 I've prepared some questions, the panelists know what they are in advance, and if time permits, you know, I'll be looking, this is a small enough room where you can just signal me and we can get other questions from the audience. And so with those rules in mind, let's engage our panelists and hear from them. And the first question I have, and then I'm going to ask Ralph to start off and we'll just go down the line. And then I'll mix it up a little bit as we go along that the last time PG&E filed for bankruptcy, and the four of us were all around in this business at that time in different respective roles. Last time this happened, it took the better part of four years to adjudicate and have an approved plan by both the bankruptcy court and the CPUC. So I'm going to throw this question to Ralph first, as I said. Will PG&E bankruptcy too take us long, or will it take less time or longer and maybe some of your reasons why? Go ahead. Ralph. Normally at the outset of a Stanford forum, one particularly gratified to be one organized by my friend Jim and Susan Sweeney, I try to curry favor with the audience by pointing out that I was the first male faculty spouse in the history of the Stanford Law School, which is true. But I'm not going to do that today because I think that my presence here is better explained as all of us experienced the first PG&E bankruptcy in 2001. This one is importantly different in some respects, and I think what I want to underscore in responding to Gary's question, how long will it take, is that that's going to depend in part on the folks in this room and people like them. And we have a shared interest in trying to get PG&E out of this as quickly as possible. Let me give you a couple of reasons for that. One is captured by the San Francisco Chronicle headline of this morning, which says, PG&E strikes deal on fires, and it's a story, you've all heard this, the billion dollars that's desperately needed by the communities that have been devastated by wildfires. But what the article doesn't make clear, and I hope it's clear in this room, is not one dime of those funds gets dispersed until PG&E is out of bankruptcy. Right now, PG&E doesn't have a billion dollars or any capacity to act in its role as part of the solution on compensation, or as its critical role as a clean energy partner for California. So that's part of the interest in getting it out, getting out of this quickly. And one of the big obstacles to getting out of this quickly, and I'll close my opening response on this, but I think we'll be coming back to it, has to do with, Gary was kindly quoting from an article I wrote in Western Energy Institute's magazine called California's uniquely dysfunctional system of wildfire liability rules. That came up for those of you who were at the panel this morning with Maggie and Michael, this came up. So if you weren't, the system we've got now is one in which California utilities own an entire wildfire, and are responsible for all of the damages associated with it. If their equipment contributed materially to the ignition or the spreading of the fire, and that is true regardless of fault, regardless of the reasonableness of the utilities conduct, this is called strict liability. You automatically own the entire wildfire if your equipment was involved in starting it or making it worse. No other state has that doctrine. California doesn't have that doctrine for its flood control districts. If you're in a flood control district and you're responsible for managing water in an area of California and there's a flood, you're not automatically owning the flood, there's a determination of whether you acted reasonably, whether you were in fact negligent. Why can't we have that rule for our utilities? This is not just a PG&E issue. This is an issue for all of our utilities. But if we don't fix this, if we don't fix this dysfunctional system of automatic liability, it will be hard for any of our utilities to remain financially viable as we move into an era where wildfire risk continues to grow. There's a whole lot we can do to minimize it, to reduce it. And that's probably the most important thing for us to talk about in the most important lesson of the PG&E bankruptcy. But as long as we stay with these uniquely dysfunctional rules, even if PG&E comes out of bankruptcy now, it's at risk of slipping back at the next bad wildfire excursion. And every other utility in California, publicly owned and privately owned, faces the same risk. So when Michael Wara said to you this morning, for those of you who are in the room, and we are all grateful to him for his service on the 901 Commission, but he said, I don't think the legislature's going to do anything to change this doctrine. He needs to be wrong about that, and we need to help make sure he is. We'll come back to that, I hope, before our hour's up. Mike Florio. Yes. I'm very hopeful, I wouldn't say confident, but hopeful that this bankruptcy is going to be resolved more expeditiously. And just why I think that's more than a naive hope is the 2001 bankruptcy was really a battle between PG&E and the state, particularly the Public Utilities Commission, was characterized as an attempted regulatory jailbreak by PG&E, and that was the underlying tension, was between the state regulators and the company, and I don't really see that in the same way here, that for the most part, PG&E and the state want the same things, they want to control, eliminate wildfire risk, which is going to be a huge challenge, they want the utility to be financially viable, and importantly, they all want to be able to continue to pursue the state's aggressive climate goals, and all of those things are in jeopardy as long as this bankruptcy continues. So in a very real sense, I think it is just about the money this time, whereas the first PG&E bankruptcy was about who's in charge. I guess you could say over 15 years or 20 PG&E has conceded that the states in charge were better or worse, so I think it is going to go more quickly, I think there's a lot of pressure, I don't know that we're going to get legislation by July 12th as the governor would like, and I think all of us