Q: Does PG&E need Bailout Bonds to pay its obligations to wildfire victims and others?
No. And PG&E has even said as much.
PG&E claimed in a statement filed with the Bankruptcy Court on August 12 that it had $10.25 billion in equity financing commitments from more than 20 of its equity holders (it later increased that figure to $13.2 billion in representations to the Bankruptcy Court). PG&E also represented to the Bankruptcy Court that it had more than adequate funding sources lined up before seeking Bailout Bonds.
“And I will point out, your honor, there is no question, again, as we have reflected in our pleadings, there are ample sources of capital here.” – Attorney’s for PG&E
Bailout Bonds would load the company with more debt, with ratepayers and taxpayers stuck holding the bag. There are better alternatives.
Q: If the Legislature approves PG&E’s bailout bonds, will the shareholders put in any new money to pay off wildfire debts or make their promised investments in safety and grid improvements?
No. The backstop commitment letter from PG&E’s shareholders, which was filed with the Court on August 12, makes clear that financial commitments by shareholders will be decreased on a dollar-for-dollar basis based on the amount of Bailout Bonds issued by PG&E, if allowed by the California legislature. If PG&E gets Bailout Bonds, shareholders are off the hook.
Q: What happens if PG&E can’t pay for the new debt created by Bailout Bonds?
Bailout Bonds would be backed by future electricity rates paid by PG&E’s customers. PG&E’s customers will not be reimbursed for the portion of their bills that are used to pay for the bonds. Furthermore, the obligation for ratepayers to cover this cost is iron clad – the charges are irrevocable and nonbypassable, meaning they will be paid by every ratepayer in PG&E service territory, even if they switch electricity providers.
Q: PG&E claims Bailout Bonds will be paid for by PG&E’s shareholders. Is this true?
No. PG&E says its shareholders will take a 20% cut in profits to cover the costs of this new debt. But, at the same time, PG&E and its hedge fund shareholders are demanding that their regulator increase their profits by at least 20% to cover any lost profits.
And if PG&E doesn’t make a profit in the future, shareholders are not required to make payments to offset the ratepayer charges. Even if there is a future bankruptcy, ratepayers will still be obligated to pay for the bonds.
Q: What is the impact of Bailout Bonds on taxpayers and California’s financial situation?
As a large California corporation, PG&E has historically made significant state corporate tax payments and dividends to its shareholders, which also adds tax revenue for California.
PG&E wants Bailout Bonds to be tax-exempt meaning billions of dollars of lost revenue for California. For example, a 20 year bond to give PG&E a $15 billion bailout would mean California loses $2.7 billion that could be invested in schools, healthcare, public safety and other critical services. It will fall on California taxpayers to cover the bill instead.
It’s not right for taxpayers to have to foot the bill for PG&E’s past misdeeds.