:42.100
on average will not pay
03:47:42.100 --> 03:47:44.760
the associated costs of securitization charges.
03:47:45.690 --> 03:47:48.930
What is that mean on average?
03:47:48.930 --> 03:47:52.790
What does that mean to rate payers on average?
03:47:55.570 --> 03:47:58.180
We're still in the process of finalizing
03:47:58.180 --> 03:47:59.620
the securitization application.
03:47:59.620 --> 03:48:02.120
We intend to file that in a few weeks.
03:48:02.120 --> 03:48:07.120
Currently what we're envisioning is a securitization that on
03:48:10.310 --> 03:48:15.310
a present value basis customers would be rate neutral.
03:48:15.590 --> 03:48:20.590
So the refund to customers of the shareholder
03:48:23.060 --> 03:48:26.900
NOL's that are realized will likely exceed
03:48:26.900 --> 03:48:29.890
the associated debt service cost
03:48:29.890 --> 03:48:31.810
for the securitization bonds
03:48:31.810 --> 03:48:32.830
in the early years.
03:48:32.830 --> 03:48:37.600
So customers would have a rate benefit early.
03:48:37.600 --> 03:48:41.270
And as those securitization bonds expire
03:48:45.770 --> 03:48:50.770
customers would pay the outer years debt service cost.
03:48:51.320 --> 03:48:53.500
So that on a present value basis
03:48:53.500 --> 03:48:55.780
on average customers are made whole.
03:48:58.080 --> 03:49:00.930
Is another way of saying that is that's gonna be lumpy?
03:49:02.770 --> 03:49:06.350
Possibly but as part of the details of trying
03:49:06.350 --> 03:49:07.790
to finalize that application, trying
03:49:07.790 --> 03:49:11.380
to make it as smooth as possible.
03:49:11.380 --> 03:49:16.080
But what I understand you to be saying is it's not neutral
03:49:16.080 --> 03:49:18.570
to customers on a yearly basis.
03:49:18.570 --> 03:49:22.340
Some years customers may realize a benefit.
03:49:22.340 --> 03:49:24.750
Other years they may realize a cost.
03:49:24.750 --> 03:49:26.030
Over time yes.
03:49:26.030 --> 03:49:27.060
Okay.
03:49:27.060 --> 03:49:30.440
And the final question I have about this,
03:49:30.440 --> 03:49:33.570
and Mr. Johnson testified about this.
03:49:36.720 --> 03:49:38.700
President Batjer asked Mr. Johnson
03:49:38.700 --> 03:49:43.090
about what happens if securitization doesn't go forward.
03:49:43.090 --> 03:49:45.680
I'm not gonna ask you that again.
03:49:45.680 --> 03:49:50.680
But if it doesn't go forward,
03:49:50.770 --> 03:49:52.810
if it's not ultimately approved,
03:49:53.695 --> 03:49:58.695
what's the impact on the key credit metrics that we look
03:49:59.400 --> 03:50:01.070
at, that the rating agencies look
03:50:01.070 --> 03:50:04.260
at, the funds from operation to debt,
03:50:04.260 --> 03:50:06.880
the other metrics if securitization isn't approved?
03:50:08.107 --> 03:50:10.570
Yeah, so the claims not doesn't need securitization.
03:50:10.570 --> 03:50:12.940
We think it's in everybody's interest if it's,
03:50:12.940 --> 03:50:17.470
and all stakeholders' interest if it's not approved, funds
03:50:17.470 --> 03:50:21.610
from operations FFO to debt would likely be
03:50:21.610 --> 03:50:25.840
about 200 basis points lower than what we're projecting
03:50:25.840 --> 03:50:28.870
here which assumes securitization is approved.
03:50:28.870 --> 03:50:33.760
And what does that do to where you would end
03:50:33.760 --> 03:50:36.270
up in the credit ratings?
03:50:37.760 --> 03:50:39.910
So each of the credit ratings have a band
03:50:41.530 --> 03:50:43.240
for the quantitative credit metrics.
03:50:43.240 --> 03:50:44.720
We would still squarely be
03:50:44.720 --> 03:50:49.720
in the band of investment grade credit metrics
03:50:51.640 --> 03:50:54.200
even if securitization's not approved.
03:50:54.200 --> 03:50:57.450
Where we see a challenge with the credit rating is more
03:50:57.450 --> 03:50:59.280
on the qualitative aspect of the plan,
03:50:59.280 --> 03:51:01.790
not the quantitative, even without securitization.
