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Weil, Gotshal & Manges LLP 

767 Fifth Avenue 

New York, NY 10153-0119

WEIL, GOTSHAL & MANGES LLP 

Stephen Karotkin (pro hac vice) 

(stephen.karotkin@weil.com) 

Jessica Liou (pro hac vice) 

(jessica.liou@weil.com) 

Matthew Goren (pro hac vice) 

(matthew.goren@weil.com) 

767 Fifth Avenue 

New York, NY 10153-0119 

Tel: 212 310 8000 

Fax: 212 310 8007 

KELLER & BENVENUTTI LLP 

Tobias S. Keller (#151445) 

(tkeller@kellerbenvenutti.com) 

Jane Kim (#298192) 

(jkim@kellerbenvenutti.com) 

650 California Street, Suite 1900 

San Francisco, CA 94108 

Tel: 415 496 6723 

Fax: 650 636 9251 

Proposed Attorneys for Debtors 

and Debtors in Possession 

UNITED STATES BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

In re: 

PG&E CORPORATION,

 - and - 

PACIFIC GAS AND ELECTRIC 

COMPANY,

Bankruptcy Case 

No. 19 -30088 (DM) 

Chapter 11 

(Lead Case) 

(Jointly Administered) 

AMENDED DECLARATION OF JASON P. 

WELLS IN SUPPORT OF FIRST DAY 

MOTIONS AND RELATED RELIEF 

Date: January 31, 2019 

Time: 10:00 a.m. (Pacific) 

Place: United States Bankruptcy Court 

 Courtroom 17, 16th Floor 

 San Francisco, CA 94102 

Debtors. 

 Affects PG&E Corporation 

 Affects Pacific Gas and Electric Company 

X Affects both Debtors 

* All papers shall be filed in the Lead Case, 

No. 19-30088 (DM). 

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I, Jason P. Wells, pursuant to section 1746 of title 28 of the United States Code, hereby declare 

under penalty of perjury that the following is true and correct to the best of my knowledge, 

information, and belief: 

I am the Senior Vice President and Chief Financial Officer of PG&E Corporation (“PG&E 

Corp.”). In 2007, I joined PG&E Corp. as the Director of Technical Accounting and was promoted to 

Senior Director of Corporate Accounting and Assistant Controller in 2008. I transferred from PG&E 

Corp. to Pacific Gas and Electric Company (the “Utility”) in 2009 and continued in the role of Senior 

Director of Corporate Accounting and Assistant Controller. I became Vice President, Finance of the 

Utility in October 2011, and became Vice President, Business Finance of the Utility in August 2013. I 

was appointed to my current position at PG&E Corp. in January 2016. I have a bachelor’s degree and 

a master’s degree in accounting from the University of Florida and I am a Certified Public Accountant 

in the State of Florida. The Utility is a wholly-owned subsidiary of PG&E Corp. 

On January 29, 2019 (the “Petition Date”), PG&E Corp. and the Utility (collectively, the 

“Debtors” or “PG&E”) each commenced with this Court (the “Court”) a voluntary case under 

chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). 

I am knowledgeable and familiar with the Debtors’ day-to-day operations, business, and 

financial affairs, and the circumstances leading to the commencement of the Debtors’ chapter 11 cases 

(the “Chapter 11 Cases”). I am authorized to submit this Declaration on behalf of the Debtors. 

Except as otherwise indicated herein, the facts set forth in this Declaration are based upon my personal 

knowledge, my review of relevant documents, information provided to me by the Debtors or the 

Debtors’ legal, restructuring, and financial advisors, or my opinions based upon experience, 

knowledge, and information concerning the Debtors’ operations and the electricity and natural gas 

industries in the State of California. If called upon to testify, I would testify to the facts set forth in this 

Declaration. 

This Declaration is submitted for the purpose of apprising the Court and other parties in interest 

of the circumstances that compelled the commencement of the Chapter 11 Cases, and in support of (i) 

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the Debtors’ chapter 11 petitions, and (ii) the motions and applications that the Debtors have filed with 

the Court contemporaneously with the filing of the chapter 11 petitions (the “First Day Motions”). 

Preliminary Statement 

The Debtors’ decision to seek relief under chapter 11 followed a comprehensive review of a 

variety of factors and the issues facing the Debtors. It represents the only viable alternative under the 

stark circumstances with which the Debtors are faced, and is in the best interests of all of the Debtors’ 

stakeholders, including their millions of customers, employees, wildfire claimants, other creditors, 

employees, and shareholders. The chapter 11 filings were necessitated by a confluence of factors 

resulting from the catastrophic and tragic wildfires that occurred in Northern California in 2017 and 

2018, and PG&E’s potential liabilities arising therefrom. The multitude of pending claims and 

lawsuits, and the thousands of additional claims that will be asserted, made it abundantly clear that 

PG&E could not continue to address those claims and potential liabilities in the California state court 

system, continue to deliver safe and reliable service to its 16 million customers, and remain 

economically viable. As noted in PG&E’s Form 8-K (the “Form 8-K”) filed on January 14, 2019 with 

the United States Securities Exchange Commission (the “SEC”), PG&E’s potential liability with 

respect to the 2017 and 2018 Northern California wildfires could exceed $30 billion, without taking 

into account potential punitive damages, fines and penalties or damages with respect to “future 

claims.” Under certain circumstances, PG&E’s potential liability could be substantially greater. 

Further, as described more fully below, PG&E’s potential liability is exacerbated by the unique 

doctrine of “inverse condemnation,” which imposes strict liability on PG&E regardless of whether it 

was negligent, and by the continuing uncertainty surrounding PG&E’s ability to recover costs 

associated with inverse condemnation. 

In view of the circumstances confronting PG&E, it did not have the ability to access the capital 

necessary to (a) address and resolve the thousands of wildfire claims that already had been asserted and 

would be asserted against it over the next several months and years; (b) operate its business and 

provide prudent and efficient electric and gas services to its millions of customers; (c) properly invest 

in its infrastructure and critical initiatives to provide safe and reliable service, and to mitigate future 

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wildfire risks in an environment impacted by climate change; and (d) service and, as required, 

refinance or satisfy its approximate $24 billion in outstanding funded debt obligations. 

PG&E’s decision to seek relief under chapter 11 followed a comprehensive review of all 

realistic alternatives and the consideration and balancing of a variety of factors, including (a) the need 

for an orderly, fair, and expeditious process to assess and resolve PG&E’s potential liabilities resulting 

from the 2017 and 2018 Northern California wildfires; and (b) how to best preserve and maximize the 

value of PG&E’s business enterprise for the benefit of all of its economic stakeholders, including 

wildfire claimants, PG&E’s other creditors, and PG&E Corp.’s shareholders. 

To be clear, the Chapter 11 Cases are not a strategy or attempt to avoid PG&E’s responsibility 

for the heartbreaking and tragic loss of life, devastating damage and destruction to homes and 

businesses, and harm to the communities that has been incurred as a result of the 2017 and 2018 

Northern California wildfires. Rather, the principal objectives of the Chapter 11 Cases are directly to 

the contrary: 

 First, to establish a process for PG&E to fully address and resolve its liabilities resulting 

from the 2017 and 2018 Northern California wildfires and to provide compensation to those 

entitled to compensation from the Debtors fairly and expeditiously – indeed, more quickly 

and more equitably than those liabilities could be addressed and resolved in the state court 

system; 

 Second, to restore PG&E’s financial stability and assure that PG&E has access to the 

capital and resources necessary to sustain and support its ongoing operations and to enable 

PG&E to continue investing in its systems infrastructure and critical safety and wildfire 

prevention initiatives, including investing in PG&E’s Community Wildfire Safety Program 

(a program to further reduce wildfire risks and help keep our customers and the 

communities we serve safe through enhanced real-time monitoring and intelligence, safety 

measures, and electrical system equipment); 

 Third, to work collaboratively and constructively with State regulators and policy makers to 

(a) address safety, and operational and structural reforms; (b) determine the most effective 

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way for PG&E to provide safe and reliable electric and natural gas service to its customers 

and communities for the long term; and (c) address the significant increase in wildfire risk 

in an environment that continues to be challenged by climate change and its ongoing and 

future impact on California, including on PG&E and its operations; and 

 Fourth, to enable PG&E to continue its extensive restoration and rebuilding efforts to assist 

the communities affected by the 2017 and 2018 Northern California wildfires. 

Chapter 11 provides the unique opportunity for all of the wildfire claims asserted and to be 

asserted against the Debtors to be comprehensively addressed in one forum. It will avoid the lengthy 

process necessarily attendant to the state court system (including applicable statutes of limitation) and, 

perhaps more importantly, avoid the risk that, due to PG&E’s financial condition, those having their 

wildfire claims dealt with earlier in the state court process will fare substantially better than other 

wildfire claimants. Chapter 11 mandates that all wildfire claimants be treated similarly, and provides 

the statutory framework and tools to accomplish that goal on an expedited basis. 

PG&E could have accessed a limited amount of secured indebtedness or other alternative forms 

of capital to temporarily extend its liquidity runway outside of chapter 11. That alternative, however, 

was not a solution nor was it in the best interests of PG&E’s stakeholders, including wildfire claimants 

(who could face subordination of their claims in certain circumstances). This course of action would 

not have addressed the fundamental issues facing PG&E – it was not a feasible way to address and 

resolve the thousands of wildfire claims and to assure PG&E would have the liquidity necessary to 

sustain ongoing operations, as well as service its outstanding funded debt. 

It also is important to recognize that Senate Bill 901 (“SB 901”), which was enacted by the 

California legislature in September, 2018, to address a portion of the liabilities PG&E faced in 

connection with the 2017 Northern California wildfires (through the issuance of recovery bonds 

(referred to as “securitization”)), does not address wildfires occurring in 2018. Since the 2018 Camp 

Fire and in view of PG&E’s potential liabilities relating to the Camp Fire, PG&E has been in regular 

contact with representatives of the Governor’s office and the relevant regulatory agencies, including 

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the staff of the California Public Utilities Commission (the “CPUC”), and has apprised those parties as 

to PG&E’s financial condition and its projected liquidity profile. 

Although, as reported, there were initial indications that relief similar to that provided for the 

2017 Northern California wildfires might be available for the 2018 Camp Fire, that relief is not 

available absent further legislation. As of the date hereof, there is no prospect of legislation being 

enacted on a timely basis, if at all, to implement the extraordinary measures necessary to stabilize 

PG&E’s financial condition and avoid the necessity of seeking relief under chapter 11. 

Additionally, on January 10, 2019, the CPUC adopted an Order Instituting Rulemaking (the 

“OIR”), which established a process to develop criteria and a methodology to determine the amount of 

PG&E’s cost recovery related to the 2017 Northern California wildfires. Based on the OIR, PG&E 

believes that any recovery of costs related to the 2017 Northern California wildfires would not occur, if 

at all, until (a) PG&E has paid claims relating to such wildfires, (b) application for recovery of such 

costs has been made, and (c) the CPUC has made a determination that such costs are just and 

reasonable or in excess of the disallowance threshold to be established by the CPUC. Therefore, 

PG&E does not expect that it would be permitted to securitize costs relating to the 2017 Northern 

California wildfires on an expedited or emergency basis. Additionally, based on the OIR as well as 

prior experience and precedent, PG&E also believes that it likely would take years for it to be able to 

recover through securitization any amount related to the 2017 Northern California wildfires, further 

exacerbating the situation facing the Debtors. 

As discussed more fully below, seeking relief under chapter 11, however, has enabled the 

Debtors to obtain a commitment for debtor in possession financing (the “DIP Financing”) in the 

amount of $5.5 billion. The DIP Financing, which is subject to the Court’s approval, together with 

cash on hand and the revenues generated from operations, will provide the Debtors with the liquidity to 

fund their operations, administer these Chapter 11 Cases, and to make the necessary expenditures to 

invest in their infrastructure, including investments to further reduce wildfire risk. 

The Chapter 11 Cases represent the best means to preserve and maximize the value of the 

Debtors’ business enterprise and are in the best interests of all of their economic stakeholders, 

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including wildfire claimants, the Debtors’ other creditors, and PG&E Corp.’s shareholders. Chapter 11 

will provide the Debtors and all parties in interest with one forum to comprehensively address and 

resolve the Debtors’ wildfire liabilities in a fair and expeditious manner, and will assure equality of 

treatment among all similarly-situated creditors of the Debtors – wildfire claimants, debtholders and 

others. Additionally, the Chapter 11 Cases will assure that PG&E has the resources, financial and 

otherwise, to sustain its operations, provide critical utility services safely and reliably, and continue its 

efforts to rebuild and restore the communities which it serves.

The Company’s Business 

PG&E Corp. was incorporated in 1995 and is a holding company whose primary operating 

subsidiary is the Utility, a public utility operating in northern and central California. The Utility was 

incorporated in 1905 and PG&E Corp. became the holding company of the Utility in 1997. The Utility 

provides natural gas and utility services to approximately 16 million customers. As of September 30, 

2018, the Debtors, on a consolidated basis, had reported approximately $71.4 billion in assets on a 

book value basis and approximately $51.7 billion in liabilities on a book value basis. 

Employees. PG&E Corp. and the Utility employ approximately 24,000 regular employees, 

approximately 20 of whom are employed by PG&E Corp. Of the Utility’s regular employees, 

approximately 15,000 are covered by collective bargaining agreements with local chapters of three 

labor unions: (i) the International Brotherhood of Electrical Workers; (ii) the Engineers and Scientists 

of California; and (iii) the Service Employees International Union. 

Regulatory Environment. The Utility’s business is subject to the regulatory jurisdiction of 

various agencies at the federal state, and local levels, including the CPUC in the State of California, 

and the Federal Energy Regulatory Commission (“FERC”) and the Nuclear Regulatory Commission 

(the “NRC”) at the federal level. PG&E Corp. is a “public utility holding company” as defined in the 

Public Utility Holding Company Act of 2005, and is subject to regulatory oversight by FERC. 

Ratemaking. The Utility’s rates for electric and natural gas utility services are set at levels 

intended to allow the Utility to recover its costs of providing service and have the opportunity to earn a 

return on invested capital. Before setting rates, the CPUC and FERC conduct proceedings to 

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determine the annual amount that the Utility will be authorized to collect from its customers. The 

Utility’s revenue requirements consist primarily of a base amount set to enable the Utility to recover its 

reasonable operating expenses (e.g., maintenance, administration and general expenses) and capital 

costs (e.g., depreciation, tax, and financing expenses). In addition, the CPUC authorizes the Utility to 

collect revenues to recover costs that the Utility is allowed to “pass-through” to customers, including 

its costs to procure electricity, natural gas and nuclear fuel, to administer public purpose and customer 

programs, and to decommission its nuclear facilities. 