would like, we may get some legislation that then has to be changed later on, because part of the complexity of this is there are a number of groups within the bankruptcy proceeding that are developing their own plans for how to resolve it, all of those plans require some kind of legislation, and generally speaking, they require different legislation depending on which version of the plan ends up prevailing, so it may be that the legislature can take some initial action, they'll probably have to come back and revisit that, and there is a tricky issue of coordinating between necessary legislation and necessary bankruptcy court approval, but I think the motivation is there on all sides to get it done, and it is just about the money. So let me just ask you to elaborate, it might be very briefly, but the other parties that you alluded to include bondholders and shareholders, I mean do you think they're anxious to get this done quickly? I mean I know they want their money, get it, but in terms of all the other things you just mentioned, they don't need legislation do they? To the extent that the plans would require some kind of wildfire fund or would require, say, you know, the DWR bonds from the energy crisis are due to be paid off in the next few years, and a number of the plans would essentially replace that roughly half-cent-a-kilowatt-hour bond charge with new bonds that would contribute to a wildfire fund. That would require legislation. You know, I think that would be in essence a rate payer contribution. I think if it were a direct rate impact, the PUC would have to approve it, and the legislature doesn't trust the PUC enough to let them do pretty much anything on this without their oversight. So I think regardless of what the plan ultimately is, it's probably going to require at least PUC and probably legislative acceptance. It doesn't sound like the speed of sound just quite yet. Going to you, Frank, and your material involved with a client of yours in these bankruptcy proceedings. So what do you think? Is this going to be a quick shot to the bar or are we going to get it over? I think this is a tough one. I want to say I hope Mike Florio is correct, but I don't think he is. I think this is a much harder problem to solve than the 2001 bankruptcy. The 2001 bankruptcy had to do with PG&E's, and all three of the investor-owned utilities had very, very high power procurement costs because of the wholesale market, runaway confiscatory prices that were being charged by Enron and these other operators. So it was a finite problem. PG&E had a large lump sum of money it needed to recover. There was an elegant solution put into place, but it still took four years to do it, which was the DWR bond charge. Then PG&E and the other utilities were deputized to go out and then become the procurers of energy going forward. It was a good solution for a company that was essentially financially solvent at the time. It just had this one problem. An elephant had to be passed through the snake. The elephant was passed through in the form of the bond charge. The elephant was these excessively high power costs in the wholesale market, and there were two parts of how we solved that, and I want to take credit for one of those two parts. One part was the bond charge. We financed the debt and we paid off the debt and we were paying it. Every one of us who pays a utility bill, you're still paying it on your monthly charge. You paid it off. The other thing we did, and it was my job as the general counsel at the Public Utilities Commission, was to pursue claims against those bad actors who robbed California. We got back, during my tenure at the commission, we got back $5 billion of what I used to call stolen money from these aggressive wholesale marketers in the wholesale market. That was the solution we put into place, a bond charge and aggressive litigation and settlement of claims against the bad guys. This time around, I think it's a much more difficult problem, because it is liability. It results from wildfires. It's a larger lump sum for one thing. It's a much bigger number to solve, and it's a more difficult problem in the sense that PG&E, notwithstanding what Ralph said about the inverse condemnation doctrine and strict liability and so forth, PG&E is at fault from some of these wildfires. It appears all but certain that PG&E is not an innocent actor, is not free of negligence. The PG&E certainly appears with the campfire in paradise. PG&E's facilities are at fault, and so it's a bigger, more difficult, more morally challenging problem to solve. So I hope, Mike Florejo is right, that we can work it through and that it somehow just becomes about the money. But it's not really. There's a moral component to this that makes it more difficult, and the sheer magnitude of the liabilities that PG&E faces makes it also much more challenging, I think, to solve. So I'd love to see it resolved. It's a serious problem for California. The insolvency and the financial, the hit that all the utility companies are taking from the investment community is a very, very serious challenge for California. We do need to solve this. There is an alignment of interests, I think, as Mike says, among the stakeholders. So there's reasons, perhaps, to be optimistic. But I just find this to be a very difficult problem to solve, a very, very difficult problem. So I'm not as optimistic, perhaps, as Mike is, that we can do this in a short time and come up with the solution that preserves the integrity of the utility companies, takes care of the victims, the wildfires, and moves us on beyond. I just see this as a very difficult situation. Okay. Follow on comment, anyone? Okay. Okay. And folks in the audience, just show your hands if you have a question that you want to pose to our panelists. I'll get you in here somehow. At least there has been at least one media story I've read claiming that the wildfire liability that sparked PG Nees decision to seek bankruptcy protection was, quote, California's first climate change caused emergency. Do you agree with that statement? And if so, why or why not? It is more complicated than that, obviously. I think we