03:51:01.790 --> 03:51:02.623
I understand.
03:51:02.623 --> 03:51:05.200
And the same would be true to for debt that Evita.
03:51:06.300 --> 03:51:09.290
You'd still be within the band even
03:51:09.290 --> 03:51:11.520
though you might be lower on the band.
03:51:11.520 --> 03:51:12.440
We would be lower on the band
03:51:12.440 --> 03:51:14.670
but within the investment grade ratings, yes.
03:51:14.670 --> 03:51:16.070
Okay, thank you very much.
03:51:18.550 --> 03:51:19.790
Okay.
03:51:19.790 --> 03:51:22.660
Mr. Wells for the seven billion
03:51:22.660 --> 03:51:25.570
in anticipated rate payer securitization described
03:51:25.570 --> 03:51:30.570
on page two dash 15 of exhibit PG&E one line 21.
03:51:31.190 --> 03:51:34.590
Is that a subset of the fire claims shown
03:51:34.590 --> 03:51:39.590
in table 2.3 on page two dash 16 of exhibit PG&E one?
03:51:42.180 --> 03:51:43.013
I apologize your Honor.
03:51:43.013 --> 03:51:44.220
I was flipping the pages.
03:51:45.880 --> 03:51:48.340
First go to page two dash 15.
03:51:48.340 --> 03:51:49.320
Yes.
03:51:49.320 --> 03:51:51.690
Line 21, there's the seven billion
03:51:51.690 --> 03:51:54.960
in anticipated rate payer securitization.
03:51:54.960 --> 03:51:55.793
Yes.
03:51:55.793 --> 03:51:57.600
Is that a subset of the fire
03:51:57.600 --> 03:52:02.600
claims that are shown in table 2.3 on the next page?
03:52:03.170 --> 03:52:04.230
Yes.
03:52:04.230 --> 03:52:09.060
And is that $7 billion of anticipated
03:52:09.060 --> 03:52:11.120
rate payer securitization associated
03:52:11.120 --> 03:52:13.150
with claims for specific fires
03:52:13.150 --> 03:52:14.990
or is that just
03:52:14.990 --> 03:52:19.990
$7 billion of that total that's in 2.3 associated
03:52:20.250 --> 03:52:21.850
with any of those elements?
03:52:23.730 --> 03:52:25.200
We're working through those details.
03:52:25.200 --> 03:52:27.120
This testimony here is more the latter.
03:52:27.120 --> 03:52:30.390
That it's seven billion of the total 24
03:52:30.390 --> 03:52:31.840
billion that's presented in this table.
03:52:31.840 --> 03:52:32.673
Okay.
03:52:42.190 --> 03:52:44.980
On page two dash three of your testimony
03:52:44.980 --> 03:52:49.980
in exhibit PG&E one you state that PG&E expects
03:52:51.200 --> 03:52:53.510
to achieve investment grade ratings
03:52:53.510 --> 03:52:55.630
for secured debt on emergence.
03:52:59.220 --> 03:53:02.240
Is there anything within the plan that describes
03:53:02.240 --> 03:53:04.910
what would occur if you did not achieve
03:53:04.910 --> 03:53:06.530
investment grade credit rating?
03:53:08.490 --> 03:53:13.050
No we don't, but we put this statement
03:53:13.050 --> 03:53:15.360
forward because of the extensive work that we have done
03:53:15.360 --> 03:53:18.070
with the rating agencies, the money center banks.
03:53:23.520 --> 03:53:25.020
Okay.
03:53:25.020 --> 03:53:25.853
And.
03:53:36.210 --> 03:53:38.463
In this application you're requesting
03:53:38.463 --> 03:53:41.700
a large amount of short term debt authorization.
03:53:44.805 --> 03:53:47.330
To your knowledge does PG&E recover
03:53:47.330 --> 03:53:50.050
the debt related costs from rate payers,
03:53:50.050 --> 03:53:50.883
and if so, how?
03:53:54.510 --> 03:53:56.410
We're asking for two short term debt authorizations.
03:53:56.410 --> 03:53:59.060
One is sort of a very temporary issue.
03:53:59.060 --> 03:54:01.736
And there's only a small
03:54:01.736 --> 03:54:05.620
percentage of that that we are intending
03:54:05.620 --> 03:54:09.440
to include in our cost of capital by filing.
03:54:10.690 --> 03:54:12.090
The other short term debt...