Liquidity and Financial Resources. The Utility’s ability to fund operations and to finance 

capital expenditures depends on the levels of its operating cash flows and access to the capital and 

credit markets. The CPUC authorizes the Utility’s capital structure, the aggregate amount of long-term 

and short-term debt that the Utility may issue, and the revenue requirements the Utility is able to 

collect to recover its cost of capital. The Utility has utilized equity contributions from PG&E Corp. 

and long-term senior unsecured debt issuances to maintain its CPUC-authorized capital structure 

consisting of 52% equity and 48% debt and preferred stock. Until recently, the Utility relied on shortterm debt, including commercial paper, to fund temporary financing needs. Those funding alternatives 

no longer exist. 

Third-Party Monitor. On April 12, 2017, the Utility retained a third-party monitor at the 

Utility’s expense as part of its compliance with the sentencing terms of the Utility’s January 27, 2017 

federal criminal convictions in connection with the natural gas explosion that occurred in the City of 

San Bruno, California, on September 9, 2010. The Utility was sentenced to, among other things, a 

five-year corporate probation period and oversight by a third-party monitor for a period of five years, 

with the ability to apply for early termination after three years. The goal of the monitor is to help 

ensure that the Utility takes reasonable and appropriate steps to maintain the safety of its gas and 

electric operations and maintains effective ethics, compliance, and safety-related incentive programs 

on a Utility-wide basis. 

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Corporate and Capital Structure 

PG&E Corp. and the Utility are public reporting companies under Section 12b of the Securities 

and Exchange Act of 1934. PG&E Corp.’s common stock is traded on the New York Stock Exchange 

under the symbol “PCG”. 

Common Stock. As of September 30, 2018, PG&E Corp. had 518,674,276 shares of common 

stock outstanding. PG&E Corp. holds all of the 264,374,809 shares of outstanding common stock of 

the Utility. On December 20, 2017, the Board of Directors of PG&E Corp. suspended quarterly cash 

dividends on PG&E Corp’s common stock, beginning with the fourth quarter of 2017 due to the 

uncertainty related to the causes of and potential liabilities associated with the 2017 Northern 

California wildfires. That suspension has remained in effect through the Petition Date. 

Preferred Stock. PG&E Corp. has authorized 75 million shares of no par value preferred 

stock and 5 million shares of $100 par value preferred stock. No such preferred stock is outstanding. 

The Utility has 75 million shares of $25 par value preferred stock and 10 million shares of $100 par 

value preferred stock. As of December 31, 2018, the Utility’s preferred stock outstanding included 

$145 million of shares with interest rates between 5% and 6% designated as non-redeemable preferred 

stock and $113 million of shares with interest rates between 4.36% and 5% that are redeemable 

between $25.75 and $27.25 per share. The Utility’s preferred stock outstanding is not subject to 

mandatory redemption. On December 20, 2017, the Boards of Directors of PG&E Corp. and the 

Utility determined to suspend quarterly cash dividends on the Utility’s preferred stock beginning with 

the three-month period ending January 31, 2018, due again to the uncertainty related to the causes and 

potential liabilities associated with the 2017 Northern California wildfires. That suspension has 

remained in effect through the Petition Date. 

Prepetition Indebtedness. The principal significant pre-Petition Date indebtedness of the 

Debtors consists of the following (this summary does not include any potential liabilities associated 

with the 2017 and 2018 Northern California wildfires, which, as stated above, could exceed $30 

billion): 

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Revolving Credit Facilities. Each of PG&E Corp. and the Utility are party to a separate 

revolving credit agreement with Bank of America, N.A., and Citibank, N.A., respectively, as 

administrative agents (each a “Revolving Credit Facility” and collectively, the “Revolving Credit 

Facilities”). The Revolving Credit Facility to which PG&E Corp. is a party permits borrowings up to 

an aggregate principal amount of $300 million. The Revolving Credit Facility to which the Utility is a 

party permits borrowings up to an aggregate amount of $3 billion. The termination date of each 

facility was extended in May, 2017, by one year to April 27, 2022. As of December 31, 2018, the 

Utility’s aggregate borrowings under its Revolving Credit Facility included $2.85 billion of revolving 

credit loans, and approximately $80 million of letters of credit outstanding. As of December 31, 2018, 

PG&E Corp.’s aggregate borrowings outstanding under its Revolving Credit Facility were in the 

amount of $300 million. 

The Revolving Credit Facilities include customary provisions regarding events of default and 

covenants, including covenants limiting the incurrence of secured debt as permitted under the Utility’s 

senior notes indentures, mergers, and imposing conditions on the sale of all or substantially all assets 

and other fundamental changes. The Revolving Credit Facilities also have a covenant requiring that 

PG&E Corp. and the Utility maintain a ratio of consolidated debt to total consolidated capitalization of 

at most 65% as of the end of each fiscal quarter (the “Financial Covenant”). 

All obligations under the Revolving Credit Facilities are unsecured. In addition, the obligations 

under the Utility’s Revolving Credit Facility are not guaranteed by PG&E Corp.; and the obligations 

under PG&E Corp.’s Revolving Credit Facility are not guaranteed by the Utility. 

Term Loans. PG&E Corp. has an outstanding unsecured term loan in the principal amount of 

$350 million that matures on April 16, 2020. The Utility has an outstanding unsecured term loan in the 

principal amount of $250 million that matures on February 22, 2019. 

Senior Notes. The Utility has outstanding various issues of senior notes (the “Senior Notes”) 

with varying interest rates and maturities ranging from 2020 to 2047, in the aggregate outstanding 

principal amount of approximately $17.5 billion. The Senior Notes are unsecured obligations of the 

Utility and are not guaranteed by PG&E Corp. The indentures governing the Senior Notes contain a 

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provision commonly known as a “negative pledge” including an “equal and ratable” clause requiring 

generally that in the event the Utility incurs indebtedness secured by Principal Properties (as defined in 

the indentures) in excess of 10% of the Utility’s Net Tangible Assets (as defined in the indentures), the 

Senior Notes must be simultaneously secured by the same assets on an equal and ratable basis with the 

newly incurred secured indebtedness. 

Pollution Control Bonds. The California Pollution Control Financing Authority and the

California Infrastructure and Economic Development Bank have issued various series of fixed-rate and 

multi-modal tax-exempt pollution control bonds for the benefit of the Utility in the aggregate 

outstanding principal amount of approximately $860 million. Approximately $760 million in principal 

amount of such pollution control bonds are backed by letters of credit. The obligations under the 

reimbursement agreements entered into by the Utility in connection with the issuance of the letters of 

credit are unsecured obligations of the Utility and are not guaranteed by PG&E Corp. 

Trade Payables. As of January 28, 2019, PG&E’s outstanding trade payables totaled 

approximately $2.1 billion. 

The Need for Chapter 11 Relief and 

the Events and Circumstances Compelling 

the Commencement of The Chapter 11 Cases 

The Northern California Wildfires 

The 2018 Camp Fire 

On November 8, 2018, a wildfire began near the city of Paradise, Butte County, California (the 

“Camp Fire”), located in the service territory of the Utility. The California Department of Forestry 

and Fire Protection’s (“Cal Fire”) Camp Fire Incident Information Website as of January 4, 2019 (the 

“Cal Fire website”), indicated that the Camp Fire consumed 153,336 acres. On the Cal Fire website, 

Cal Fire reported 86 fatalities and the destruction of 13,972 residences, 528 commercial structures and 

4,293 other buildings resulting from the Camp Fire. 

The cause of the Camp Fire remains under investigation and PG&E is cooperating with those 

investigations. The Utility has submitted two Electric Incident Reports (the “EIRs”) to the CPUC, one 

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on November 8, 2018 and one on November 16, 2018. On December 11, 2018, the Utility publicly 

released a letter to the CPUC supplementing the EIRs which stated: 

 On Cal Fire’s website, Cal Fire has identified coordinates for the Camp Fire near Tower 

:27/222 on the Utility’s Caribou-Palermo 115 Kv Transmission Line and has identified the 

start time of the Camp Fire as 6:33 a.m. on November 8, 2018. 

 On November 8, 2018, at approximately 6:15 a.m., the utility’s Caribou-Palermo 115 Kv 

Transmission Line relayed and deenergized. At approximately 6:30 a.m. that day, a utility 

employee observed fire in the vicinity of Tower :27/222, and this observation was reported 

to 911 by Utility employees. In the afternoon of November 8, the Utility observed damage 

on the line at Tower :27/222. Specifically, an aerial patrol identified that a suspension 

insulator supporting a transposition jumper had separated from an arm on Tower :27/222. 

 On November 14, 2018, the Utility observed a broken C-hook attached to the separated 

suspension insulator that had connected the suspension insulator to a tower arm, along with 

wear at the connection point. In addition, the Utility observed a flash mark on Tower 

:27/222 near where the transposition jumper was suspended and damage to the transposition 

jumper and suspension insulator. 

 In addition to the events on the Caribou-Palermo 115 Kv Transmission Line, on November 

8, 2018, at approximately 6:45 a.m., the Utility’s Big Bend 1101 12 Kv Circuit experienced 

an outage. On November 9, 2018, a Utility employee on patrol arrived at the location of the 

pole with Line Recloser (“LR”) 1704 on the Big Bend 1101 Circuit and observed that the 

pole and other equipment were on the ground with bullets and bullet holes at the break 

point of the pole and on the equipment. On November 12, 2018, a Utility employee was 

patrolling Concow Road north of LR 1704 when he observed wires down and damaged and 

downed poles at the intersection of Concow Road and Rim Road. At this location, the 

employee observed several snapped trees, with some on top of the downed wires. 

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2017 Northern California Wildfires 

As has been well-reported, beginning on October 8, 2017, multiple wildfires spread through 

Northern California, including Napa, Sonoma, Butte, Humboldt, Mendocino, Lake, Nevada, and Yuba 

Counties. According to a report issued by Cal Fire, dated October 30, 2017, at the peak of the 2017 

Northern California wildfires, there were 21 major fires that, in total, burned over 245,000 acres and 

destroyed an estimated 8,900 structures. The 2017 Northern California wildfires resulted in 44 

fatalities. 

Cal Fire has issued its determination on the causes of 18 of the 2017 Northern California 

wildfires, and alleged that each of these fires involved the Utility’s equipment. The remaining 2017 

Northern California wildfires remain under Cal Fire’s investigation, including the possible role of the 

Utility’s power lines and other facilities. Additionally, the 2017 Northern California wildfires are 

under investigation by the CPUC’s Safety and Equipment Divisions. 

During the second quarter of 2018, Cal Fire issued news releases announcing its determination 

on the causes of 16 of the 2017 Northern California wildfires (the La Porte, McCourtney, Lobo, 

Honey, Redwood, Sulphur, Cherokee, 37, Blue, Norrbom, Adobe, Patrick, Pythian, Nuna, Pocket and 

Atlas fires, located in Mendocino, Lake, Butte, Sonoma, Humboldt, Nevada and Napa counties). 

According to the Cal Fire news releases, the first four fires “were caused by trees coming into contact 

with power lines” and the remaining 12 fires “were caused by electric power and distribution lines, 

conductors and the failure of power poles.” 

On October 9, 2018, Cal Fire issued a news release announcing the results of its investigation 

into the Cascade fire, located in Yuba County, concluding the Cascade fire “was started by sagging 

power lines coming into contact during heavy winds” and that “the power line in question was owned 

by Pacific Gas and Electric Company.” During the third quarter of 2018, Cal Fire released its 

investigation report related to the Point fire, concluding the Point fire was caused by the “failure of the 

PG&E distribution line” and “could be attributed to limbs falling on the line in high winds.” 

On January 24, 2019, Cal Fire released the results of its investigation of the 2017 Tubbs fire, 

which concluded that the fire “was caused by a private electrical system adjacent to a residential 

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structure.” This conclusion is consistent with PG&E’s longstanding belief based on available evidence 

that its equipment did not cause the Tubbs fire. 

Cal Fire has not publicly issued any news releases or other determinations with respect to the 

Maacama and Pressley wildfires. The timing and outcome of the Cal Fire investigation into the 

remaining fires is uncertain. 

Claims and Proceedings Related to the 2017 and 2018 Northern California Wildfires 

It is my understanding that California law includes a doctrine of “inverse condemnation” that is 

routinely invoked in California wildfire damages, claims and litigation. Inverse condemnation imposes 

strict liability (including liability for attorneys’ fees) for damages as a result of the design, construction 

and maintenance of utility facilities, including utilities’ transmission lines. 

It also is my understanding that if the Utility’s facilities, such as its electric distribution and 

transmission lines, are determined to be the substantial cause of one or more of the 2017 and 2018 

Northern California wildfires, and the doctrine of inverse condemnation applies, the Utility could be 

liable for property damage, business interruption, interest, and attorney’s fees without having been 

found negligent. California courts have imposed liability under the doctrine of inverse condemnation 

in legal actions brought by property holders against utilities on the grounds that losses borne by the 

person whose property was damaged through a public use undertaking should be spread across the 

community that benefited from such undertaking, and based on the assumption that utilities have the 

ability to recover these costs from their customers. Further, courts in California have determined that 

the doctrine of inverse condemnation is applicable regardless of whether the CPUC ultimately allows 

recovery by the utility for any such costs. The CPUC may decide not to authorize cost recovery even 

if a court decision were to determine that the Utility is liable as a result of the application of the 

doctrine of inverse condemnation. 

It also is my understanding that in addition to such claims for property damage, business 

interruption, interest, and attorneys’ fees, the Utility could be liable for fire suppression costs, 

evacuation costs, medical expenses, personal injury damages, “future claims,” and other damages 

under other theories of liability, including if the Utility were found to have been negligent. Further, the 

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Utility could be subject to material fines or penalties if the CPUC or any law enforcement agency 

brought an enforcement action, including a criminal proceeding, and determined that the Utility failed 

to comply with applicable laws and regulations. 

