Judge skeptical of allowing ratepayer group to play a role in PG&E’s bankruptcy

SAN FRANCISCO -- A consumer advocacy organization told a bankruptcy judge Thursday that California ratepayers should be appointed as an official committee in Pacific Gas and Electric Corp.'s bankruptcy "to ensure that the public interest is being served."

State ratepayers are demanding "increased transparency" from the court through a seat at the leadership table since PG&E owes money to millions of ratepayers and because the cost of the utility's bankruptcy could result in rate increases, said an attorney with the Utility Reform Network.

While he was sympathetic to the frustrations, the judge handling the utility's reorganization questioned whether he even had the authority to do so because he was skeptical ratepayers can be considered creditors in bankruptcy court.

"This is not about deciding good guys and bad guys," said U.S. Bankruptcy Judge Dennis Montali of San Francisco. "I have to interpret the statute one way or the other."

The judge did not make a decision at the hearing but appeared inclined to deny the appointment.

PG&E customers are also creditors because the utility is obligated to distribute hundreds of millions of dollars from a greenhouse gas allowance auction to ratepayers, which will be paid out in the form of credits toward outstanding bills, according to Robert G. Harris, who represents the Utility Reform Network.

Montali asked Harris to assume that a customer got a $100 bill from PG&E and is owed a $5 credit. The individual is no longer a creditor after the credit is applied in October, the judge said.

An attorney for the Northern California Power Agency, which supported the appointment of a ratepayers committee, said the judge should examine the issue from a "basic equity point of view," but Montali quickly dismissed the argument.

"If there was equity, we'd have a section in the bankruptcy code that just says, 'Do whatever you want,'" he said.

Montali added that it was not a discretionary decision but one that has to be based on existing statutes.

PG&E attorney Stephen Karotkin of Weil, Gotshal & Manges LLP said the judge put his finger on the issue when he said the claims will be paid soon, which will invalidate the ratepayers' status as creditors. He added that the argument is actually so that the California Public Utilities Commission can address "concerns about rates going forward, and how they'll look coming out of Chapter 11" after they are appointed as an official committee.

The U.S. Trustees and the committee of unsecured creditors agreed with PG&E.

The tort claimants committee was sympathetic to the ratepayers' concerns, especially if it "turns out that the estate is insolvent and the cost of wildfire losses gets passed to ratepayers," according to Cecily Dumas of Baker & Hostetler LLP, who added that she had to consider the technical legal arguments raised with the court.

In his last chance to salvage the matter, Harris said ratepayers could have filed claims for "wrongdoing that PG&E engaged in that is subject to investigation by the California Public Utilities Commission" and suspects they will now do so.

Montali seemed to disagree that ratepayers could ever be considered creditors, even if they allege harm by the utility.

"We're asking for a diverse committee with all ratepayers in California to generate a sufficient amount of trust," Harris said.