03:54:19.410 --> 03:54:21.189
I know we recover from customers.
03:54:21.189 --> 03:54:25.162
I'm drawing a blank as to where and how.
03:54:25.162 --> 03:54:27.980
Okay.
03:54:27.980 --> 03:54:30.960
Counsel could you provide a follow-up
03:54:30.960 --> 03:54:31.910
on Monday for that?
03:54:44.700 --> 03:54:49.700
On page two dash 19 of your testimony in PG&E dash one.
03:54:57.260 --> 03:54:58.093
I'm there.
03:55:05.520 --> 03:55:08.657
At lines 13 through 16 you talk
03:55:14.060 --> 03:55:18.820
about the reduction in interests cost,
03:55:21.850 --> 03:55:25.480
the cost of debt essentially reductions of about
03:55:28.200 --> 03:55:31.940
a billion dollars as a result of the note holder RSA.
03:55:38.845 --> 03:55:39.678
Do you see that?
03:55:39.678 --> 03:55:40.511
I do.
03:55:45.423 --> 03:55:47.540
It's my understanding that some of the intervener
03:55:47.540 --> 03:55:51.120
testimony estimates the cost savings
03:55:51.120 --> 03:55:53.680
around 600 million rather than a billion.
03:55:53.680 --> 03:55:58.150
Do you have any comments on the calculation differences?
03:55:59.950 --> 03:56:03.220
The nominal value of the savings is
03:56:03.220 --> 03:56:04.800
a little bit more than a billion dollars.
03:56:04.800 --> 03:56:07.790
Originally when I put forward this testimony
03:56:07.790 --> 03:56:10.600
I used debt discount rate,
03:56:10.600 --> 03:56:14.150
because I was evaluating it through the lens of the company.
03:56:16.420 --> 03:56:18.720
Intervener testimony appropriately pointed
03:56:18.720 --> 03:56:20.920
out that from a customer standpoint
03:56:20.920 --> 03:56:23.030
a more appropriate discount rate would be
03:56:23.030 --> 03:56:26.250
our weighted average cost in capital.
03:56:28.296 --> 03:56:29.160
I think our collection was closer
03:56:29.160 --> 03:56:33.220
to 700 million but directionally in that ballpark.
03:56:33.220 --> 03:56:38.210
And so the difference is the intervener version
03:56:38.210 --> 03:56:41.040
or the somewhere between 600
03:56:41.040 --> 03:56:42.490
and 700 million dollar
03:56:42.490 --> 03:56:44.930
calculation is using weighted cost of capital?
03:56:44.930 --> 03:56:46.740
Yes at the higher discount rate.
03:56:46.740 --> 03:56:48.080
Thank you.
03:56:48.080 --> 03:56:51.070
All right that concludes my questions.
03:56:53.226 --> 03:56:55.210
Do you have any redirect?
03:56:55.210 --> 03:56:56.043
Yes.
03:56:56.043 --> 03:56:56.920
All right, are you ready to go?
03:56:56.920 --> 03:56:58.160
Yes.
03:56:58.160 --> 03:56:58.993
Go forward.
03:56:58.993 --> 03:57:00.090
Thank you.
03:57:00.090 --> 03:57:02.390
Mr. Wells you were asked some questions
03:57:02.390 --> 03:57:03.990
by Commissioner Rechtschaffen
03:57:03.990 --> 03:57:06.360
about the impact of securitization
03:57:06.360 --> 03:57:08.340
on company's credit ratings.
03:57:08.340 --> 03:57:10.680
So first I just wanna clarify
03:57:10.680 --> 03:57:12.350
between qualitative and quantitative.
03:57:12.350 --> 03:57:15.490
On the quantitative side can you explain
03:57:15.490 --> 03:57:18.370
how securitization would effect
03:57:18.370 --> 03:57:20.730
the company's quantitative credit
03:57:20.730 --> 03:57:22.760
metrics as measured by S&P?
03:57:27.170 --> 03:57:32.170
S&P essentially excludes the debt associated
03:57:33.290 --> 03:57:38.290
with securitization in the calculation of FFO to debt.
03:57:38.700 --> 03:57:41.100
So there's a lower essentially denominator
03:57:41.100 --> 03:57:46.100
and therefore a higher ratio
03:57:46.290 --> 03:57:51.290
under the S&P methodology when securitization's included.