As of January 11, 2019, the Debtors were aware of approximately 46 complaints on behalf of at 

least 2,000 plaintiffs related to the Camp Fire, six of which seek to be certified as class actions. The 

litigation currently pending against PG&E related to the Camp Fire includes claims under multiple 

theories of liability, including inverse condemnation, trespass, private nuisance, public nuisance, 

negligence, negligence per se, negligent interference with prospective economic advantage, negligent 

infliction of emotional distress, premises liability, violations of the Public Utilities Code, violations of 

the Health & Safety Code, malice and false advertising in violation of the California Business and 

Professions Code. The plaintiffs principally assert in that litigation that PG&E’s alleged failure to 

maintain and repair its distribution and transmission lines and failure to properly maintain the 

vegetation surrounding such lines were the causes of the Camp Fire. The plaintiffs seek damages and 

remedies that include wrongful death, personal injury, property damage, evacuation costs, medical 

expenses, establishment of a class action medical monitoring fund, punitive damages, attorney’s fees 

and other damages. Less than three months have elapsed since the Camp Fire, a relatively short period 

of time in which to assert claims. As such, PG&E expects a significant number of additional claims to 

be asserted with respect to the Camp Fire. 

As of January 11, 2019, PG&E was aware of approximately 700 complaints on behalf of at 

least 3,600 plaintiffs related to the 2017 Northern California wildfires, five of which seek to be 

certified as class actions. These cases have been coordinated in the San Francisco County Superior 

Court. As of the Petition Date, the coordinated litigation is in the early stages of discovery. A trial 

with respect to the Atlas fire is scheduled to begin on September 23, 2019. The litigation currently 

pending against PG&E related to the 2017 Northern California wildfires includes claims under 

multiple theories of liability, including inverse condemnation, trespass, private nuisance and 

negligence. The claims principally assert that PG&E’s alleged failure to maintain and repair its 

distribution and transmission lines and failure to properly maintain the vegetation surrounding such 

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lines were the causes of the 2017 Northern California wildfires. The plaintiffs seek damages that 

include wrongful death, personal injury, property damage, evacuation costs, medical expenses, 

punitive damages, attorneys’ fees and other damages. 

Insurance carriers that have made payments to their insureds for property damage arising out of 

the 2017 Northern California wildfires have filed 41 subrogation complaints in the San Francisco 

County Superior Court as of January 11, 2019. These complaints allege, among other things, 

negligence, inverse condemnation, trespass and nuisance. The allegations are similar to the ones made 

by individual plaintiffs. Insurance carriers have filed three similar subrogation complaints with respect 

the Camp Fire in the Sacramento County Superior Court. 

Various government entities, including Mendocino, Napa and Sonoma Counties and the City of 

Santa Rosa, also have asserted claims against PG&E based on the damages that these government 

entities allegedly suffered as a result of the 2017 Northern California wildfires. Such alleged damages 

include, among other things, loss of natural resources, loss of public parks, property damages and fire 

suppression costs. The causes of action and allegations are similar to the ones made by individual 

plaintiffs and the insurance carriers. PG&E expects similar claims to be made by various government 

entities with respect to the Camp Fire. 

PG&E also expects to be the subject of thousands of additional claims in connection with the 

2017 and 2018 Northern California wildfires. 

Potential Losses and Claims 

As noted above and as set forth in detail in the Debtors’ Form 8-K, the Debtors’ potential 

exposure with respect to the 2017 and 2018 Northern California wildfires could exceed $30 billion, 

exclusive of potential punitive damages, fines and penalties, or damages with respect to future claims. 

Notably, the Debtors incurred significant fines and penalties in connection with past incidents – for 

example, penalties in the amount of $1.6 billion in connection with the San Bruno explosion in 2015. 

PG&E has approximately $840 million of insurance coverage for liabilities, including wildfire 

events, for the period August 1, 2017 through July 31, 2018. During the third quarter of 2018, PG&E 

renewed its liability insurance coverage for wildfire events in the aggregate amount of approximately 

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$1.4 billion for the period from August 1, 2018 through July 31, 2019. The Debtors expect that their 

losses with respect to the 2017 and 2018 Northern California wildfires will greatly exceed available 

insurance. 

SB 901 

In apparent recognition of, among other things, the severe financial strain the potential liability 

with respect to the 2017 Northern California wildfires would have on PG&E, on September 21, 2018, 

California enacted SB 901 to provide PG&E with economic relief relating to certain wildfire costs 

associated with the 2017 Northern California wildfires. That relief included: 

 in determining cost recovery in connection with the 2017 Northern California wildfires, 

directing the CPUC to consider PG&E’s financial status and determine the maximum 

amount PG&E can pay without harming customers or materially impacting its ability to 

provide adequate and safe service, ensuring that the costs that are disallowed for recovery 

in rates assessed for the wildfires, in the aggregate do not exceed that amount; and 

 authorizing the CPUC to issue a financing order that permits PG&E to recover through the 

issuance of recovery bonds (securitization), wildfire related costs in excess of the maximum 

disallowance permitted above. 

The enactment of SB 901 in September, 2018, provided PG&E with the prospect that, 

assuming cost recovery under SB 901 was timely, PG&E would have the ability to continue to access 

the necessary capital on relatively customary, historical terms to address its liabilities relating to the 

2017 Northern California wildfires, its other obligations, and to properly maintain and invest in its 

business operations. As noted above, however, SB 901 does not address wildfires occurring in 2018 

and, accordingly, provides no relief for the Camp Fire. Moreover, again as noted above, despite the 

securitization relief authorized by SB 901 in connection with the 2017 Northern California wildfires, 

the recent rulemaking adopted by the CPUC in the OIR has made it clear that any ability of the 

Debtors to recover costs for the 2017 Northern California wildfires through securitization would not be 

available for years, if at all, and only after the Debtors have actually paid claims arising from the 2017 

Northern California wildfires. 

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The Debtors’ Liquidity and Financial Resources 

As a result of the 2017 and 2018 Northern California wildfires, PG&E’s potential liability with 

respect thereto, and the failure to expressly provide relief for 2018 wildfires in SB 901, PG&E’s credit 

profile has deteriorated severely. During 2018 and 2019, the Debtors’ credit ratings were subject to 

multiple downgrades by the credit agencies, and are currently rated below “investment grade” by all 

three major rating agencies. On November 13, 2018, PG&E Corp. and the Utility drew all amounts 

available under their respective Revolving Credit Facilities to assure access to additional liquidity. 

Events in recent weeks have caused significant further deterioration by reason of: 

(a) Further downgrades of the Debtors’ credit ratings on January 7, 2019 and January 10, 

2019, that triggered a requirement that PG&E post substantial cash collateral in connection with its 

power purchase and other supply arrangements; 

(b) other requests for cash collateral made by third parties, including the California State 

Division of Workers’ Compensation, and in connection with State environmental remediation projects; 

(c) potential impending defaults under the agreements governing PG&E’s existing funded 

debt; 

(d) significant contraction in customary trade terms; 

(e) the negative impact and uncertainty created by: 

 the recent CPUC order instituting an investigation to determine whether PG&E 

violated legal requirements to timely locate and mark natural gas pipelines for safety 

purposes and falsified records; 

 the recent CPUC Scoping Memo and Ruling setting forth the scope to be addressed 

in the next phase of its ongoing investigation into whether the organizational culture 

and governance of PG&E prioritizes safety and adequately directs resources to 

promote accountability and achieve safety goals and standards; and 

 recent orders entered by the United States District Court (a) regarding whether 

PG&E has been in violation of its “conditions of supervision” in connection with its 

probation period related to the San Bruno explosion; and (b) proposing new 

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conditions of probation. 

In addition, to preserve liquidity, on January 15, 2019, PG&E did not make the interest payment of 

approximately $21.6 million with respect to its outstanding 5.40% of Senior Notes due January 15, 

2040. 

As explained above, PG&E believed it could have accessed outside of chapter 11 limited 

additional capital in the form of secured indebtedness or in more esoteric forms that would have been 

expensive or dilutive. In addition, the ability to incur additional secured indebtedness would be limited 

by covenants in PG&E’s applicable loan documents, accounting accruals, as well as by “equal and 

ratable clauses” in its indentures that, if triggered, would have had the effect of subordinating wildfire 

claims to PG&E’s existing funded debt obligations that have the benefit of such clauses and which 

obligations currently are of the same rank and priority as wildfire claims. 

After a comprehensive review, the Boards of both PG&E Corp. and the Utility, and 

management determined that temporarily extending PG&E’s liquidity runway was not in the best 

interests of its economic stakeholders and would not address and, indeed would merely postpone 

addressing, the fundamental issues facing PG&E and jeopardize its long-term viability. 

PG&E is faced with a crisis that threatens its ability to continue to operate as a going concern 

and to provide safe and reliable electric and gas services to its millions of customers. The Chapter 11 

Cases are the only viable option to fairly and expeditiously resolve PG&E’s wildfire liability, to restore 

PG&E’s financial health and stability, and to make sure that PG&E has the liquidity and resources to 

fund its operations. In connection with the administration of the Chapter 11 Cases, PG&E will 

continue to consider all possible solutions to improve safety, reliability and service, while assuring fair 

and equitable treatment for wildfire claimants, other creditors, its employees, customers, communities, 

shareholders and all other parties in interest. The Chapter 11 Cases will facilitate PG&E working with 

these various constituencies in one centralized forum to comprehensively address and resolve its 

liabilities, explore structural alternatives, and implement necessary changes to maximize value for all 

of its economic stakeholders and to assure PG&E’s long-term viability. 

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First Day Motions 

The Debtors filed their First Day Motions on the Petition Date to ensure that the Debtors’ 

businesses continue to function during these Chapter 11 Cases. For the reasons set forth below, I 

submit that (a) the relief requested in the First Day Motions is necessary to enable the Debtors to 

operate with minimal disruption during the pendency of their Chapter 11 Cases, and (b) approval of the 

First Day Motions is warranted.1

I. MOTION OF DEBTORS PURSUANT TO FED. R. BANKR. P. 1015(b) FOR ENTRY 

OF ORDER DIRECTING JOINT ADMINISTRATION OF CHAPTER 11 CASES (THE 

“JOINT ADMINISTRATION MOTION”) 

Pursuant to the Joint Administration Motion, the Debtors request entry of an order directing 

joint administration of the Chapter 11 Cases for procedural purposes only pursuant to Bankruptcy Rule 

1015(b) and request that each of their Chapter 11 Cases be administered under a consolidated caption, 

in the following form: 

UNITED STATES BANKRUPTCY COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

In re: 

PG&E CORPORATION et al., 

Debtors. 

§ 

§ 

§ 

§ 

§ 

Case No. 19-______ (___) 

Chapter 11 

(Jointly Administered) 

The Debtors further request the Court’s direction that a notation substantially similar to the 

following language be entered on the docket maintained by the Clerk of the Court to reflect the joint 

administration of the Chapter 11 Cases: 

An order has been entered in accordance with Bankruptcy Rule 1015(b) directing the 

procedural consolidation and joint administration of the Chapter 11 Cases as set forth in 

the Motion of Debtors Pursuant to Fed. R. Bankr. P. 1015(b) for Entry of Order 

Directing Joint Administration of Chapter 11 Cases, as filed on the docket in Case No. 

19-[_____] ( ). The docket in Case No. 19-[_____] ( ) should be consulted for all 

matters affecting the case. 

 

1

 Capitalized terms used in this part of the Declaration and not defined herein shall have the meanings 

ascribed to them in the relevant First Day Motion. 

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Joint administration of the Chapter 11 Cases will provide significant administrative efficiencies 

without harming the substantive rights of any party in interest. Many of the motions, hearings, and 

orders that will be filed in the Chapter 11 Cases almost certainly will affect each of the Debtors. I 

believe that the entry of an order directing joint administration of the Chapter 11 Cases will reduce fees 

and costs by avoiding duplicative filings, objections, notices, and hearings, and will allow the United 

States Trustee for Region 17 (the “U.S. Trustee”) and all parties in interest to monitor the Chapter 11 

Cases with greater ease and efficiency. 

Accordingly, I respectfully submit that the relief requested in the Joint Administration Motion 

is in the best interests of the Debtors’ estates, their creditors, their shareholders, and all other parties in 

interest, and should be granted. 

II. MOTION OF DEBTORS PURSUANT TO 11 U.S.C. §§ 105, 362, 363, 364, 503 AND 507, 

AND FED. R. BANKR. P. 2002, 4001, 6003, 6004 AND 9014 FOR INTERIM AND 

FINAL ORDERS (I) AUTHORIZING THE DEBTORS TO OBTAIN SENIOR 

SECURED, SUPERPRIORITY, POSTPETITION FINANCING, (II) GRANTING 

LIENS AND SUPERPRIORITY CLAIMS, (III) MODIFYING THE AUTOMATIC 

STAY, (IV) SCHEDULING FINAL HEARING AND (V) GRANTING RELATED 

RELIEF (THE “DIP MOTION”) 

As the Senior Vice President and Chief Financial Officer of PG&E Corp., I was intimately 

involved in assessing the Debtors’ financing needs during the course of the Chapter 11 Cases. As of 

the Petition Date, PG&E Corp. had approximately $370 million of cash on hand. I anticipate that 

amount will be more than sufficient for PG&E Corp. to meet its obligations during the course of the 

Chapter 11 Cases. As reported in the January 14, 2018 Form 8-K filed with the SEC, the Utility had 

approximately $1.1 billion in cash on hand as of that date. However, starting in early January 2019, as 

a consequence of supplier uncertainty, media speculation, credit downgrades, and reactions to the SB 

901 15 day notice, the Utility’s liquidity was depleted by an aggregate of approximately $811 million 

used to satisfy collateral posting needs, address accelerated payment and pre-pay demands of energy 

commodity suppliers, and address requests from other essential suppliers for shortened payment terms. 

As of the filing, the Utility had cash on hand of approximately $240 million, net of customer deposits 

and cash held from counterparties of approximately $250 million. 

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Prior to the commencement of the Chapter 11 Cases, the finance team, under my direction, 

developed a bottoms up projection of operating cash flows and projected capital investment. The 

Debtors are net users of cash given the substantial capital invested in the business for routine and 

replenishment capital expenditures, wildfire prevention and restoration efforts; additionally, the 

Debtors invest in energy storage, electric vehicle initiatives and related technologies to meet 

California’s carbon reduction goals. In addition, with the help of the Debtors’ outside advisors, we 

developed and applied adjustments to the projections to account for the impacts of chapter 11, the 

working capital effect of the notice under SB 901 described above and anticipated chapter 11 expenses. 

That work led us to conclude that the Utility would require $5.5 billion of debtor in possession 

financing over a two-year period. 

