The California Public Utilities Commission on Thursday rejected Pacific Gas & Electric’s plan to spin off its non-nuclear generating assets, totaling 5.6 GW, into a subsidiary called Pacific Generation and sell a minority interest to a third party to raise capital.
PG&E Corp. was in exclusive talks to sell a stake of up to 49.9% in Pacific Generation to KKR, a private equity firm, the companies said April 30. PG&E expected that Pacific Generation would have higher credit ratings and a lower cost of debt than PG&E, which it said would reduce customer rates by more than $100 million over 20 years.
Also, KKR would provide “efficient capital” that would help PG&E invest in wildfire prevention, safety and its power plant fleet, the companies said.
PG&E expects to spend at least $62 billion on capital investments over five years starting this year, up 20% from its previous five-year plan, according to the San Francisco-based company’s April 25 quarterly earnings presentation.
However, PG&E failed to show the proposed transaction meets “even the minimal public interest standard,” the PUC said in its decision.
The proposed transaction will result in additional costs, which would contribute to rate increases, with no evidence of offsetting rate savings, the PUC said. Also, it is unclear how the transaction would affect PG&E’s credit rating and whether the PUC would have jurisdiction over Pacific Generation, according to the agency.
Among other things, there would be decreased legal accountability for PG&E’s safe and reliable operation of the generating assets, the PUC said.
The planned spinoff included about 3,848 MW of hydroelectric power, 1,400 MW of natural gas, 152 MW of solar and 182 MW of battery energy storage, according to the PUC. The assets have a 2023 weighted average forecast rate base of about $3.5 billion, the PUC said.
The proposed deal was opposed by various parties, including a coalition consisting of the California Hydropower Reform Coalition, Friends of the River, American Whitewater, California Sportfishing Protection Alliance, California Trout, Foothill Conservancy, California Outdoors and Trout Unlimited.