started to get into this this morning when Michael Warren made the point that climate change is increasing the likelihood of catastrophic wildfires in California. There's no question about that. There are other contributing factors. There is the rush toward the fire, the phrase that was used this morning, the land use changes that are putting more and more people at risk. There are issues in terms of how we have been constructing buildings historically and how we've been operating in electric infrastructure and all of those together made for just recall how how both unexpected and catastrophic 2017 and 2018 were because the following is true. You can add up all of the damages from all the wildfires from 2000 to 2016 over 16 years, get a substantial number. In 2017, the damages for that one year alone exceed those of the previous 16 years combined. And then in 2018, the damages are bigger than 2017. The campfire of 2018 that destroyed paradise destroyed more structures than the great Chicago fire of 1871. In terms of we have had wildfires in California since time immemorial, but this level of property destruction is unprecedented. Climate change is contributing to it. And there are a whole host of things we need to do in response. They have to do with land use. They have to do with construction practice. They have to do with forest management. But I want to come back to and resist some. We can't get away from the man made contribution to this. PG&E is in bankruptcy today not because of any of those things, not even because of the magnitude of the campfire. It's in bankruptcy because the minute the campfire happened and the minute it was clear that PG&E equipment was involved and respectfully, Frank, nobody knows whether there was fault involved or negligence. We just don't know. And part of the reason why we don't know is there's no reason to find out under the existing legal system. It doesn't matter whether PG&E was negligent. It doesn't matter whether PG&E behaved unreasonably. We need to change. And now I want to spend 60 seconds explaining how both how easy this is and how bizarre the situation is. Some people act as if this doctrine were graven in stone. We're part of California's, you know, back with the 49ers. Somehow this got into the Constitution so we're stuck with it. Here's what the Constitution of the State of California said. This is the provision that has been construed to mean that utilities own wildfires. Private property may be taken or damaged for a public use only when just compensation is paid to the owner. Now that provision or something like it is in every state constitution in the United States. We are the only one that has construed it to mean that investor owned utilities have strict liability for wildfire damage. And that happened about 10 years ago by a lower court in California. It's never even been reviewed or confirmed by the Supreme Court. So the straightforward thing that the legislature could do in a piece of legislation, roughly one paragraph in length is to say that California is going to follow the same rule as the rest of the country going to apply the same doctrine as it does to flood control districts in evaluating utility liability for wildfire damage. And if we did that, it would help avoid these automatic PG&E hadn't really, I think the three of us will agree on this, but let me put it out there and make sure. PG&E had no choice about declaring bankruptcy. PG&E was about to run out of money. PG&E had no access to credit or capital because the entire world knew that PG&E owned that wildfire, the minute that we knew that its equipment had been involved in starting it or making it worse. And if we don't change that, we will be back in this situation. However, effectively we manage everything else. We're at unacceptable risk of being back in this situation again for all of our electric utilities. And if you believe that the electric systems are an important part of the clean energy transition, a point that's been made over and over again, the one thing all of the debaters agreed on in the high speed rail debate was the importance of electricity in moving California to a clean energy future. That is at risk because of this dysfunction, this unique dysfunction, it's easy to fix. It requires a legislature that is hearing from a diverse constituency and not just those with a proprietary interest in maintaining this uniquely dysfunctional system. And there are a lot of those people here in this room. So on my follow-up question might be, is that message being heard by folks in the legislature or their advisors in Europe? In my opinion right now it's not for a couple of reasons. I mean certainly being heard for those of you who have been listening, you've been hearing it from me. What they're not hearing it from, the most important constituency they are not hearing from is consumer advocates. And there's a great one here to my left. It is beyond understanding me, why would consumer advocates not complain about a system that automatically loads the full weight of wildfire damage, which we know will be escalating in the future on captive electricity users. They're a whole host of able and eloquent consumer advocates in Sacramento and I am daring to hope that they're going to figure this out before too much. Well let's find out. Florio what do you think? Well just to be clear. Good time to bury your former colleagues. I absolutely agree with Ralph that this is a crazy interpretation that needs to be fixed. I think in some ways and it's not just turn it's you know. I didn't mention anybody. Yeah I know. It's the oil companies, it's the ag consumers. Everybody is lined up saying this is PG&E's fault. It's not the customer's fault. PG&E should pay. Which reminds me a little bit of the posture we took during the energy crisis which was well the utilities made this deal with stranded cost recovery and frozen rates and they've got to live with it. Right. And you know too late I think I back then came to the realization that you know there was a bigger problem than just the AB-1890 electric restructuring deal that had turned sour on the utilities that and Frank very well