The Debtors project capital spending to exceed cash flow from operations by approximately 

$1.6 billion in each of 2019 and 2020 largely driven by projected capital spending of $6.6 billion in 

2019 and $6.9 billion in 2020, as well as other investing activities of more than $300 million 

forecasted for 2019 and more than $125 million for 2020. This forecasted level of capital spending is 

in-line with historical capital spending of $5.8 billion in 2017 and $6.6 billion in 2018. Due to the 

regulated nature of the Utility’s businesses, only a small fraction of the capital spending program is 

discretionary. Cash flow from operations is forecasted to be $5.3 billion in 2019 and $5.5 billion in 

2020. This creates an aggregate operating cash flow deficit after capital expenditures of nearly $3.2 

billion over the two-year forecast period which PG&E must finance externally. 

In addition to the combined operating deficit of $3.2 billion mentioned above, the Debtors need 

additional funding to service the DIP Financing and pay related costs. Furthermore, the Debtors’ 

advisors have projected that the Debtors will need to post additional collateral in 2019 of 

approximately $500 million to meet, among other things, environmental and other state requirements. 

The DIP Financing sizing also incorporates projected professional fees for estate-paid professionals to 

be paid during the pendency of the Chapter 11 Cases. 

In the event the Chapter 11 Cases extend beyond 2020, the DIP Facility permits the Debtors, 

subject to Court approval and obtaining commitments from lenders, to access up to $4 billion of 

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incremental DIP Financing. The incremental financing need was derived by assuming that cash flow 

from operations remain consistent with prior years, capital spending increases slightly from 2020 and 

all other costs related to the Chapter 11 Cases are extended for an additional year. I believe that the 

DIP Facility and incremental financing will provide adequate liquidity to the Debtors throughout the 

pendency of the Chapter 11 Cases, assuming emergence from chapter 11 no later than 2021. 

The Debtors would experience irreparable harm if the interim order approving the DIP Motion 

is not entered. Access to immediate financing is essential to ensure that the Utility has sufficient 

working capital to continue operating. Absent authority to borrow under the DIP Facility on an 

emergency basis, the Debtors will not be able to continue operations on a normal basis which could 

potentially create public safety issues due to the inability to provide services to their customers and 

maintain safe operations, resulting in immediate and irreparable harm to the Debtors and their estates, 

creditors (including wildfire claimants), employees, customers, and PG&E Corp.’s shareholders, and 

jeopardize their ability to successfully administer these Chapter 11 Cases. 

The Debtors enter chapter 11 with only $860 million of aggregate cash. Approximately $250 

million of that cash is comprised of customer deposits that the Debtors believe should not be used to 

fund their operations and working capital needs. Approximately $370 million is held by PG&E Corp. 

for its own uses. As a result, the Utility, which is the operating entity of the Debtors, has access to 

only $240 million of cash as of the Petition Date, which is insufficient to meet operating expenses and 

address short-term working capital needs and to have sufficient additional liquidity to address both 

ordinary course and non-ordinary course variability in the business. The Debtors believe they need 

access to $1.5 billion of post-petition DIP financing during the course of the interim period to operate 

their businesses in an appropriate and prudent manner. 

The Debtors evaluated, with the assistance of their advisors, the amount of funding that they 

will require during the interim borrowing period of the Chapter 11 Cases. The amount was derived 

from a cashflow projection developed from an analysis of the Debtors’ receipts and disbursements (the 

“13-Week Budget,” attached to the DIP Motion as Exhibit C). I believe the 13-Week Budget presents 

a reasonable estimate of the Debtors’ cash sources and needs during the next thirteen weeks. 

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Given these estimates, access to the requested portion of the DIP Facility would provide the 

Debtors sufficient liquidity to stabilize their operations during the Interim Period. Specifically, the 

DIP Facility will allow the Debtors to: (a) acquire timely energy supply that is essential to the Debtors’ 

ability to provide uninterrupted services to their customers; (b) provide the liquidity necessary to 

stabilize supply with other non-energy vendors including those performing critical safety, vegetation 

management, and wildfire restoration services; (c) fund approximately $260 million of payroll 

obligations coming due in the first month of the Chapter 11 Cases; (d) fund other essential payments to 

be made under first day orders; (e) fund collateral that the state has requested to backstop the Debtors’ 

workers’ compensation programs; (f) fund the near-term administrative costs of these Chapter 11 

Cases; and (g) permit the Debtors to maintain a working capital reserve of $450 million to cover the 

intra month timing of energy supply costs. The interim DIP funding amount would also provide a 

reasonable liquidity buffer to the Debtors in the event they underperform their projections, or in case 

unexpected fluctuations occur in energy markets causing a disruption in supply or requirements to post 

additional collateral, which could result in the need to access several hundred million dollars within a 

day’s time. Furthermore, the liquidity buffer provides the Utility with the necessary resources to 

respond to winter storms or other emergency circumstances. 

By contrast, without the funding provided by the DIP Facility during the Interim Period, the 

Debtors’ access to cash needed to operate their businesses would evaporate and energy suppliers and 

trade creditors would likely cease extending credit, creating a vicious cycle that would jeopardize the 

Debtors’ ability to operate. 

Moreover, ensuring that the Debtors continue to operate pending a final hearing on the DIP 

Motion is not merely a commercial objective. Unlike many other chapter 11 cases, here, it is 

especially crucial that the Debtors obtain financing to continue their operations because the Debtors 

provide energy to nearly 16 million people across 700,000 square miles in Northern and Central 

California. Given the nature of the Debtors’ businesses, any interruption of the Debtors’ ability to pay 

vendors and operate their businesses could potentially (i) cause environmental hazards or pose 

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significant risk to the environment, (ii) pose a threat to health and public safety, or (iii) compromise the 

ability to provide power to the California electrical grid. 

Based upon the above, I believe the DIP Facility represents the best option for meeting the 

Debtors’ liquidity needs, and respectfully submit that the Debtors should be authorized to access up to 

$1.5 billion of the DIP Facility during the Interim Period. 

III. MOTION OF DEBTORS PURSUANT TO 11 U.S.C. §§ 105(a), 363(b), AND 507 AND 

FED. R. BANKR. P. 6003 AND 6004 FOR INTERIM AND FINAL AUTHORITY TO (I) 

(A) CONTINUE EXISTING CASH MANAGEMENT SYSTEM, (B) HONOR CERTAIN

PREPETITION OBLIGATIONS RELATED TO THE USE THEREOF, (C) CONTINUE 

INTERCOMPANY ARRANGEMENTS, (D) CONTINUE TO HONOR OBLIGATIONS 

RELATED TO JOINT INFRASTRUCTURE PROJECTS, AND (E) MAINTAIN 

EXISTING BANK ACCOUNTS AND BUSINESS FORMS; AND (II) WAIVING THE

REQUIREMENTS OF 11 U.S.C. § 345(b) (THE “CASH MANAGEMENT MOTION”). 

Pursuant to the Cash Management Motion, the Debtors are seeking interim and final authority, 

in the ordinary course of business and consistent with the Debtors’ prepetition practices, to (i)(a) 

continue operating their existing cash management system (the “Cash Management System”), as 

described herein, including the continued maintenance of existing bank accounts at the Debtors' banks 

(the “Banks”), (b) honor certain prepetition obligations related to the Cash Management System, (c) 

continue certain intercompany arrangements among the Debtors and certain non-Debtor affiliates and 

subsidiaries (the “Non-Debtor Affiliates and Subsidiaries”), (d) continue to honor all obligations 

with respect to certain Joint Infrastructure Projects (as defined below), and (e) maintain existing 

business forms; and (ii) waive the requirements of section 345(b) of the Bankruptcy Code to the extent 

they apply to any of the Bank Accounts (as defined below). Further, pursuant to the Cash 

Management Motion, the Debtors request that the Court authorize, but not direct, the Banks to receive, 

process, honor, and pay all checks presented for payment and electronic payment requests relating to 

the foregoing to the extent the Debtors have sufficient funds standing to their credit with such Bank, 

whether such checks were presented or electronic request were submitted before or after the Petition 

Date, and that all such Banks be authorized to rely on the Debtors’ designation of any particular check 

or electronic payment request as appropriate pursuant to the Cash Management Motion without any 

duty of further inquiry and without liability for following the Debtors’ instructions. 

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In the ordinary course of business, the Debtors utilize their Cash Management System, which is 

an integrated, centralized system designed to collect, transfer, and disburse funds generated by their 

electricity and natural gas operations. The Cash Management System has several main components: 

(i) cash collection, including the collection of payments made to the Debtors from revenue generated in 

the ordinary course through the sale and delivery of electricity and natural gas to customers; (ii) 

relatively minimal cash transfers among the Debtors and certain Non-Debtor Affiliates and 

Subsidiaries; and (iii) cash disbursements that fund the Debtors’ business operations and related 

obligations. Although the Utility and PG&E Corp. each maintain separate systems, the Cash 

Management System is an integrated system. Pursuant to that certain Restated Continuing Services 

Agreement, dated October 15, 1999, between the Utility and PG&E Corp, (the “PG&E Corp. CSA”), 

the Utility operates the cash management system of PG&E Corp. and all transfers between accounts 

held by PG&E Corp. and the Utility are made pursuant to wire transfers in accordance with the PG&E 

Corp. CSA. It is critical that the Cash Management System remains intact during these Chapter 11 

Cases to ensure the seamless continuation of transactions and the uninterrupted supply of power and 

electricity to the Utility's customers. 

The Cash Management System facilitates cash monitoring, forecasting, and reporting and 

enables the Debtors to maintain control over the administration of the Bank Accounts located at the 

Banks, including, but not limited to, the accounts listed on Schedule 1 to the proposed interim order 

annexed to the Cash Management Motion. The Debtors maintain one-hundred eight (108) bank 

accounts (each, a “Bank Account” and, collectively, the “Bank Accounts”) at various Banks, of 

which thirty (30) are actively used in the Cash Management System (such accounts, the “Primary 

Bank Accounts”). Of the Primary Bank Accounts, sixteen (16) accounts are maintained at The Bank 

of New York Mellon (“BNYM”), six (6) accounts are maintained at Bank of America, N.A. 

(“BoAML”), four (4) accounts are maintained at Citibank, N.A. (“Citi”), one (1) account is 

maintained at Royal Bank of Canada (“RBC”), two (2) accounts are maintained at Union Bank of 

California (“Union Bank”), and one (1) account is maintained at U.S. Bank, N.A (“U.S. Bank”). 

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Twenty-one (21) of the Primary Bank Accounts are maintained at Banks designated as authorized 

depositories by the U.S. Trustee pursuant to the U.S. Trustee’s Guidelines (the “UST Guidelines”). 

The remaining seventy-eight (78) Bank Accounts are not utilized in the day-to-day flow of 

funds throughout the Cash Management System and are comprised mainly of specialized accounts, 

including: (a) forty-nine (49) tax-exempt bond accounts, maintained in connection with each of the 

Debtors' tax-exempt debt issuances, held at Deutsche Bank Trust Company Americas (the “Deutsche 

Bank Bond Accounts”), (b) six (6) escrow accounts maintained in connection with ongoing 

partnerships with third-parties held at U.S. Bank N.A. Global Corporate Trust Services (the “U.S Bank 

Escrow Accounts”), (c) three (3) trust accounts maintained in connection with retirement benefits - 

two (2) held at Wells Fargo Bank N.A. (Acct No. XX5300 and XX5400) and one (1) at Fidelity 

Management Trust Company (Acct No. XX0137) (the “Retiree Benefit Trust Accounts”), (d) one (1) 

account to hold certain reserve funds for employees who work with asbestos in the course of their 

employment required under the Asbestos Hazard Emergency Response Act held at BoAML (Acct No. 

XX2988) (the “Asbestos Medical Reserve Account”), (e) two (2) accounts for contributions to 

political action committees funded from voluntary deductions from employee payroll held at Bank of 

Marin (Acct Nos. XX0132 and XX0140) (the “PAC Accounts”), (f) two (2) legacy accounts 

established prior to the transition to payroll at BoAML (Acct No. XX7115) for employees to cash 

checks held at BNYM (Acct No. XX4017) and at BoAML (Acct No. XX1675) (the “Legacy Payroll 

Accounts”), (g) one (1) account that was used to hold funds from PG&E Corp.’s Commercial Paper 

Program held at Citi (Acct No. XX9167) (the “CP Account” and together with the Deutsche Bank 

Bond Accounts, the U.S Bank Escrow Accounts, the Retiree Benefit Trust Accounts, the Asbestos 

Medical Reserve Account, the PAC Accounts, and the Legacy Payroll Accounts, the “Specialty 

Accounts”), and (h) fourteen (14) dormant accounts with no activity or de minimis balances (the 

“Dormant Accounts”). 

The Debtors maintain robust controls relating to the Cash Management System. The Cash 

Management System is overseen by personnel working in the Banking and Money Management 

(“B&MM”) division of the Utility's treasury department (the “Treasury Department”). B&MM 

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manages all aspects of the Cash Management System, providing services that include cash positioning, 

cash concentration, wire transfers, automated clearing house (“ACH”) transfers, tax payments, and the 

issuance of short-term debt and purchase or redemption of investments, as well as managing bank 

accounts for certain Non-Debtor Affiliates and Subsidiaries. On a daily basis, B&MM prepares a cash 

summary that reflects the cash position after incoming and outgoing payments (via cash, wire transfer, 

ACH, or check), including short-term debt and short-term investment purchases or redemptions. 

Although certain recurring electronic payments are made automatically, disbursements by wire transfer 

require dual approval, and disbursements by check are reconciled before they clear. In preparing the 

daily cash summary, B&MM conducts a review of cash account balances, confirms that all manual 

wire transfers have been properly authorized, and determines whether all investments are in line with 

the Debtors' short-term investment policy (the “Short-Term Investment Policy”). Under the 

oversight of each of the Debtors’ Controller, corporate accounting reconciles all Bank Account 

balances against the Debtors’ books and records on a monthly basis. Various levels of authorizations 

are required for the release of disbursements, which are determined by the size and type of the 

disbursement. 