03:57:52.990 --> 03:57:56.140
So all else equal does that increase
03:57:56.140 --> 03:57:56.973
the--
03:57:56.973 --> 03:57:58.060
All else equal it increases
03:58:00.665 --> 03:58:01.820
the FFO to debt.
03:58:01.820 --> 03:58:05.160
And the implication of that for credit ratings?
03:58:06.050 --> 03:58:09.610
It's obviously favorable for credit ratings
03:58:09.610 --> 03:58:12.380
to have a higher FFO to debt rating.
03:58:12.380 --> 03:58:13.280
Okay, now let's talk
03:58:13.280 --> 03:58:16.410
about the qualitative side, the business risk.
03:58:16.410 --> 03:58:18.020
How in your judgment would
03:58:18.020 --> 03:58:22.000
a Commission decision approving securitization affect
03:58:22.000 --> 03:58:25.340
the rating agencies evaluation of the company's
03:58:25.340 --> 03:58:26.173
business risk?
03:58:30.550 --> 03:58:32.350
I think it is an important signal.
03:58:36.936 --> 03:58:37.769
Let me step back.
03:58:39.020 --> 03:58:44.020
One of the larger concerns of the California regulatory
03:58:44.900 --> 03:58:49.200
environment after the denial of San Diego Gas
03:58:49.200 --> 03:58:54.200
and Electric's claim for wildfire cost
03:58:56.530 --> 03:59:00.100
as part of their 2007 and 2008 fires created
03:59:00.100 --> 03:59:04.300
a perception in the financial community that utilities
03:59:04.300 --> 03:59:07.760
would likely not be able to recover costs in the future.
03:59:07.760 --> 03:59:11.020
I think a signal that securitization's approved
03:59:11.020 --> 03:59:14.690
would offset that previous decision
03:59:14.690 --> 03:59:19.690
and lead to more optimism around potential recovery
03:59:20.540 --> 03:59:22.140
in the future and therefore
03:59:22.140 --> 03:59:26.460
a better assessment of the qualitative factors
03:59:26.460 --> 03:59:30.490
for the utility credit ratings.
03:59:32.310 --> 03:59:35.290
While we're on that topic you were asked some questions
03:59:35.290 --> 03:59:38.570
about decisions, sorry investigation,
03:59:38.570 --> 03:59:42.060
the presiding officer's decision, the investigation 1906015.
03:59:44.810 --> 03:59:46.400
Do you have any views
03:59:46.400 --> 03:59:50.730
about the impact of that presiding officer's decision
03:59:50.730 --> 03:59:52.640
on the same qualitative
03:59:52.640 --> 03:59:54.540
factors that you were just discussing?
03:59:55.990 --> 04:00:00.850
I think it is credit negative on a qualitative basis
04:00:01.860 --> 04:00:06.860
to modify settlements, because
04:00:07.030 --> 04:00:12.030
it introduces unpredictability in the regulatory process.
04:00:16.040 --> 04:00:17.240
Another factor the market looks
04:00:17.240 --> 04:00:18.690
to is timely decision making.
04:00:20.120 --> 04:00:23.360
And modifying settlements creates
04:00:23.360 --> 04:00:27.690
the potential that parties will be more reticent
04:00:27.690 --> 04:00:29.230
to engage in settlement discussions.
04:00:29.230 --> 04:00:30.220
Your Honor.
04:00:30.220 --> 04:00:31.280
I believe this is a bit
04:00:31.280 --> 04:00:33.060
beyond the scope of my questioning
04:00:33.060 --> 04:00:35.430
on that presided on officer's decision.
04:00:35.430 --> 04:00:38.360
I understand why you might think.
04:00:38.360 --> 04:00:41.880
I'm gonna allow him to answer, but briefly.
04:00:41.880 --> 04:00:44.420
So I think it creates potential
04:00:44.420 --> 04:00:46.560
uncertainty that heightens risk
04:00:46.560 --> 04:00:50.100
and therefore is challenges the qualitative
04:00:50.100 --> 04:00:52.040
aspect of the credit ratings.
04:00:52.040 --> 04:00:54.680
You were asked some questions by counsel for A4NR
04:00:54.680 --> 04:00:58.770
about the stress test around future adverse events.
04:00:58.770 --> 04:01:01.810
And you mentioned 20% of transmission
04:01:01.810 --> 04:01:03.100
and distribution rate based.
04:01:03.100 --> 04:01:05.180
Where did that figure come from?
04:01:05.180 --> 04:01:06.540
AB1054.