summarized that. And I think that utility consumer advocates are locked in a mentality of it's us versus the utility when here there's a much bigger problem. You know if the cost doesn't fall on the utility in the first instance we don't have to fight it over at the PUC over whether it's rate payers or shareholders. And in fact the money is so big it can't be either and survive it. So and I think you know what you've got on the other side are insurance companies and trial lawyers who are usually at each other's throats but are united in this and what I saw last summer was those folks with their publicity campaign very effectively preempt almost capture the consumer advocate argument by saying don't bail out the utilities by changing this law. When in fact you know it would probably be utility customers that were bailed out to a large extent if the necessary change were made but you've got well organized well funded interests that benefit from this current system and there the people who are harmed by it are diffuse and unorganized and fighting with each other. Doesn't sound too good. Now back to my original question and I'll if you wouldn't mind would this would you agree that this is California's first climate change caused emergency or not? To a large extent I would agree and that goes back to my time on the PUC about two years into my tenure there I was I was assigned to take over the wildfire safety proceeding. The commission has had an open proceeding on this topic ever since the San Diego fire. I was going to ask is it because of the San Diego? Yeah and you know it's been really a constant series of revisions to the rules and what where the case was when I took it over is the commission had just imposed a new set of rules for elevated requirements for what were called high fire threat districts and this was after the San Diego fires you're looking at the Santa Ana winds in Southern California. Could you specify like what are we talking about requirements regarding infrastructure poles? Yeah infrastructure inspections and clearances all of those kinds of things that are part of general order I forget the number and the the dilemma that the commission faced was how to define the area where these heightened requirements because they're costly I mean it's not a free lunch it costs a lot of money to harden infrastructure even I mean the the communications utilities are also implicated by this because they share the poles well they're they're not cost-based regulated anymore so they don't want to spend a nickel on their share of the problem because it comes out of their bottom line they can't necessarily pass it through so it was a very contentious proceeding and everyone said well okay we should have stricter standards in high fire threat areas what's a high fire threat area well everybody kind of knows but uh so they took a map from Cal Fire the Cal Fire said this map is not useful for the purpose you're intending to use it but use it anyway the commission said well it's the only map we've got there we go there's an answer and what the commission did was work with Cal Fire to commission what was essentially original scientific research looking at wind speeds humidity precipitation all of these factors that go into wildfire risk is that we want to hire the best experts and draw these maps that will tell us what are the places where the high fire threat exists now this was a long and expensive undertaking and long and expensive are you square it when you're talking about the PUC but one of the things that I asked at the time was well we're all talking about southern california what about northern california oh now I was under the assumption this map covered both well it it did but the thinking somebody cut it in half well it was only applied to southern california thank you first instance based on the map that wasn't suitable for the purpose but the question was asked well what about northern california okay and the response from the gathered experts was well this isn't really a northern california problem now windy enough yeah the high winds in northern california happened in the winter when it's raining so yeah you get storm damage and stuff but wildfire that's santa anna winds in in la and san diego well fast forward two or three years of this research and the results come back showing 44 percent of the state is a high fire threat area not san diego orange in los angeles counties but everywhere and this was kind of a shock to the system and you say well why will you look at the mid teens the decade that we're just coming to the end of we had the what was it four five-year drought yeah that drought killed a lot of trees in the northern california for us if the drought didn't get them they were weakened and the bark beetles got them and we have had a monumental die-off of trees in sort of the seara foothills areas areas like napa and sonoma and on up into humboldt uh places that i used to drive through 10 years ago and all you would see were trees for as far as you could see in any direction now they're big patches of brown in the middle of all of that where the trees have died that has incredibly heightened the fire risk so i don't know that i would say climate change with a with a capital c but certainly the drought and the beetle infestation and all of these things accumulated certainly in some part driven by climate change we now have tens of millions of dead trees in our forests that are just sitting there waiting for a spark utility lines have caused fires to start with some regularity throughout history the difference is it used to be a fire would start and it would get put out almost immediately didn't spread that fast today that you've got an environment where the fire is going to spread naturally you add high wind to it and you get these conflagrations that are are not part of our historical experience at least in northern california so it's it's a very bad situation and you know it's something that you know there just aren't easy solutions saying before we even had the wine country fires governor brown asked the puc to approve biomass energy con contracts where the plants that exist