As explained in further detail below, the Cash Management System is generally comprised of 

four (4) different types of accounts: (a) collection accounts into which cash and other receivables 

generated from the Debtors' operations are deposited (collectively, the “Collection Accounts”), (b) 

concentration accounts into which cash is automatically swept from the various Collection Accounts 

on a daily basis (collectively, the “Concentration Accounts”), (c) disbursement accounts for 

designated disbursements (collectively, the “Disbursement Accounts”), and (d) the Specialty 

Accounts. An average of approximately $81.6 million in receipts and $86.0 million in disbursements 

flows through the Cash Management System per banking day. A diagram illustrating the general 

movement of cash through the Cash Management System is annexed as Exhibit B to the Cash 

Management Motion. 

Given the complexity of the Debtors’ operations and the volume of transactions processed 

through the Cash Management System each day, maintaining the Cash Management System in its 

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current state is crucial to the Debtors’ continued operations. Any disruption to the Cash Management 

System would unnecessarily and significantly disrupt the Debtors’ operations, which may result in 

power outages or other service disruptions to the Debtors’ customers, and may impede the successful 

administration of these Chapter 11 Cases. 

A. Collection Accounts 

1. Utility Collection Accounts 

As part of its daily operations, the Utility collects cash, checks, wire transfers, ACH payments, 

and credit card and debit card payments from customers and certain third parties. As described below, 

these funding sources flow into the Utility Master Concentration Account (as defined below) through 

nine (9) depository accounts (the “Utility Depository Accounts”). When the Utility is in receipt of 

proceeds from non-recurring funding sources such as tax refunds, debt issuances, and rebates issued by 

regional service operators and/or independent system operators, such proceeds are deposited directly 

into the Utility Master Concentration Account (as defined below). 

a) Customer Depository Accounts 

The Utility maintains five (5) Utility Depository Accounts (each a “Utility Customer 

Depository Account”) that process customer payments. Two (2) Utility Customer Depository 

Accounts (Acct Nos. XX5477 and XX7822) are held at BNYM, one (1) account (Acct No. XX1958) is 

held at Citi, one (1) account (Acct No. XX0817) is held at BoAML, and one (1) account (Acct No. 

XX5581) is held at Union Bank. The BNYM, BoAML, and Citi Utility Customer Depository 

Accounts only accept electronic payments posted through online and mobile payment channels and 

customer ACH debits. The Union Bank Utility Customer Depository Account collects cash and check 

payments that are either mailed to the Utility or made directly at the Utility’s local offices. All of the 

Utility Customer Depository Accounts, except for the Union Bank Account, are zero balance accounts, 

meaning they do not carry a cash balance at the end of each business day. The funds in the Citi and 

BoAML Utility Customer Depository Accounts are swept into the Citi Utility Concentration Account 

and BoaML Utility Concentration Accounts (each as defined below), respectively, on a daily basis, 

where the funds ultimately flow into the Utility Master Concentration Account. The BNYM Utility 

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Customer Depository Accounts are swept into the Utility Master Concentration Account on a daily 

basis. 

b) Utility Campground Collection Accounts 

The Utility also maintains two (2) Utility Depository Accounts (the “Utility Campground 

Depository Accounts”) that process payments from customers that use campgrounds owned by the 

Utility. One (1) Utility Campground Depository Account is held at U.S. Bank (Acct No. XX2311) and 

one (1) Utility Campground Depository Account is held at BoAML (Acct No. XX2302). 

c) Non-Energy Collection Account 

The Utility also maintains one (1) Utility Depository Account to collect funds from certain nonenergy related revenue sources held at Citi (Acct No. XX2901). 

d) Outside Collections Accounts 

In the ordinary course of business, the Utility contracts with third-parties to collect on customer 

accounts that have fallen into delinquency. The proceeds of such activities are deposited into a Utility 

Customer Depository Account held at Citi (Acct No. XXX2316) (the “Utility Outside Collection 

Account”). The Utility Outside Collection Account is a zero balance account and is swept into the Citi 

Utility Concentration Account on a daily basis. 

2. PG&E Corp. Collection Accounts 

As PG&E Corp.’s primary asset is its equity interest in the Utility, it does not maintain any 

third-party collection accounts. 

B. Concentration Accounts2

1. Utility Concentration Accounts 

The Utility maintains three (3) accounts where it concentrates and collects cash from its various 

Depository Accounts (collectively, the “Utility Concentration Accounts”): (a) one (1) primary 

concentration account with BNYM (Acct No. XX9994) (the “Utility Master Concentration 

Account”); (b) one (1) customer deposit concentration account with BoAML (Acct No. XX3212) (the 

 

2

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cover short-term liquidity needs (the “Commercial Paper Program”). Citi served as the issuing and 

payment agent with respect to issuances and redemptions of commercial paper under the Commercial 

Paper Program. The Commercial Paper Program is not currently active and the Debtors are not 

currently seeking relief to continue the Commercial Paper Program at this time. 

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“BoAML Utility Concentration Account”); and (c) one (1) customer deposit concentration account 

with Citi (Acct No. XX0901) (the “Citi Utility Concentration Account”). The Utility funds its 

business operations and related expenditures from the revenues and funds that flow through the Utility 

Concentration Accounts, including payments of principal and interest on account of the Utility's 

prepetition debt and intercompany payments made to StanPac (as defined below), Gill Ranch (as 

defined below), and PG&E Corp. (pursuant to the PG&E Corp. CSA). The Utility Master 

Concentration Account serves as the Utility’s main centralized operating account into which receipts 

and customer payments are ultimately deposited from the Utility Customer Depository Accounts and 

from which disbursements are made throughout the Cash Management System as necessary. 

Historically, the proceeds of financings and draws on the Utility’s $3 billion prepetition unsecured 

revolving credit facility were deposited directly into the Utility Master Concentration Account. As of 

the Petition Date, such facility had approximately $35 million of undrawn capacity. Additionally, 

from time to time, excess funds in the Utility Master Concentration Account at the close of market may 

be invested by B&MM on an overnight basis until the following business day, in accordance with the 

Debtors’ Short-Term Investment Policy, which is discussed in further detail below. 

Funds in the BoAML Utility Customer Depository Account are automatically swept into the 

BoAML Utility Concentration Account on a daily basis. The funds in each of the Citi Utility 

Customer Depository Account and the Citi Utility Outside Collections Depository Account are 

automatically swept into the Citi Utility Concentration Account on a daily basis. Funds in the BoAML 

Utility Concentration Account and Citi Utility Concentration Account are manually drawn down to the 

Utility Master Concentration Account on a daily basis. The Utility Campground Depository Accounts 

are manual swept into the Utility Master Concentration Account on a periodic basis. 

2. PG&E Corp. Concentration Accounts 

PG&E Corp. concentrates and collects its cash in one primary account with BNYM (Acct No. 

XX9023) (the “PG&E Corp. Master Concentration Account”). PG&E Corp. funds its business 

operations and related expenditures from the revenues and funds that flow through the PG&E Corp. 

Master Concentration Account, including payments of principal and interest on account of PG&E’s 

prepetition debt and intercompany payments made to the Utility pursuant to the PG&E Corp. CSA. 

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The PG&E Corp. Master Concentration Account serves as PG&E Corp.’s main centralized operating 

account into which funds are ultimately deposited from transfers from the Utility pursuant to the 

PG&E Corp. CSA and from which disbursements are made throughout the Cash Management System 

as necessary. 

Historically, the proceeds of financings and draws on PG&E Corp.'s $300 million prepetition 

unsecured revolving credit facility were deposited directly into the PG&E Corp. Master Concentration 

Account. As of the Petition Date, the revolving credit facility is fully drawn. Additionally, from time 

to time, excess funds in the PG&E Corp. Master Concentration Account at the close of market may be 

invested by B&MM on an overnight basis until the following business day, in accordance with the 

Debtors’ Short-Term Investment Policy, which is discussed in further detail below. 

C. Disbursement Accounts 

1. Utility Disbursement Accounts 

The Utility uses the funds in the Utility Master Concentration Account to fund its ongoing 

operations through nine (9) disbursement accounts (collectively, the “Utility Disbursement 

Accounts”). All of the Utility Disbursement Accounts are zero balance accounts. On a daily basis, the 

Utility projects its disbursement obligations and funds the Utility Disbursement Accounts accordingly. 

The following is a brief summary of the various Utility Disbursement Accounts. 

 Vendor Disbursement Account. Two (2) disbursement accounts at BNYM (Acct 

Nos. XX9978 and XX9990) are designated to fund nearly all operating expenses 

and capital expenditures related to the Utility’s business operations, including all 

third party vendor, supplier payments and customer payments as well as employee 

expense reimbursements. 

 BoAML Payroll Disbursement Accounts. One (1) disbursement account at 

BoAML (Acct No. XX7115) is used to fund employee payroll, which is funded 

from the BoAML Concentration Account. 

 Disability Disbursement Account. The Utility maintains an account at BNYM 

(Acct No. XX8544) dedicated to making distributions to employee participants in 

the Utility’s short-term disability plan. 

 Customer Refund and Rebate Accounts. The Utility maintains two (2) additional 

disbursement accounts at BNYM (Acct Nos. XX3044 and XX3532) which 

distribute refunds, rebates, and reimbursements to the Utility’s customers. 

 RBC Currency Exchange Account. The Utility maintains a disbursement account 

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with RBC (Acct No. XX0446) to facilitate purchases of natural gas from Canadian 

entities that only accept payment in Canadian dollars. 

 Gill Ranch Operating Account. As discussed in more detail below, the Utility 

maintains an operating account for the Gill Ranch natural gas storage facility at 

BNYM (Acct No. XX4122). 

 Land Drafts Account. The Utility maintains a disbursement account with BNYM 

(Acct No. XX0143) to issue checks in connection with health care and injury claims 

incurred by individuals and with the Utility’s land management activities. 

2. PG&E Corp. Disbursement Accounts 

PG&E Corp. uses the funds in the PG&E Corp. Master Concentration Account to fund its 

ongoing operations through five (5) disbursement accounts (collectively, the “PG&E Corp. 

Disbursement Accounts”). All of the PG&E Corp. Disbursement Accounts are zero balance 

accounts. On a daily basis, PG&E Corp. projects its disbursement obligations and funds the PG&E 

Corp. Disbursement Accounts accordingly. The following is a brief summary of the various PG&E 

Corp. Disbursement Accounts. 

 Vendor Disbursement Account. One (1) disbursement account at BNYM (Acct 

No. XX4558) is designated to fund nearly all operating expenses and capital 

expenditures related to PG&E Corp’s operations, including all third-party vendor 

and supplier payments. 

 Payroll Disbursement Accounts. One (1) disbursement account at BNYM 

(Account No. XX9946) (the “PG&E Corp. Payroll Funding Account”) and two 

(2) payroll disbursement accounts at BoAML (Acct Nos. XX7981 and XX7107), 

with one utilized for checks and the other for direct deposit payments, each of such 

accounts is funded from the PG&E Corp. Payroll Funding Account. 

 Union Bank Payroll Account. PG&E Corp. maintains one (1) payroll account at 

Union Bank of California (Acct No. XX9557) to comply with certain state law 

requirements. 

D. Intercompany Transactions 

In the ordinary course of business, the Debtors maintain business relationships among 

themselves and with the Non-Debtor Affiliates and Subsidiaries, which result in intercompany 

receivables and payables (the “Intercompany Transactions”). The various categories of 

Intercompany Transactions are summarized in further detail below. The Debtors maintain records of 

all transfers and, therefore, can ascertain, trace, and account for all Intercompany Transactions, and 

will continue to do so during these Chapter 11 Cases. If the Intercompany Transactions were to be 

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discontinued, the Cash Management System and related administrative controls would be disrupted to 

the detriment of the Debtors and all stakeholders. Accordingly, pursuant to the Cash Management 

Motion, the Debtors are seeking authority to continue the Intercompany Transactions and make any 

prepetition payments related thereto. 

1. The PG&E Corp. CSA 

The Utility and PG&E Corp. are parties to the PG&E Corp. CSA. Under the terms of the 

PG&E Corp. CSA, PG&E Corp. provides certain corporate services to the Utility, including, among 

other things, management staffing, strategic planning, and investor relations support (the “PG&E 

Corp. Affiliate Services”). From time to time, PG&E Corp. also contributed certain equity securities 

to the Utility, which the Utility distributed to its employees in accordance with its share-based 

employee incentive plans (the “PG&E Corp. Equity Contributions”). The Utility and PG&E Corp. 

also share certain corporate services and allocate the relative costs of such services and expenses 

between each other, including, without limitation, accounting and audit functions, money management 

and investment services, payroll administration, legal, governance, and public relations (the “Shared 

Services”). Furthermore, the Utility funds certain of PG&E Corp.’s operating expenses, including, 

among other things, the purchase of insurance (the “Corp. Expenses”). The intercompany obligations 

and related transfers that arise under the PG&E Corp. CSA are governed by CPUC Decisions 96-11-

017 and 97-12-088, as well as certain other CPUC-approved tariffs, and are generally subject to CPUC 

oversight. PG&E Corp. invoices the Utility on a monthly basis for reimbursement of the PG&E Corp. 

Affiliate Services, the Utility’s allocation of the Shared Services, including the costs incurred by 

PG&E Corp. for the purchase of any associated goods during the preceding month, and, if applicable, 

the value of any PG&E Corp. Equity Contributions ultimately distributed to the Utility’s employees 

(collectively, the “Corp. CSA Claims”). Likewise, the Utility invoices PG&E Corp. on a monthly 

basis for reimbursement of the costs of Shared Services allocated to PG&E Corp., including the costs 

of any associated goods, as well as PG&E Corp.’s allocated share of the Corp. Expenses that were 

incurred during the preceding month (collectively, the “Utility CSA Claims”). Corp. CSA Claims are 

paid via wire transfer directly out of the Utility Disbursement Account XX9978 (rather than book 

entry) and must be paid within 30 days of receipt of invoice. Similarly, Utility CSA Claims are paid 

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via wire transfer directly out of the PG&E Corp. Disbursement Account XX4558 (rather than book 

entry) and must be paid within 30 days of receipt of invoice. During the 12-month period prior to the 

Petition Date, the monthly average of Corp. CSA Claims that the Utility owed to PG&E Corp. was 

approximately $13.8 million, and that PG&E Corp. owed to the Utility was approximately $1.8 

million. 