04:01:06.540 --> 04:01:07.890
Can you be more specific?
04:01:11.700 --> 04:01:16.270
Is there a provision in 1054 that relates to that metric?
04:01:17.380 --> 04:01:22.380
The potential for losses under
04:01:23.130 --> 04:01:25.420
for catastrophic fires were
04:01:25.420 --> 04:01:27.220
a utility is deemed to be imprudent.
04:01:31.510 --> 04:01:34.400
On page two dash 15 there's
04:01:34.400 --> 04:01:36.220
a sentence that you were examined
04:01:36.220 --> 04:01:38.340
about that I wanna clarify.
04:01:38.340 --> 04:01:42.140
It's on lines 24 through 27.
04:01:43.270 --> 04:01:45.040
And there's a reference here.
04:01:45.040 --> 04:01:46.550
Are you there?
I am.
04:01:46.550 --> 04:01:48.520
PG&E will use the proceeds from
04:01:48.520 --> 04:01:53.260
the realization of the shareholder certain tax benefits.
04:01:53.260 --> 04:01:54.260
Do you see that?
04:01:54.260 --> 04:01:55.500
I do.
04:01:55.500 --> 04:01:58.490
And by certain did you mean that there were
04:01:58.490 --> 04:02:01.000
certain tax benefits or that the tax benefits were
04:02:01.000 --> 04:02:02.350
definitely going to happen?
04:02:11.210 --> 04:02:12.760
Maybe, would it be better for the sentence
04:02:12.760 --> 04:02:16.480
to read realization of certain shareholder tax benefits?
04:02:16.480 --> 04:02:17.340
Yes.
Okay.
04:02:22.240 --> 04:02:23.700
Your Honor, I would like
04:02:23.700 --> 04:02:26.460
to limit the use of leading questions.
04:02:29.637 --> 04:02:32.920
Or rewriting testimony by counsel.
04:02:32.920 --> 04:02:36.450
I understand your concerns.
04:02:36.450 --> 04:02:37.810
I'm allowing the answer.
04:02:38.930 --> 04:02:40.450
You were asked some questions
04:02:40.450 --> 04:02:45.450
about whether the utilities assets are subject to liens.
04:02:48.010 --> 04:02:51.910
Under the debtor in possession financing, are
04:02:51.910 --> 04:02:55.390
utility assets subject to liens?
04:02:55.390 --> 04:02:56.223
Yes they are.
04:02:59.200 --> 04:03:00.660
You were asked a question
04:03:00.660 --> 04:03:04.820
about the treatment of Tubbs claims,
04:03:04.820 --> 04:03:06.630
claims arising from the Tubbs Fire.
04:03:07.890 --> 04:03:11.800
Under the TCC RSA are those claims resolved?
04:03:14.810 --> 04:03:16.810
Yes they were included in the TCC RSA.
04:03:19.770 --> 04:03:20.930
You were asked a question
04:03:20.930 --> 04:03:24.270
about whether holding company debt could have an impact
04:03:24.270 --> 04:03:26.710
on the utilities cost of debt.
04:03:26.710 --> 04:03:30.020
And you said it could within certain threshold.
04:03:30.020 --> 04:03:31.190
I do.
04:03:31.190 --> 04:03:33.430
Is the quantum of holding company debt
04:03:33.430 --> 04:03:36.120
under the plan of reorganization?
04:03:37.094 --> 04:03:38.700
Would that affect the utility's cost of debt?
04:03:38.700 --> 04:03:39.533
No.
04:03:42.300 --> 04:03:44.930
You were asked some questions by counsel
04:03:44.930 --> 04:03:49.930
for TURN and EPUC about the fees that are being as
04:03:54.130 --> 04:03:57.500
to which the company would seek recovery,
04:03:57.500 --> 04:03:59.060
the financing professional fees.
04:03:59.060 --> 04:03:59.893
Do you recall that?
04:03:59.893 --> 04:04:00.726
I do.
04:04:01.699 --> 04:04:02.532
Okay, can you summarize
04:04:02.532 --> 04:04:06.310
the estimated quantum of the bankruptcy related
04:04:06.310 --> 04:04:11.020
fees that the company is not seeking recovery of.
04:04:11.020 --> 04:04:13.890
Our current estimate is just under 1.6 billion.
04:04:17.960 --> 04:04:19.150
You were asked some questions
04:04:19.150 --> 04:04:21.970
about a potential securitization transaction.