and have you know come off their old perpa contracts could burn wood waste from the forest sell the electricity to the utilities and help get rid of the problem we approved some of those contracts but it's really a drop in the bucket and it's essentially too expensive to harvest that would get it out of the forest truck it to the plants and burn it you know it's it's not an economical way of producing electricity but you know to his credit you know governor moonbeam saw this coming but the other response that was was too little and i understand that the number of bio plants i should call them biomass plants has been reduced or yes decline they've been ongoing as this this effort kind of gave them a temporary boost but you know the utilities haven't been really all that eager to contract for 10 or 12 cent power when they can get it much cheaper that's true that's an interesting question we might come to and let me go to you frank is this a climate cause emergency i was going to quickly say that i think we just heard from commissioner florio that he's responsible for the trouble that well i i was trying to figure out the failure of the commissioner he had the shot 10 years ago he failed and now we're living with the consequences but now we know we only look at the utilities are strictly liable i think the answer is yes i think it is climate change related i'm thinking about an interview i read with Pedro Pizarro the CEO of southern california edison's parent company and he said we're all all of us the utility companies are just one wildfire away from insolvency so pgne happened to be the one that was hit this past fall but it could happen today tomorrow next week for san diego gas and electric or southern california edison so i don't think there's any denying that the scale of the problem the scale of the damages that results from these periodic fires is much worse than we have seen historically some of that may be related to land use policies and that we're building in places we shouldn't be building and so forth but undeniably some of it is due to changes in the climate the drought then let me ask you a follow-on question also speaking with Pedro as i do often suppose calfire comes out and says and i i'll forget the name of the fire that's particularly important just the letter w but forget it what if edison ends up marching into bankruptcy give me your vision of the political landscape that ensues over the next couple months if that happens frank maybe maybe that's the catalyst that that causes everybody to say okay no we really have to get serious about rouse legislation we have to get serious about a victims fund and so forth so what you're saying right there is we don't have enough of a serious situation to really make a big change maybe that we the serious situation that we have i wouldn't understate it is focused on northern california right now the southern california is one file one wildfire away from the problem but they are not experiencing the problem right now so the perhaps i'm not that tuned into sacramental but perhaps the political motivation to solve this would be stronger if you had a catastrophe in southern california clearly it would and the other the other problem if you want to call that pg&e has managed the bankruptcy compared to last time they've managed it much better this time it's possible that dan richard shift in position has something to do with it although i would for a moment draw that he won't take credit dan dan will remember that in the at the beginning of the pg&e bankruptcy in 2001 one of the things that happens the creditors basically went and tried to grab all of the clean energy investments because pacific gas and electric company and they were momentarily successful all the renewable energy all the energy efficiency all the low-income services all that was frozen pg&e then when and this is where credit is due went in with nrdc and got those funds unfrozen relatively quickly and the bankruptcy judge who was the bankruptcy judge then who is the bankruptcy judge now this time around preemptively kept all of that going so pg&e has not yet there if you ask people over the last six months what catastrophic harm have you experienced as a result of pg&e's bankruptcy my guess is most customers haven't noticed it the moment where you start to notice it is when things like this happen and there is an urgently needed settlement involving claimants who are universally sympathized with and you suddenly realize those people can't get paid until we fix this and there are a whole host of other people like that there are a whole host of renewable energy contract holders who are worried about whether they're going to continue to get paid and there is going forward the need for a mobilized aggressively innovative electric sector that is very much at risk if we don't fix this so i hope between pg&e and between all of the other utilities in the state coming forward and saying this is about us too we can generate that urgency particularly if their customer groups join them in saying that and i think they will and now you've got some hands coming up okay but gary can i quickly add on that topic pg&e on its first day of bankruptcy filed a motion threatening to reject all of its power or any number of its power purchase agreements that it has for renewable energy and for resource adequacy and that is a it's a byproduct of this bankruptcy that really deserves to be mentioned and i am involved in that on behalf of one of the largest renewable energy companies that's in contract with pg&e but it's it's one aspect of bankruptcy in bankruptcy law the enterprise that's reorganizing in bankruptcy has the ability to quote reject its executory contracts for example if i'm if i own a chain of stores i may want to reject some of the leases that i have to close some of my stores get rid of those lease obligations pg&e on its first day of bankruptcy has threatened and has been making steps ever since then since january to be able to reject its power purchase agreements and those are the agreements upon which california has built huge amounts of renewable and conventional energy sources over