2. Non-Debtor Affiliates’ and Subsidiaries’ Continuing Services Agreements 

The Utility is party to shared services arrangements with certain Non-Debtor Affiliates and 

Subsidiaries, including the following agreements: (a) that certain Continuing Services Agreement 

between the Utility and PG&E Corporation Support Services, Inc., dated Oct. 15, 1999, (b) that certain 

Continuing Services Agreement between the Utility and Pacific Energy Capital IV, LLC, dated July 27, 

2010, (c) that certain Continuing Services Agreement between the Utility and PCG Capital, Inc., dated 

March 1, 2011, (d) that certain Continuing Services Agreement between the Utility and PG&E 

Corporation Support Services II, Inc., dated April 16, 2007, (e) that certain Continuing Services 

Agreement between the Utility and Certain Subsidiaries, including Eureka Energy Company, Natural 

Gas Corporation of California, and Pacific Energy Fuels Company, dated March 28, 2008, and (f) that 

certain Continuing Services Agreement between the Utility and Eureka Energy Company, dated 

February 23, 2009 (collectively, the “Utility Non-Debtor CSAs”). 

PG&E Corp. has also entered into shared services arrangements with certain Non-Debtor 

Affiliates and Subsidiaries, including the following agreements: (a) that certain Continuing Services 

Agreement between PG&E Corp. and PG&E Corporation Support Services, Inc., dated Oct. 13, 1999 

and (b) that certain Continuing Services Agreement between PG&E Corp. and PG&E Corporation 

Support Services II, Inc., dated April 13, 2007 (collectively, the “PG&E Corp. Non-Debtor CSAs” 

and, together with the Utility Non-Debtor CSAs, the “Non-Debtor CSAs”). 

The Non-Debtor CSAs provide for the exchange of certain corporate services between the 

Debtors and the applicable Non-Debtor Affiliates and Subsidiaries (the “Non-Debtor Shared 

Services”). These Non-Debtor Shared Services are relatively de minimis and include, but are not 

limited to, joint purchasing of third-party services and goods as well as shared services related to joint 

corporate oversight, governance, support systems and personnel, to the extent such shared services 

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conform to requirements of CPUC Decision 97-12-088. On an annual basis, the net cash impact on the 

Debtors with respect to amounts owed by the Debtors to the Non-Debtor Affiliates and Subsidiaries 

and to the Debtors by the Non-Debtor Affiliates and Subsidiaries is effectively neutral. As of the 

Petition Date, the Debtors estimate that they owe approximately $500,000 on account of Non-Debtor 

Shared Services. 

3. Standard Pacific Gas Line 

The Utility holds an 86% ownership interest in Standard Pacific Gas Line, Inc. (“StanPac”). 

StanPac owns approximately 55 miles of natural gas pipelines located in Contra Costa County and the 

greater Sacramento area. The Utility operates StanPac and regularly incurs related operating expenses 

and capital costs (the “StanPac Costs”). Pursuant to that certain System Management and Operating 

Agreement, dated March 28, 1996, among the Utility, StanPac, and Chevron Pipeline Company (the 

“StanPac Operating Agreement”), the Utility invoices StanPac for the StanPac Costs on a monthly 

basis. Under the StanPac Operating Agreement, the Utility is obligated to fund its proportional, 

allocated share of certain non-capital expenses, including taxes (the “StanPac Non-Capital Costs”), 

on a monthly basis or at such time that such StanPac Non-Capital Costs come due. In the ordinary 

course of business, the Utility wires an amount equal to its allocated share of the previous month’s 

StanPac Non-Capital Costs directly to StanPac. During the 12-month period prior to the Petition Date, 

the monthly average of StanPac Non-Capital Costs that the Utility paid to StanPac was approximately 

$400,000. To maintain its pipeline connections to the intrastate and interstate natural gas pipeline grid, 

it is critical that the Utility continue paying the StanPac Costs and StanPac Non-Capital Costs in the 

ordinary course. As of the Petition Date, the Utility estimates that it owes approximately $400,000 on 

account of StanPac Costs and Stanpac Non-Capital Costs. and that approximately $400,000 of that 

amount will become due and payable within thirty (30) days after the Petition Date. 

4. Gill Ranch Project 

The Utility owns a 25% ownership interest in an underground natural gas storage facility (the 

“Gill Ranch Project”) at Gill Ranch, located near Fresno, California, with a capacity of approximately 

20 billion cubic feet. The other 75% of the Gill Ranch Project is owned by Gill Ranch Storage, LLC 

(“Gill Ranch LLC”), the operator of the Gill Ranch Project, which, in turn, is owned by Norwest 

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Natural Gas. The Gill Ranch Project is linked to the Utility’s natural gas mainline transmission 

system, allowing it to serve customers throughout California. Pursuant to that certain Joint Project 

Agreement, dated January 31, 2018, between Gill Ranch LLC and the Utility, and that certain Operator 

Agreement, dated January 31, 2008, between Gill Ranch LLC and the Utility (collectively, the “Gill 

Ranch Agreements”), the Utility is obligated to fund its proportionate, allocated share of operating 

costs, capital expenses, and certain other non-capital expenses for the Gill Ranch Project on a monthly 

basis (the “Gill Ranch Costs”). To maintain access to its emergency natural gas reserves it is critical 

that the Utility continue paying the Gill Ranch Costs in the ordinary course. Pursuant to the Gill 

Ranch Agreements, and in the ordinary course of business, the Utility deposits an amount equal to its 

allocated share of the previous month’s Gill Ranch Costs into an account maintained by the Utility and 

held at BNYM (Acct. No. XX4122). The funds in such account are used by Gill Ranch LLC, as 

operator, to develop, operate and manage the Gill Ranch Project in accordance with approved 

programs and budgets. During the 12-month period prior to the Petition Date, the monthly average of 

Gill Ranch Costs that the Utility owed in connection with the Gill Ranch Project was approximately 

$200,000. As of the Petition Date, the Utility estimates that it owes approximately $200,000 on 

account of Gill Ranch Costs and that approximately $200,000 of that amount will become due and 

payable within thirty (30) days after the Petition Date. 

The Cash Management System is similar to those commonly employed by other large corporate 

enterprises in which transfers between related entities are tracked as Intercompany Transactions. At 

any point in time, there may be outstanding amounts due and owing between the Debtors themselves 

as well as between the Debtors and their Non-Debtor Affiliates and Subsidiaries, all of which are 

recorded and documented as Intercompany Transactions. 

It is my understanding based upon discussions with counsel, that the Debtors do not require the 

Court’s approval to continue entering into and performing under the Intercompany Transactions 

because the Debtors enter into and perform under Intercompany Transactions “in the ordinary course 

of business.” Furthermore, as stated above, transfers that take place pursuant to the PG&E Corp. CSA 

are subject to CPUC oversight. The Intercompany Transactions between PG&E Corp. and the Utility 

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are integral to their ongoing operations and to providing reliable utility services to their customers. As 

previous stated, the Intercompany Transaction between the Debtors and the Non-Debtor Affiliates and 

Subsidiaries are relatively de minimis. 

In addition, prepetition payments of amount owing with respect to StanPac, the Gill Ranch 

Project, and the Joint Infrastructure Projects will assure the ongoing operation of those ventures, that 

the Debtors continue to receive certain basic services on an uninterrupted basis, and allow the Debtors 

to maintain their investment in such ventures. The Debtors also intend to continue making all post 

Petition Date payments relating to those ventures in the ordinary course of business. 

E. Joint Infrastructure and Co-Ownership Projects 

In the operation of its gas delivery and power distribution business, the Utility’s infrastructure 

often interfaces with third-party equipment, including various gas pipeline and electric transmission 

interconnections. In some instances, certain pipelines, facilities, and transmission infrastructure are 

jointly owned by the Utility and one or more third-parties (the “Joint Infrastructure Projects”) and, 

in some cases, are maintained to comply with regulatory and compliance requirements. The Joint 

Infrastructure Projects are typically governed by contractual arrangements between the Utility and the 

applicable third-party that provide for the scope of each party’s obligations, including obligations to 

operate and maintain the infrastructure, contribute capital, and/or pay for services. During the 12-

month period prior to the Petition Date, the monthly average that the Utility paid in connection with 

the Joint Infrastructure Projects was de minimis and the monthly average that the Utility received in 

connection with Joint Infrastructure Projects was approximately $600,000. As of the Petition Date, the 

Utility estimates that any amounts owed on account of the Joint Infrastructure Projects are de minimis. 

The Debtors seek authority to pay such amounts, including any amounts relating to the period prior to 

the Petition Date, as they come due in the ordinary course of business. 

F. Short-Term Investment Policy 

The Short-Term Investment Policy, a copy of which is annexed as Exhibit C to the Cash 

Management Motion, provides guidance for the Debtors to sweep excess funds in the Utility Master 

Concentration Account and the PG&E Corp. Master Concentration Account on an overnight basis. 

The Debtors move excess funds from those accounts to brokerage accounts held at BNYM (Acct No. 

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XX98400 for the Utility and Acct No. XX18400 for PG&E Corp). The amounts invested pursuant to 

the Short-Term Investment Policy vary on a daily basis. Pursuant to the Short-Term Investment 

Policy, (i) investments are limited to highly marketable, interest-earning securities with stable market 

values and maturities of 12 months or less, and (ii) the Debtors must sufficiently assess the credit 

rating for parent companies of entities issuing securities prior to investing in those securities.3 The 

objective of the Short-Term Investment Policy is to achieve the best available yield while ensuring 

safety and preservation of principal and maintaining adequate liquidity to meet cash flow requirements. 

Investments made pursuant to the Short-Term Investment Policy are subject to multiple internal 

controls which require, among other things, that only designated employees may make investments 

pursuant to the Short-Term Investment Policy, all investments must be in compliance with the 

Sarbanes–Oxley Act of 2002, financial institutions must send confirmations of investment transactions 

directly to persons or departments responsible for recording cash transactions, and monthly investment 

statements must be reconciled to the Debtors’ general ledger accounts. Typically, the following types 

of investments are approved pursuant to the Short-Term Investment Policy: (i) money market mutual 

funds, (ii) bank-related securities, (iii) U.S. government and government-sponsored securities, (iv) 

repurchase agreements, (v) corporate debt securities, and (vi) state and local government obligations. 

During the pendency of the Chapter 11 Cases, the Debtors will limit investments to U.S. government 

and government-sponsored securities that are backed by the full faith and credit of the United States. 

It is my understanding based upon discussions with counsel that section 345(a) of the 

Bankruptcy Code governs a debtor’s deposit and investment of cash during a chapter 11 case and 

authorizes such deposits or investments as “will yield the maximum reasonable net return on such 

money, taking into account the safety of such deposit or investment.” I further understand that, tor 

deposits or investments that are not “insured or guaranteed by the United States or by a department, 

agency, or instrumentality of the United States or backed by the full faith and credit of the United 

States,” section 345(b) of the Bankruptcy Code requires that the debtor obtain from the “entity with 

 

3

 In addition, B&MM invests certain funds held by the Utility in the Voluntary Disability Plan 

Insurance (“VPDI”) brokerage account (Acct No. XX48400 held at BNYM), which account is 

maintained to comply with certain state requirements relating to employee contributions to the 

Debtors’ VPDI. 

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which the money is deposited or invested a bond in favor of the United States [that is] secured by the 

undertaking of a[n adequate] corporate surety . . . unless the court for cause orders otherwise.” 

It is my understanding based upon discussions with counsel that, in chapter 11 cases such as 

these, strict adherence to the requirements of section 345(b) of the Bankruptcy Code would be 

inconsistent with the value-maximizing purpose of chapter 11 by unduly hampering a debtor’s ability 

under section 345(a) to invest money such “as will yield the maximum reasonable net return on such 

money.” It is my understanding based upon discussions with counsel that, here, the Debtors satisfy 

both the procedural and substantive requirements necessary to obtain a waiver of section 345(b) of the 

Bankruptcy Code. 

First, as set forth above, twenty-one of the thirty Primary Bank Accounts are maintained at 

banks that have been approved by the U.S. Trustee as “authorized depositories” in accordance with the 

UST Guidelines. Although BNYM and RBC are not U.S. Trustee-designated authorized depositories, 

BNYM is a highly rated, nationally chartered bank, and both are subject to supervision by national 

banking regulators. BNYM is the world’s largest custodian bank and asset servicing company with 

$1.9 trillion in assets under management and $33.3 trillion in assets under custody as of December 

2017. RBC holds consolidated assets of over $832 billion, operates in 44 countries, and has been 

approved as a qualifying foreign banking organization by the Federal Reserve Board, thereby 

subjecting it to the same comprehensive regulatory regime that governs the operations of U.S. 

domestic banking entities. To the extent that the accounts at RBC and BNYM are not in technical 

compliance with the requirements of section 345, pursuant to the Cash Management Motion, the 

Debtors seek to have such requirements waived so as to allow BNYM and RBC to accept and hold 

cash in accordance with the Debtors’ prepetition practices. Furthermore, the Short-Term Investment 

Policy, as modified by the Debtors, is in compliance with section 345(b) as the modified Short-Term 

Investment Policy limits investments to those that are either “insured or guaranteed by the United 

States or by a department, agency, or instrumentality of the United States or backed by the full faith 

and credit of the United States.” 

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 Moreover, there is cause to warrant a waiver of the requirements of section 345(b) of the 

Bankruptcy Code. It is my understanding based upon discussions with counsel, that courts consider 

the “totality of the circumstances” in determining whether “cause” exists, with particular regard to the 

following factors: (i) the sophistication of the debtor’s business; (ii) the size of the debtor’s business 

operations; (iii) the amount of investments involved; (iv) the bank ratings (Moody’s and Standard and 

Poor) of the financial institutions where debtor in possession funds are held; (v) the complexity of the 

case; (vi) the safeguards in place within the debtor’s own business of insuring the safety of the funds; 

(vii) the debtor’s ability to reorganize in the face of a failure of one or more of the financial 

institutions; (viii) the benefit to the debtor; (ix) the harm, if any, to the estate; and (x) the 

reasonableness of the debtor’s request for relief from section 345(b) requirements in light of the overall 

circumstances of the case. 

It is my understanding based upon discussions with counsel that, here, “cause” exists because, 

among other things: (i) all of the Banks holding significant balances are highly rated, reputable banks 

that are subject to supervision by national banking regulators; (ii) the Debtors retain the right to close 

accounts with the Banks and establish new bank accounts as needed; (iii) the cost associated with 

satisfying the requirements of section 345(b) is needlessly burdensome to the Debtors and their estates; 

and (iv) the process of satisfying such requirements would lead to needless inconvenience and 

inefficiencies in the management of the Debtors’ business. The benefits of a waiver would far 

outweigh any potential harm to the estates from noncompliance with section 345(b). The complex 

nature of the Debtors’ businesses requires numerous bank accounts. Moreover, a bond secured by the 

undertaking of a corporate surety would be prohibitively expensive (if such a bond could be obtained 

at all). Furthermore, based on its experience opening new bank accounts, the Debtors estimate that it 

would take months to create a new suite of bank accounts to service their business. I respectfully 

submit that the costs of disruption to the business by having to close dozens of accounts far outweighs 

the risks of the Debtors continuing to maintain their historic Bank Accounts during the administration 

of the Chapter 11 Cases. Accordingly, I respectfully submit that the Court should waive the 

requirements of section 345(b) in these Chapter 11 Cases on a final basis. However, if the U.S. 