04:04:21.970 --> 04:04:25.200
In your experience do securitization
04:04:25.200 --> 04:04:27.960
transactions typically permit pre-payment?
04:04:30.580 --> 04:04:31.730
Not in my experience.
04:04:46.510 --> 04:04:48.470
You were asked some questions going back
04:04:48.470 --> 04:04:53.470
to the subject of the estimated 140, 54 million of financing
04:04:53.510 --> 04:04:56.280
fees that the company would seek to recover.
04:04:56.280 --> 04:04:59.730
And you said, "The quantum is uncertain
04:04:59.730 --> 04:05:00.820
"and subject to change."
04:05:00.820 --> 04:05:01.653
Is that correct?
04:05:01.653 --> 04:05:03.210
That's correct.
04:05:03.210 --> 04:05:04.980
If that amount changed would
04:05:04.980 --> 04:05:09.420
the company seek recovery of fees that would exceed
04:05:09.420 --> 04:05:13.040
the net savings to customers from the depth financing?
04:05:13.040 --> 04:05:13.873
No.
04:05:20.530 --> 04:05:24.863
You were asked some questions regarding a data response
04:05:29.330 --> 04:05:33.010
in which the company stated
04:05:33.010 --> 04:05:35.010
in that data response that it had not
04:05:35.010 --> 04:05:38.860
at that time made a final determination regarding
04:05:38.860 --> 04:05:43.860
its intended recovery of 2017, 2018 wildfire costs.
04:05:45.942 --> 04:05:46.775
Do you recall that?
04:05:46.775 --> 04:05:47.608
I do.
04:05:47.608 --> 04:05:52.608
And are you certain of the date?
04:05:52.920 --> 04:05:55.610
What is the date on which the company made
04:05:55.610 --> 04:05:57.610
a final determination of its approach
04:05:57.610 --> 04:05:59.990
with respect to that subject relative
04:05:59.990 --> 04:06:01.770
to the date of that data response?
04:06:03.092 --> 04:06:06.009
(faintly speaking)
04:06:08.910 --> 04:06:09.743
Okay.
04:06:09.743 --> 04:06:14.680
Do you recall which cross examiner asked the question?
04:06:16.890 --> 04:06:18.090
Let's be off the record.
04:06:20.470 --> 04:06:22.860
Sorry, I seem to recall that there was a question
04:06:22.860 --> 04:06:24.910
where counsel asked about, didn't you ask
04:06:24.910 --> 04:06:26.580
about a data response where we talked
04:06:26.580 --> 04:06:28.460
about at that time what the?
04:06:29.939 --> 04:06:32.856
(faintly speaking)
04:06:47.510 --> 04:06:49.680
I thought there was a question
04:06:49.680 --> 04:06:50.830
about the date on which
04:06:50.830 --> 04:06:53.490
the company had formulated a position, but I might--
04:06:53.490 --> 04:06:54.526
I don't think so.
04:06:54.526 --> 04:06:56.800
Okay.
04:06:56.800 --> 04:06:58.818
We're off the record as well so that.
04:06:58.818 --> 04:07:01.735
(faintly speaking)
04:07:25.660 --> 04:07:27.610
Okay, I'll let it pass.
04:07:27.610 --> 04:07:30.020
Let's be back on the record.
04:07:30.020 --> 04:07:32.340
While we were off the record we had a discussion
04:07:32.340 --> 04:07:36.580
about this particular question,
04:07:36.580 --> 04:07:38.910
and we're going to forego this question.
04:07:38.910 --> 04:07:40.060
Thank you your Honor.
04:07:40.910 --> 04:07:42.330
Can I have just one second please?
04:07:42.330 --> 04:07:43.600
Let's be off the record.
04:07:47.470 --> 04:07:49.000
Those are the only questions I have your Honor.
04:07:49.000 --> 04:07:50.570
Let's be back on the record.
04:07:50.570 --> 04:07:53.200
Mr. Weisman has indicated that he did not have
04:07:53.200 --> 04:07:54.700
any further questions.
04:07:56.130 --> 04:07:59.970
So we have a limited opportunity for re-cross.
04:08:02.050 --> 04:08:02.920
Mr. Geesman.
04:08:06.720 --> 04:08:09.110
Mr. Weisman asked you whether
04:08:09.110 --> 04:08:13.740
the rating agencies used securitization as
04:08:13.740 --> 04:08:17.750
positive credit metrics or not,
04:08:17.750 --> 04:08:22.130
and I believe your answer was confined to Standard & Poor's.