the past 12 to 15 years and if they get abrogated what will happen and if they get abrogated well already just by virtue of the threat the the the credit ratings of those counterparties have already been degraded and if they proceed with rejection they will go into bankruptcy the renewable energy projects will go bankrupt the projects will not necessarily the projects well anyway it's a project finance right yes yes so it's a big problem for the existing people but it's also a very big problem for our ability to build more of this kind of resource california has very aggressive goals for increasing our level of greenhouse gas free electrical resources and that entire initiative is a threat now because of the PG&E bankruptcy and this threat to the existing battery of power purchase agreements it's a big aspect that deserves mention hold off dan i want i think mike wants to add did you want to add something on uh well i i totally agree with frank i think if the contracts are rejected they don't just disappear they become unsecured claims in the bankruptcy right so in a sense i'm not sure who wins in that scenario because the problem now is no one yeah PG&E has no has current obligations that exceed their resources you've got these contracts that run out 15 20 years in the future and yes they're above market but if you abrogate those contracts you bring all of that forward and it becomes a current liability in the bankruptcy so it really makes things worse it's less money for all the other unsecured current comments but dan you had a comment and then i'm going to go to the back of the room oh you don't have to go to the back room i was talking about a person with their hand i thought they wanted us to use the microphone oh yeah i got in trouble with that yeah some of us some of us follow the rules so two things first of all on that last point yeah the any any contracts that are rejected get thrown into the mix and they become unsecured creditors which means politically that PG&E's taken payments right now are not part of the bankruptcy because they're just pass-throughs and they throw them into the bankruptcy proceeding competing against claims from wildfire victims which doesn't strike me as a very smart thing to do yeah so but on the other hand PG&E may want to create headroom because they know that other costs are coming and i think that i'm also following closely the issue that frank raised which is you already had the topaz solar facility downgraded to junk clearway is a big renewable producer has already reported that this is putting real financial pressure on them excellent is i think i read this in a publication yeah you might have read it recently yeah but anyway the main thing i wanted to say was that as we were talking here uh somebody sent me an email that the governor just announced a wildfire uh plan like an hour ago and i haven't fully read it because i was listening closely to what was going on here but apparently what he's proposed is a what will ultimately be a 24 billion dollar fund with about half of it coming from the rate payers through the continuation of the uh the current the dedicated rate component that's on the on the bills from the last energy crisis due to roll off next year so they do that the other half would come from the utilities and they'd have access to tap into this fund to pay off futures future claims future claims it doesn't address it still leaves it to PG&E to come up with the money for the 2017-2018 wildfire so that's still 15-20 billion and they only get to tap into this new fund if they pass the PUC prudent management manager standard right so um it'll be very interesting to see how wall street reacts to this because i think at least from the outside the PUC hasn't fully fleshed out that prudent manager standard the governor's climate advisor will be addressing this group as the final item on the agenda today and i suspect she'll have a few things to say about this probably anyway i just want to point out that that was that was going on and after this panel of noted experts i'll sit down and read it more closely yeah and then we'll have a special panel just can i just a quick word if i can about the prudent prudent standard um i used to work at the federal energy regulatory commission the standard there is that the utility is presumed to be prudent and if a challenger wants to question the prudence of the utility then the challenger bears the burden of coming forward with some evidence in california the rule has been the opposite until now the public utilities commission rule is that the utility bears the burden in the first instance to prove that it was prudent it's the opposite of the federal rule and i understand i understand from a distance here that the governor's proposal is essentially to adopt that federal rule as california's rule where the utility would get the presumption of prudence subject to being rebutted by the challenger wasn't san die a girl yes the federal government allowed them to recoup professor wario chic is nodding his head yeah it's a good illustration how those two standards can be implied before you get up there i i want to make sure i think i have a question the yes please yes please because if you don't i have to yell at you just want to follow up on a couple things um on the uh furk issue of furk has started concurrent jurisdiction over the ability of the bank of cc court to reject or pgd to reject the contract so i think the bankruptcy judge ruled that furk didn't have that jurisdiction but i think they're going to appeal it to the ninth circuit so i was curious if frank had a view on how that would play out and then follow up question on the uh the pba contracts i think the pc has taken the position for the power purchase contracts that the pc would um use as important to maintain those in in place because of the renewable energy goals of california so i was curious if mike has a view if the uh if there was a plan put forward apart of the pgd bankruptcy that required pdc sign off you know how the pcc would view view that so those are the questions so you want frank to go first and then sure that'd be great yeah it was two