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Trustee needs additional time to consider the waiver, in the alternative, the Court should, on an interim 

basis, extend the Debtors’ time to comply with the requirements of section 345(b) of the Bankruptcy 

Code for sixty (60) days while the Debtors discuss the issue with the U.S. Trustee and any statutory 

committees appointed in these Chapter 11 Cases. 

G. Bank and Payment Processing Fees 

In the ordinary course of business, the Debtors incur and pay, honor, or allow to be deducted 

from the appropriate Bank Accounts, certain service charges, repayments on account of ordinary 

course ACH credit extensions (e.g., in connection with the Banks’ processing of refunds or mistaken 

payments into Utility Depository Accounts), and other related fees, costs, and expenses charged by the 

Banks (collectively, the “Bank Fees”). To the extent the balance in the applicable Bank Account 

decreases below a threshold amount established by the applicable Bank, the Debtors may incur 

additional fees for sending and receiving wire transfers, clearing checks, ACH transfers, and other 

transactions. In addition, the Debtors pay certain payment processing fees to third parties relating to 

payment support and processing for customers making payments by credit card, debit card, and ACH 

bank payment (collectively, the “Payment Processing Fees”). The Debtors currently pay 

approximately $140,000 per month on account of Bank Fees and approximately $200,000 per month 

on account of Payment Processing Fees. As of the Petition Date, the Debtors estimate that 

approximately $140,000 in Bank Fees and $400,000 in Payment Processing Fees are accrued and 

unpaid and will become due in the first thirty (30) days after the Petition Date. The Debtors seek 

authority to pay such amounts, including any amounts relating to the period prior to the Petition Date, 

as they come due in the ordinary course of business. 

Payment of the Bank Fees is in the best interests of the Debtors, their estates, and all parties in 

interest as it will prevent any disruption to the Cash Management System. It is my understanding 

based upon discussion with counsel that because the Banks may have setoff rights with respect to the 

prepetition Bank Fees, payment of the prepetition Bank Fees should not affect other parties in interest 

and would merely be a matter of timing. In addition, payment of the Payment Processing Fees will 

prevent any disruption to the Debtors’ ability to collect payments from their customers that pay utility 

bills via credit card, debit card, or ACH bank payment. 

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H. The Debtors’ Existing Business Forms and Checks 

In the ordinary course of business, the Debtors issue checks from time to time and use a variety 

of correspondence and business forms, including, but not limited to, letterhead, purchase orders, and 

invoices (collectively, the “Business Forms”). To minimize the expense to the Debtors’ estates 

associated with developing and/or purchasing entirely new forms or otherwise complying with 

Bankruptcy Local Rule 2015-1(a), the delay in conducting business prior to obtaining such forms, and 

the confusion of suppliers and other vendors, pursuant to the Cash Management Motion, the Debtors 

seek authority to continue using their Business Forms substantially in the forms used immediately prior 

to the Petition Date, without reference therein to the Debtors’ status as “Debtor in Possession.” The 

Debtors do not believe that any prejudice will be suffered by any party of this relief is granted. 

Strict compliance with the UST Guidelines, which require reprinting such documents, would 

unnecessarily increase the Debtors’ expenses and would risk confusing the Debtors’ customers, 

suppliers, and employees. Accordingly, the Debtors believe it is appropriate to continue to use all 

Business Forms as such forms were in existence prior to the commencement of these Chapter 11 

Cases, without any reference to the Debtors’ current status as debtors in possession. 

The Cash Management System constitutes an ordinary-course and essential business practice 

providing significant benefits to the Debtors, including the ability to control corporate funds, ensure 

the maximum availability of funds when and where necessary, reduce borrowing costs and 

administrative expenses by facilitating the movement of funds, and ensure the availability of timely 

and accurate account balance information consistent with prepetition practices. The use of the Cash 

Management System has historically reduced the Debtors’ expenses by enabling the Debtors to use 

funds in an optimal and efficient manner. Accordingly, the continued use of the Cash Management 

System without interruption is vital to the Debtors’ business operations and the success of these 

Chapter 11 Cases. 

Further, in these Chapter 11 Cases, strict enforcement of the UST Guidelines would severely 

disrupt the Debtors’ ordinary financial operations by reducing efficiencies, increasing administrative 

burdens, and creating unnecessary expenses. As stated, the Debtors maintain approximately 108 Bank 

Accounts as part of the Cash Management System. If the Debtors were required to close these Bank 

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Accounts and open new debtor-in-possession accounts, the Debtors would be forced to reconstruct the 

Cash Management System in its entirety. This reconstruction would be impractical and cost 

prohibitive in an enterprise like the Debtors. B&MM, including accounting and bookkeeping 

employees, would need to focus their efforts on immediately opening new bank accounts and working 

to establish proper cash flow controls, thereby diverting them from their daily responsibilities during 

this critical juncture of the Debtors’ Chapter 11 Cases. Many accounts could not be replaced in time to 

effectively continue the Debtors’ businesses. Even if possible, the opening of new bank accounts 

would increase operating costs, and the delays that would result from opening new accounts, revising 

cash management procedures, and redirecting payments would negatively impact the Debtors’ ability 

to operate their business while establishing these new arrangements, to the detriment of all parties in 

interest. 

The Debtors’ transition into chapter 11 will be significantly smoother and more orderly, with 

minimum disruption and harm to the Debtors’ operations, if the Bank Accounts are continued 

following the Petition Date with the same account numbers. By preserving business continuity and 

avoiding the disruption and delay to the Debtors’ collection and disbursement procedures that would 

necessarily result from closing the Bank Accounts and opening new accounts, all parties in interest, 

including employees, vendors, customers, and creditors will be best served. The confusion that would 

otherwise result, absent the relief requested in the Cash Management Motion, would ill-serve the 

Debtors’ rehabilitative efforts. 

Accordingly, for the reasons set forth herein, I respectfully submit that the relief requested in 

the Cash Management Motion is necessary and appropriate, is in the best interests of their estates and 

all parties in interest, is necessary to avoid immediate and irreparable harm to the Debtors, and should 

be granted. 

IV. MOTION OF DEBTORS PURSUANT TO 11 U.S.C. §§ 105(A), 363(B), AND 507 AND 

FED. R. BANKR. P. 6003 AND 6004 FOR INTERIM AND FINAL AUTHORITY TO (I) 

PAY PREPETITION WAGES, SALARIES, AND OTHER COMPENSATION AND 

BENEFITS; (II) MAINTAIN EMPLOYEE BENEFIT PROGRAMS; AND (III) PAY 

RELATED ADMINISTRATIVE OBLIGATIONS (THE “EMPLOYEE WAGES AND 

BENEFITS MOTION”) 

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Pursuant to the Employee Wages and Benefits Motion, the Debtors are seeking interim and 

final authority to (i) pay, in their sole discretion, all prepetition amounts required under or related to 

the Debtors’ Compensation Obligations, Employee Incentive and Retention Programs, Reimbursable 

Expenses, Withholding Obligations, Payroll Maintenance Fees, Severance Programs, Employee 

Benefits Programs, and Supplemental Workforce Obligations (each as defined below, and together 

with any Employee Program Administrative Obligations (as defined below), the “Prepetition 

Employee Obligations”); (ii) continue their prepetition compensation practices, programs, benefits, 

and policies for their Employees (as defined below) (collectively, the “Employee Wage and Benefits 

Programs”) as such were in effect as of the Petition Date and as such may be modified, amended, or 

supplemented from time to time in the ordinary course of the Debtors’ businesses, and (iii) honor and 

pay any related administrative fees, costs, expenses, and obligations arising thereunder (collectively, 

the “Employee Program Administrative Obligations”). Further, the Debtors request that the Court 

authorize and direct all applicable Banks to receive, process, honor, and pay all checks issued or to be 

issued and electronic funds transfers requested or to be requested relating to the Prepetition Employee 

Obligations. 

The following chart sets forth the various categories and approximate outstanding amounts of 

the Prepetition Employee Obligations4 that the Debtors are seeking authority to pay pursuant to the 

Employee Wages and Benefits Motion within the first thirty days of the Chapter 11 Cases (the 

“Interim Period”) and on a final basis. Each of the categories of Prepetition Employee Obligations, 

including the related Employee Program Administrative Obligations, is defined and discussed in 

further detail below. 

Category 

Approx. Amount 

Seeking to Pay 

During Interim 

Period 

Approx. Amount 

Seeking to Pay on 

Final Basis 

Compensation Obligations $61,200,000 $61,200,000 

Incentive and Retention Program 

Obligations (excluding 2018 STIP) $970,000 $35,970,000 

 

4

 Amounts related to the Employee Program Administrative Obligations are included in the relevant 

categories in the chart below and also described below. 

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Reimbursable Expenses $3,800,000 $3,800,000 

Withholding Obligations5

$24,330,000 $24,330,000 

Payroll Maintenance Fees $75,000 $75,000 

Severance Obligations $630,000 $820,000 

Benefits Program Obligations6

$73,600,000 $95,792,000 

Supplemental Workforce Obligations $25,000,000 $35,000,000 

As discussed above, the Utility is one of the nation’s largest utility companies, providing 

electric and natural gas service to approximately 16 million customers in northern and central 

California. Together, the Debtors employ approximately 24,000 Employees,7 including approximately 

14,300 Employees who are paid on an hourly basis and approximately 9,000 Employees who earn 

salaries.8

 Of the Debtors’ approximately 24,300 Employees, approximately 15,200 Employees are 

covered under collective bargaining agreements (the “Represented Employees”) with the local 

chapters of three (3) labor unions: (i) the International Brotherhood of Electrical Workers (“IBEW”), 

(ii) the Engineers and Scientists of California (“ESC”), and (iii) the Service Employees International 

Union (“SEIU”) (collectively, the “Unions”). The Debtors’ Employees perform a variety of critical 

functions, including operating and maintaining the Debtors’ generation units, natural gas facilities, and 

distribution and transmission assets; performing customer outreach and other critical customer-facing 

services; collecting payments from the Debtors’ customers; and ensuring the safety and reliability of 

the Debtors’ operations. Employees are also responsible for administering PG&E’s clean energy, low 

income and energy efficiency programs as well as administering payroll, benefits, facilities and 

information systems and technology required to support the operational employees. 

 

5

 Substantially all of this amount represents amounts withheld from Employee compensation for 

withholding taxes and the Debtors’ payroll tax obligations. 

6

 As noted below, a significant portion of this amount (approximately $30 million) represents amounts 

withheld from or contributed by Employees. 

7

 For purposes of the Employee Wages and Benefits Motion, “Employees” means all persons entitled 

to, as of the Petition Date, compensation, benefits, reimbursement, and any other similar payments as a 

consequence of their being employed by either Debtor. The term “Employees” does not include any 

Supplemental Workers (as defined below). 

8

 The Debtors’ Employees reside in nearly every county in California, as well as in thirty-six other 

states including, Arizona, Pennsylvania, Texas, and Virginia. 

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It is my understanding based upon discussions with counsel that the Debtors have twelve (12) 

Employees who constitute “insiders” for purposes of section 503 of the Bankruptcy Code (the 

“Insiders”). 

In addition to their Employees, the Debtors use the services of approximately 1,900 

independent contractors and, through various staffing agencies (the “Staffing Agencies”), temporary 

workers to assist with their operations (each, a “Supplemental Worker” and, collectively, the 

“Supplemental Workforce” and, together with the Employees, the “Personnel”). Members of the 

Supplemental Workforce, who complement the efforts of the Debtors’ Employees, primarily perform 

specialized tasks that, for various reasons, the Employees cannot perform on their own, including, for 

example, certain maintenance and repair work on transmission lines following weather-related events. 

The Debtors’ Personnel are the lifeblood of the Debtors’ businesses—without them, the 

Debtors’ operations would come to a halt. Due to the highly technical, specialized, and regulated 

nature of the electricity generation and energy transmission and distribution industry, the Debtors must 

maintain a uniquely skilled workforce, whose knowledge base is critical to the Debtors’ businesses and 

ongoing operations and, as a result, to the success of the Chapter 11 Cases. Further, all of the Debtors’ 

customers, located throughout an approximately 70,000-square-mile service area in northern and 

central California, rely on the Debtors’ Personnel to receive electricity and natural gas service. 

Without the Debtors’ Personnel, the Debtors’ customers in northern and central California would not 

receive essential utility services. 

A. Compensation Obligations 

The Debtors pay their Employees salaries, wages, and other compensation, including overtime 

pay, for the Employees’ services (collectively, the “Compensation Obligations”). Employees who 

are paid wages on an hourly basis are paid bi-weekly in arrears, and the Debtors’ salaried Employees 

receive payment on a monthly basis on approximately the 23rd day of each month for services 

rendered from the 1st to the 23rd of that month as well as for services yet to be rendered for the 

remainder of the month. Approximately 14,300 Employees are paid hourly and approximately 9,000 

Employees are paid a monthly salary. Although the vast majority of the Debtors’ Employees elect to 

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have their compensation deposited directly into their bank accounts though an electronic funds 

transfer, approximately 700 Employees are paid by check. 

On average, the Debtors pay approximately $297,400,000 each month on account of 

Compensation Obligations. As of the Petition Date, the Debtors estimate that the aggregate amount of 

accrued, but unpaid, Compensation Obligations totals approximately $61,200,000, all of which will 

come due during the Interim Period. On a per-Employee basis, the outstanding prepetition 

Compensation Obligations average approximately $4,400, below the statutory caps imposed by 

sections 507(a)(4) and 507(a)(5) of the Bankruptcy Code. The Debtors do not believe that payment of 

the prepetition Compensation Obligations will result in any Employee receiving more than $12,850 on 

account thereof. Pursuant to the Employee Wages and Benefits Motion, the Debtors seek authority to 

pay the Compensation Obligations in the ordinary course of business, including all prepetition amounts 

relating to such obligations. 