04:08:22.130 --> 04:08:26.330
Isn't it true that Moody's is less permissive
04:08:26.330 --> 04:08:30.370
about your ability to de-consolidate securitization
04:08:30.370 --> 04:08:31.930
from your balance sheet?
04:08:31.930 --> 04:08:32.830
That is correct.
04:08:34.430 --> 04:08:36.470
Thank you your Honor.
Thank you.
04:08:36.470 --> 04:08:37.710
Ms. Sheriff.
04:08:37.710 --> 04:08:39.670
No re-cross your Honor.
04:08:39.670 --> 04:08:40.800
Thank you.
04:08:40.800 --> 04:08:41.633
Ms. Kelly.
04:08:42.870 --> 04:08:43.950
No re-cross your Honor.
04:08:43.950 --> 04:08:45.150
Thank you.
04:08:45.150 --> 04:08:46.710
Mr. Abrams.
04:08:46.710 --> 04:08:48.270
This should be limited to the questions
04:08:48.270 --> 04:08:51.810
for which re-direct was related to your questions.
04:08:51.810 --> 04:08:53.460
Thank you your Honor.
04:08:53.460 --> 04:08:55.910
Amongst all of the questions he didn't mention me
04:08:55.910 --> 04:08:57.800
by name, so it was very difficult
04:08:57.800 --> 04:08:59.160
for me to understand exactly,
04:08:59.160 --> 04:09:01.470
but I did bring up the Tubbs Fire
04:09:01.470 --> 04:09:03.910
in relation to the TCC RSA.
04:09:03.910 --> 04:09:06.020
And on cross I would like
04:09:06.020 --> 04:09:09.040
to understand what you mean by resolved?
04:09:11.360 --> 04:09:16.360
The Tubbs Fire victims were considered as
04:09:17.200 --> 04:09:18.770
part of the total settlement.
04:09:18.770 --> 04:09:23.770
So the settlement is intended to compensate Tubbs victims
04:09:30.620 --> 04:09:32.020
with the other fire victims.
04:09:33.440 --> 04:09:35.480
I guess I'm still lacking
04:09:35.480 --> 04:09:37.530
the understanding of what resolved means.
04:09:37.530 --> 04:09:41.360
So does resolve mean that the Commission can't start
04:09:41.360 --> 04:09:43.390
an investigation into Tubbs?
04:09:43.390 --> 04:09:44.970
Does it mean that other wild fire
04:09:44.970 --> 04:09:49.050
survivors couldn't seek compensation through Tubbs?
04:09:49.050 --> 04:09:50.990
What does resolved mean?
04:09:52.350 --> 04:09:54.050
Settled the amount of the claim.
04:09:55.280 --> 04:09:57.440
Just specific to that, not beyond it.
04:09:57.440 --> 04:09:58.690
Is that correct?
04:09:58.690 --> 04:09:59.840
That's correct.
04:09:59.840 --> 04:10:00.950
Thank you.
04:10:00.950 --> 04:10:03.010
Thank you, Mr. Algatar.
04:10:04.173 --> 04:10:05.460
(faintly speaking)
04:10:05.460 --> 04:10:06.990
Mr. Finkelstein.
04:10:06.990 --> 04:10:08.090
All right, thank you.
04:10:09.320 --> 04:10:10.490
Mr. Miley.
04:10:10.490 --> 04:10:12.068
Nothing your Honor, thank you.
04:10:12.068 --> 04:10:14.820
Okay, thank you Mr. Wells for your testimony.
04:10:14.820 --> 04:10:16.140
You are excused.
04:10:17.000 --> 04:10:20.100
At this time let's go off the record.
04:10:22.020 --> 04:10:23.670
The court reporters need a break.
04:10:25.240 --> 04:10:28.020
So we'll take an hour for lunch.
04:10:28.020 --> 04:10:28.900
Is that good?
04:10:28.900 --> 04:10:32.910
And then when we resume I will start with Ms. Brunell.
04:10:34.500 --> 04:10:39.500
And Mr. Bloom will
04:10:39.690 --> 04:10:42.000
the TCC have any questions for Ms. Brunell?
04:10:42.000 --> 04:10:43.770
We will not your Honor.
04:10:43.770 --> 04:10:45.550
Okay, great.
04:10:48.490 --> 04:10:53.327
And I have for Ms. Brunell A4NR, CLECA, MCE,
04:10:55.100 --> 04:10:57.470
SBUA, TURN, and Abrams.