weeks ago today that judge montal in the bank of cc court ruled that the federal energy regulatory commission has no role in deciding whether these contracts get rejected the big and that'll be subject to an appeal to the ninth circuit united states court of appeals for the ninth circuit um and i don't have a prediction except that say that's an unresolved area of the law but the question on a lot of our minds is well what about the role of the public utilities commission in reviewing these if pgne wants to reject contracts remember all of these contracts that pgne has were approved by the public utilities commission through a public process and they were found to be just and reasonable and appropriate for customers to pay for uh is pgne obligated to come to the public utilities commission let alone FERC before it can move ahead with rejection of these contracts we don't know um on march the fifth the my successor the general counsel the public utilities commission testified at a senate hearing in sacramento and she said unequivocally yes the public utilities commission would have the power of the jurisdiction to review any rejections before they could become effective but judge montal is ruling two weeks ago appears to be very sweeping in its scope and he essentially says no regulatory agency of any kind can question what i the bankruptcy court decide should be rejected so uh these are these are very hot questions right now emanating from the bankruptcy case that pgne follows and not just pgne i mean there there are similar bankruptcies in other parts of the country first energy in ohio i think dyna g but the first energy one is the one that was appealed to i think the fifth sixth circuit yeah six it was just argued or will be argued this month yeah somebody else will get to the supreme court before pgne does i think well i think what they'll do is they'll have both cases come emerge if they come up with different answers but go ahead to the question that was posed regarding the puc as if you were still there yeah i i'm skeptical that the puc has the authority to i mean if FERC doesn't have it i don't see how the puc has it but you see this is why you don't want your utilities in bankruptcy if you want your state to maintain control if you want state authority state legislature state regulators to matter and this to me gary the one point we haven't talked about at all but i just want to make sure it's on the table this is another reason why you shouldn't automatically necessarily want the electric utility bill to be the place where all wildfire claims go because if you're going to be if you're going to insist on that if you think that's a good rule then every utility is going to be one big wildfire away from bankruptcy and that is going to cripple their ability to be clean energy partners going forward we ought to be thinking about whether there is some sharing here that's appropriate florida involves the state of florida when there's a catastrophic hurricane there are insurance contributions that are imaginable there are contributions from folks who are living in wildfire risk areas that mike warris commission addressed this issue at some length and i think mike i'm fairly stating the conclusion that you thought that the responsibility should be more widely shared and not simply automatically default to the utilities so we have a question yeah thank you introduce yourself if you know jeremy platt many years in the electric power research before research institute before i retired i'm questioning maybe ralph did it could you revisit the cost number you talked about there is a x dollars of bankruptcy cost i guess the 2001 oh was so we were like mike was referring to my question yeah go that was that cost yeah and how does that compare to whatever cost you're talking about this collection of wildfires right now and related to that is is there an additional tsunami of punitive damages that could somehow add to these costs or is that just not part of the story i don't know so i'm curious about how big punitive damages are not part of this story because they're not allowed under the inverse condemnation system that kill it that's the only part of it i guess i could qualify it we endorse i'm not sure i endorse it i don't think we should get rid of punitive damages but in terms of the transaction costs of bankruptcy are ludicrously high although they're much less than wildfire costs i think mike you estimated four hundred million dollars from the 2001 bank that's lawyers fees that's insane this is a this is a small secular priesthood that operates at ludicrous multiples of normal rates what do you think the bill will be this time if you this time it'll be a lot more than four hundred million dollars unless unless we get it through quickly i mean that's another reason to get it's a little billion right but the total cost of now the wildfire claims just pending against pg&e at the my pg&e has estimated to be a 30 billion dollars michael warra told us this morning that a credible one-day catastrophe going forward in the bay area could be 35 billion dollars within a 24 hour period so yes that gives you some sense the magnitudes of liability here exceed what any individual utility could plausibly be expected to bear and it underscores the need for what the governor has just put forward which is some kind of a mechanism for anticipating these costs and preparing for them the one quarrel i would have with the proposal that dan richards kindly read us off his cell phone is that evidently this proposal once again assumes that all the costs will be paid through utility bills and i don't think that's a complete solution okay so i would add to that too that there's a certain absurdity in all of or an element of randomness that if you're in the campfire area and the fire can be traced to a pg&e facility all of a sudden the sky opens up a billion dollars money on you if you're damaged by the tubs fire in calistoga that blew all the way over to santa rosa and it turns out pg&e was not at fault you know you you're not involved you get nothing i mean you get your own insurance but if you're uninsured so you know our people who are damaged by a lightning induced fire less worthy than those who are damaged by a utility started fire no but they're they're shooting at the insulators trust me yeah yeah um oh i want oh i just remembered the fire in southern california was woosy fire but we're running a little bit short on time so let me go with my third question here and let each of you um have a chance let me start uh the session here with uh florio and then go to frank and then uh finish um with ralph which is uh give me your your vision of um you know what pg&e will look like post bankruptcy and if you want to expand upon that and talk about all utilities in california especially the investor owned utilities in california please do so well the honest answer is i don't have a clue because every idea under the sun is floating around but let me put forward something that i think would be a constructive and politically feasible solution uh one of the things that you know i think people are aware of the rapid growth of of community choice aggregation around the state and in the commission proceeding that was looking at the future of p of pg&e i believe a number of the cca's came in and said their future should be as a wires only utility just get them out of the commodity business and san diego gas and electric recently changed its historical position and said yeah that we agree with that we'd like to get out of providing the electrons and we'll just be the poles and wires company i think that you know the politicians are going to insist on some kind of pound of flesh from pg&e and you know it's as the price of whatever small b or capital b bailout happens here i think it's a great opportunity for them to pound their chests and say we got pg&e out of the commodity business they're just going to be a poles and wires company when it may be a better corporate strategy in the long run for pg&e as well and there's a lot of work to be done on our distribution systems we've got grid modernization that's kind of hitting pause because we have to deal with the wildfire stuff there's a concept of a distribution system operator kind of like the iso is for transmission to have an entity that is focused solely on managing distribution systems and interfacing with the iso that has not really it was discussed a lot in the new york rev but hasn't gone that far and you know i think there's a lot to be said for that as well so i think there's a a potential resolution here that looks to the public like yeah we really hammered pg&e and really it's just putting them in a a more forward-looking role for the future as as an aggregator of distributed resources and a manager of a two-way rather than one way so frank your vision of the world post bankruptcy should we live so long i guess i don't share the view that it's a good idea to take the utilities out of the procurement business the utilities are sophisticated large capable counter parties in dealing with the enrons of the world the big wholesale power sellers you need sophistication you need some oomph you need to be able to hold your own and to take that function away from the utilities have generally done a pretty good job in that area and to take that responsibility away from them and just and then disperse it among small unsophisticated not credit worthy community choice aggregators with all due respect to me that seems like a catastrophically bad idea because i have dealt with those wholesale sellers and i know what they're like they are really sophisticated they are very aggressive and very capable and if you're not a grown-up and able to go toe to toe with them they will clean your clock they clean california's clock in 2000 2001 and they'll do it again and so i am i'm a skeptic now i'm offering you my point of view i think it is reasonably likely that that is the direction we're going it seems the utilities are quite happy to get rid of that function quite happy throw me in that briar patch i don't want to do it i never like doing it i don't make any profit at it so go ahead and turn that over to somebody else but a centralized procurement entity run by the state of california or community choice aggregators the utilities are happy to throw us away um and i think it's maybe it is likely to happen but i think it's a bad idea i think we need we need to keep the utilities uh involved in that aspect of our power business in order to to do it right okay Ralph a billion dollar flows right one and then what happens well i use the last word part jen jen pepper is sitting up front i was the head of finance of clean energy there is no more sophisticated sponsor of this there is no more sophisticated or adept procurement i will stipulate uh than that one so i will differ with frank at least as to the particulars on that but but look where i want to be on this is i think the one essential thing i predict that pgd will come out as and this is the this is the upside uh is renewed in its commitment to be california's essential clean energy partner and this is the note on which i am happy to close i when i started 40 years ago in rdc i walked in the door and in the small and cramped conference room of nrdc small and cramped office the entire pgd senior leadership was gathered and they were being deposed by aggressive nrdc lawyers uh in the in the course of a case that went all the way onto the u.s supreme court where nrdc won and pgd lost and i assumed i would spend the rest of my career gloriously defeating pgne officers and managers uh what came to pass instead is the pgne to i hope the gratification of everyone here and certainly to mine uh became the nation's largest energy efficiency investor nation's largest renewable energy investor uh the strongest proponent for climate action in the u.s congress the essential force behind first on towards nigger and then jerry browns most aggressive climate initiatives that is the side of the company i would like remembered here after a day of fairly harsh treatment uh and that's the side i want to see come back stronger than ever when the bankruptcy is over okay join me in putting our hands together and thanking our panelists for coming here today