04:10:58.540 --> 04:10:59.880
Your Honor, if I could
04:10:59.880 --> 04:11:01.760
possibly go first with Ms. Brunell?
04:11:01.760 --> 04:11:03.380
Yes I have you listed first,
04:11:03.380 --> 04:11:04.370
'cause I know you need to leave
04:11:04.370 --> 04:11:06.790
at two 20, no later than two 20.
04:11:08.770 --> 04:11:13.510
And is there a preferred order Ms. Kelly?
04:11:18.158 --> 04:11:19.910
Happy to go whenever you'd like your Honor.
04:11:19.910 --> 04:11:21.160
How about you go third?
04:11:22.160 --> 04:11:24.090
Mr. Abrams you go fourth.
04:11:24.950 --> 04:11:26.910
Happy to go towards the end.
04:11:26.910 --> 04:11:29.500
That is towards the end.
Thank you.
04:11:29.500 --> 04:11:32.490
Unless TURN, you would like to go before Mr.,
04:11:32.490 --> 04:11:35.050
the TURN and Mr. Abrams are the last two.
04:11:35.050 --> 04:11:36.830
Oh no, SBUA sorry.
04:11:36.830 --> 04:11:39.280
We'll have you go fourth Mr. Strauss,
04:11:39.280 --> 04:11:41.571
then either TURN or Abrams.
04:11:41.571 --> 04:11:43.215
(faintly speaking)
04:11:43.215 --> 04:11:45.118
Okay.
04:11:45.118 --> 04:11:47.670
(audio is choppy) so let me have you go first
04:11:47.670 --> 04:11:49.840
between the two of them Mr. Abrams.
04:11:49.840 --> 04:11:53.900
So you'll be fifth and then Mr. Long will be sixth.
04:11:53.900 --> 04:11:54.733
Okay.
04:11:54.733 --> 04:11:55.570
Your Honor may I get
04:11:55.570 --> 04:11:57.290
on your planning agenda just with respect
04:11:57.290 --> 04:11:59.410
to witness scheduling for next week,
04:11:59.410 --> 04:12:04.080
because I have used up all of my chips
04:12:04.080 --> 04:12:05.930
with my consultant being out here for the week,
04:12:05.930 --> 04:12:08.130
and I'd like to get a date certain when you get a chance--
04:12:08.130 --> 04:12:10.490
Yeah, I was hoping we were gonna do that at the end
04:12:10.490 --> 04:12:13.930
so we can excuse the witnesses that are,
04:12:13.930 --> 04:12:16.870
we wanna get through that, and then we'll do that stuff
04:12:16.870 --> 04:12:19.690
at the end, and we'll do the procedural items
04:12:19.690 --> 04:12:21.300
at the end after the witnesses.
04:12:22.390 --> 04:12:27.390
Mr. Abrams has something he would like to ask procedurally.
04:12:28.020 --> 04:12:32.420
Can we do it after witness Brunell and Hogle?
04:12:34.180 --> 04:12:35.907
Yes your Honor, thank you.
Okay, thank you.
04:12:35.907 --> 04:12:39.500
(faintly speaking)
04:12:39.500 --> 04:12:40.333
Correct.
04:12:44.125 --> 04:12:44.965
Yes.
04:12:44.965 --> 04:12:46.014
(faintly speaking)
04:12:46.014 --> 04:12:47.219
Yes.
04:12:47.219 --> 04:12:48.052
Your Honor do we have
04:12:48.052 --> 04:12:49.850
a estimated time of departure?
04:12:51.920 --> 04:12:53.230
For the end of the day?
04:12:53.230 --> 04:12:54.063
Yeah.
04:12:55.040 --> 04:12:58.670
For the witnesses we do, I think.
04:12:58.670 --> 04:13:01.790
So I'm looking at this, and I'm seeing
04:13:08.180 --> 04:13:13.180
threeish hours, so if people are more concise
04:13:18.180 --> 04:13:20.430
we can be less than threeish.
04:13:22.240 --> 04:13:24.110
But that to me means about five.
04:13:24.110 --> 04:13:24.943
Okay.
04:13:26.240 --> 04:13:27.140
Okay.
04:13:27.140 --> 04:13:31.943
So let's come back at two o'clock.
04:13:33.880 --> 04:13:36.221
Okay.
Thank you your Honor.
04:13:36.221 --> 04:13:39.138
(faintly speaking)