B. Employee Incentive and Limited Retention Programs 

The Debtors maintain certain incentive and retention programs9 (collectively, the “Employee 

Incentive and Retention Programs” and, all amounts required under or relating thereto, the 

“Incentive and Retention Program Obligations”) to motivate and reward certain Employees. The 

Employee Incentive and Retention Programs include (i) the Short-Term Incentive Plan, (ii) the 

Rewards and Recognition Program, (iii) the Temporary Assignment Program, (iv) the Service Award 

Program, and (v) the Limited Retention Programs (each as defined below).10 The Employee Incentive 

and Retention Programs are critical components of Employees’ general compensation structure and 

bring substantial value to the Debtors’ estates. The incentive programs align eligible Employees’ 

interests with those of the Debtors by linking awards under the incentive programs to the overall 

 

9

 Unless otherwise specified, programs and practices mentioned in Employee Wages and Benefits 

Motion benefit Employees of both Debtors, although they may be maintained or administered by only 

one of the Debtors. 

10 The Debtors also maintain an annual long-term incentive program (“LTIP”) for certain Employees. 

At this time, the Debtors are not seeking authority to make any cash payments under such programs, 

and are not seeking authority to implement an LTIP and grant awards for 2019. Earned and previously 

granted equity awards under existing LTIPs will continue to be provided (but no cash payments or 

dividend payments thereon). In addition, the Debtors reserve the right to seek Court approval to 

implement a key employee retention plan, a key employee incentive plan, and a short term incentive 

plan for 2019. 

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performance and efficiency of the Debtors’ operations. The Limited Retention Programs include a 

discrete program at the department level and a CPUC-approved retention program for Employees at 

the Debtors’ Diablo Canyon Nuclear Plant. 

Pursuant to the Employee Wages and Benefits Motion (except with respect to the Insiders), the 

Debtors seek authority to pay obligations in connection with the Employee Incentive and Retention 

Programs in the ordinary course of business (except as otherwise provided in the Employee Wages and 

Benefits Motion), including all prepetition amounts on account of such obligations, and to continue to 

administer the Employee Incentive and Retention Programs as set forth herein in the ordinary course of 

business. Each of the Employee Incentive and Retention Programs is described in further detail below. 

Although Insiders of the Debtors have historically been eligible to receive payments or awards under 

certain of the Employee Incentive and Retention Programs, the Debtors are not requesting authority at 

this time to make any payments under any Employee Incentive and Retention Programs to the Insiders. 

1. Short-Term Incentive Plan 

The Debtors maintain a broad-based program (the “Short-Term Incentive Plan”) through 

which certain Employees are eligible for annual cash awards based on the Debtors’ achievement of 

certain enterprise-wide performance targets and such Employees’ individual performance. Awards 

under the Short-Term Incentive Plan (collectively, “STIP Awards”) are based on a formula that is 

unique to each Employee and that takes into account each Employee’s base pay rate, job position, and 

individual performance, as well as the Debtors’ performance as a whole. The STIP Awards are an 

integral component of the compensation of Employees who participate in the plan and upon which 

they rely on an annual basis. The Debtors believe that the STIP Awards incentivize strong Employee 

performance and are critical to ensuring that Employees stay motivated and reach higher performance 

standards, which in turn maximizes the value of the Debtors’ business for all parties in interest. 

For fiscal year 2018, approximately 14,000 Employees were eligible to receive STIP Awards at 

a total aggregate expected cost to the Debtors of approximately $130,000,000 for 2018 performance, 

which is to be paid in March, 2019. The average individual STIP Award for 2018 is expected to be 

approximately $13,000, and individual STIP Awards are expected to range from approximately $5,000 

to $90,000, exclusive of the Insiders. Annually, the Compensation Committee of the PG&E Corp. 

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Board of Directors (the “Compensation Committee”) certifies the Debtors’ level of achievement of 

the enterprise-wide performance targets for the applicable fiscal year, and approves the final STIP 

score, as well as final STIP Awards. A STIP Award is forfeited if an Employee leaves prior to 

December 31 of the year in which the STIP Award is earned, unless the Employee is severed without 

cause or is qualified as a Retiree (as defined below), in which case the person is entitled to a prorated 

award based on the percentage of the year they were an active Employee. 

Pursuant to the Employee Wages and Benefits Motion, the Debtors seek authority to pay 

Employees the STIP Awards earned for 2018, except that they are not requesting authority to pay STIP 

Awards to any Insiders or to any officers to the extent earned during the period they were officers. 

Further, the Debtors are not requesting authority to pay any STIP Awards on an interim basis. 

Consideration of the relief sought in the Employee Wages and Benefits Motion with respect to the 

STIP Awards will be deferred to the final hearing on the Employee Wages and Benefits Motion. 

2. Rewards and Recognition Program 

The Debtors maintain a program (the “Rewards and Recognition Program”) to promote 

timely recognition of Employees in good standing who have gone above and beyond their normal job 

responsibilities, such as emergency response or participation in special initiatives outside their regular 

job duties. Awards under the Rewards and Recognition Program (collectively, “R&R Awards”) may 

be monetary, non-monetary, or both, and are made by the Debtors on a discretionary basis and in 

discretionary amounts. Non-monetary awards are provided in the form of gift cards. Members of 

management establish and distribute guidelines for the Rewards and Recognition Program to help 

ensure consistency throughout the various departments, but R&R Awards are granted on a 

departmental basis. R&R Awards are subject to the Debtors’ policies and practices, which control the 

amount of R&R Awards at each level that the leadership of each department may approve. On an 

annual basis, approximately 6,300 Employees receive R&R Awards at a total cost to the Debtors of 

approximately $15,200,000. In 2018, the average R&R Award was approximately $1,200. R&R 

Awards are processed through the Debtors’ employee and leadership SAP portal, and can be submitted 

at any time. The Debtors disburse R&R Awards throughout the year, depending on the department. 

As of the Petition Date, the Debtors estimate that approximately $650,000 in value of R&R Awards are 

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outstanding on account of the Rewards and Recognition Program with respect to the prepetition period, 

all of which will come due during the Interim Period. Pursuant to the Employee Wages and Benefits 

Motion, the Debtors request authority to pay all R&R Awards, including all prepetition amounts 

relating thereto. 

3. Temporary Assignment Program 

The Debtors maintain a program (the “Temporary Assignment Program”) to provide awards 

(collectively, “Temporary Assignment Awards”) to Employees who are temporarily transferred to 

positions in so-called “temporary positions” (the “Temporary Positions”). Awards are paid in 

discretionary amounts based on the eligible Employee’s performance and duration of employment in 

the Temporary Position. On an annual basis, approximately 350 Employees receive Temporary 

Assignment Awards at an aggregate cost to the Debtors of approximately $2,600,000. In 2018, the 

average Temporary Assignment Award was approximately $5,400, and individual Temporary 

Assignment Awards ranged from approximately $160 to $28,650. The Debtors generally disburse 

Temporary Assignment Awards upon Employees’ completion of their placements in Temporary 

Positions. As of the Petition Date, the Debtors estimate that approximately $250,000 is outstanding on 

account of the Temporary Assignment Program, all of which will come due during the Interim Period. 

Pursuant to the Employee Wages and Benefits Motion, the Debtors request authority to pay all 

Temporary Assignment Awards, including all prepetition amounts relating thereto. 

4. Service Award Program 

The Debtors maintain a program (the “Service Award Program”) that recognizes Employee 

service milestones every five years and at retirement for all Employees. Full- or part-time Employees 

with at least five years of service are eligible to participate and may elect to receive a non-monetary 

award, such as gift cards and tickets to sporting events and concerts, or to make a donation in an 

amount determined by the Debtors, to one of the following pre-selected nonprofit organizations: 

REACH Program, California State Parks Foundation, or the American Red Cross Bay Area Chapter. 

Eligible Employees select their service award through the Debtors’ service award portal operated by BI 

Worldwide. 

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On an annual basis, approximately 5,300 Employees and Retirees receive awards under the 

Service Award Program at a total cost to the Debtors of approximately $850,000. In 2018, the average 

award ranged from $43 for those with five years of service to $419 for those with 25 years or more of 

service. The Debtors disburse service awards throughout the year. As of the Petition Date, the 

Debtors estimate that approximately $70,000 is outstanding on account of the Service Award Program, 

all of which will come due during the Interim Period. Pursuant to the Employee Wages and Benefits 

Motion, the Debtors request authority to pay all obligations arising under the Service Award Program, 

including any prepetition amounts. 

5. Limited Retention Programs 

The Debtors maintain a limited retention-based awards program at the departmental level, 

which provides cash awards to certain key, hard-to-replace Employees to ensure that they continue 

their employment with the Debtors (the “Retention Program”). The Retention Program does not 

include any Insiders. To receive an award (each, a “Retention Award”) pursuant to the Retention 

Program, an Employee’s manager must articulate a business case explaining, among other things, the 

need for the award and why that need cannot be met through other means. The Retention Program 

awards Employees who are identified as key Employees either because they have indicated that they 

are planning to leave and their job function is critical, or they are identified by the Debtors as key 

based on a specific work assignment. On an annual basis, approximately 50 Employees receive 

Retention Awards at a total cost to the Debtors of approximately $1,200,000. In 2018, the average 

Retention Award was approximately $27,000, and Retention Awards ranged from approximately 

$2,583 to $150,000. The Debtors disburse Retention Awards throughout the year. As of the Petition 

Date, the Debtors estimate that there are no amounts outstanding on account of the Retention Program. 

The Debtors also maintain a separate retention program for Employees (none of whom are 

Insiders) at Diablo Canyon Power Plant (“DCPP”), the Utility’s nuclear generation facility. 

Approximately 1,360 Employees are currently participating in the program. The Debtors made a 

decision not to seek relicensing of the DCPP which will ultimately result in the plant’s closure. The 

operation of the DCPP will, however, continue for several years and the Debtors need skilled and 

knowledgeable personnel to operate the plant safely and reliably. In order to incentivize Employees to 

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remain at DCPP, the Debtors proposed a retention plan, which was initially approved by the CPUC in 

January of 2018 with certain modifications. The California legislature subsequently passed legislation 

(Public Utilities Code Section 712.7, effective January 1, 2019) requiring the CPUC to approve full 

funding for the retention program and in December 2018, the CPUC issued a decision approving full 

funding for the retention program initially proposed (the “Diablo Canyon Retention Program”). 

Pursuant to such legislation, the retention payment percentage was raised from 15% to 25% for each 

retention plan participant. As a result, in April of 2019, the Debtors will be required to make 

retroactive payments on account of each DCPP retention plan participant. The Debtors estimate that 

this retroactive payment will aggregate approximately $35,000,000. Normal ongoing payments with 

respect to the program will be made in the Fall of 2019. 

The Diablo Canyon Retention Program includes a base retention program that is provided to 

the Debtors’ Employees who satisfy the following criteria: (i) they work in a regular active full-time 

status at DCPP or solely support DCPP operations, (ii) their job or job functions will be eliminated as a 

result of the cessation of operations at DCPP, (iii) they work during the entirety of one or both of the 

commitment periods, and (iv) they sign a base retention program payback agreement. The first 

commitment period is a four- (4) year commitment of employment which covers years 2016 through 

2020. The second period is a three- (3) year commitment which covers years 2020 through 2023. 

Pursuant to the Diablo Canyon Retention Program, eligible Employees will receive a payment equal to 

25% of the Employee’s base salary plus overtime for each yearly segment of the commitment period. 

The Debtors make each yearly segment payment between October 1 and December 31 of each year. 

At the end of the Employee’s assignment at DCPP, the Employee will have the option to select to 

remain on the payroll for six months while conducting a job search for internal employment. If the 

Employee is not successful in finding internal employment, their final severance payment (under the 

DCPP Severance Program, discussed below) will be reduced by the amount the Employee was paid 

during the six months. Employees who must relocate to secure an employment opportunity will be 

reimbursed for moving expenses to a maximum of $5,000. As stated, no amounts related to the Diablo 

Canyon Retention Program are payable during the Interim Period. Because, among other things, the 

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CPUC has authorized full funding for this program, the Debtors intend to continue the program in the 

ordinary course. 

C. Reimbursable Expenses 

In the ordinary course of business, the Debtors reimburse their Employees for reasonable and 

customary expenses incurred in the scope of their employment (collectively, the “Employee 

Reimbursable Expenses”). The Employee Reimbursable Expenses can include those expenses 

related to business travel, relocation, certain meals, fitness memberships, and communications (e.g., 

certain cell phone expenses), depending on the position, department, and seniority of the Employee. 

In connection with this practice, the Debtors provide certain Employees with credit cards (the 

“Employee Credit Cards”) to be used for paying certain Employee Reimbursable Expenses. The 

Debtors’ vendor, U.S. Bank, requires that the Debtors pre-fund the accounts for the Employee Credit 

Cards. 

Employees also use the Debtors’ expense reimbursement portal operated by Concur Expense 

Management to seek reimbursement for expenses charged to Employee Credit Cards and for businessrelated purchases that are not charged to an Employee Credit Card. 

In addition to the Employee Credit Cards, certain Employees are provided with purchasing 

cards (the “Employee Purchasing Cards” and, together with the Employee Credit Cards, the 

“Employee Cards”) to pay for certain emergency expenses, meals for large groups of Employees, and 

expenses related to various operational materials and services necessary for the Debtors’ operations. 

The Debtors’ vendor, U.S. Bank, also requires that the Debtors pre-fund the accounts for the Employee 

Purchasing Cards. The Debtors typically fund the accounts on a bi-weekly basis and maintain 

approximately $20 million on account with U.S. Bank to cover obligations relating to the Employee 

Cards. All Employee Cards issued by the Debtors to their Employees have pre-funded account limits 

and detailed restrictions on permissible expenditures. 

The Debtors also reimburse the members of their Boards of Directors for expenses incurred in 

connection with the performance of their duties as directors (collectively with the Employee 

Reimbursable Expenses, the “Reimbursable Expenses”). 

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The Debtors estimate that Reimbursable Expenses aggregate approximately $17,200,000 per 

month, including the pre-funded accounts for the Employee Cards. As of the Petition Date, the 

Debtors estimate that approximately $3,800,000 is outstanding on account of Reimbursable Expenses, 

all of which will come due during the Interim Period. Pursuant to the Employee Wages and Benefits 

Motion, the Debtors seek authority to satisfy all prepetition obligations related to Reimbursable 

Expenses, including those incurred through the use of Employee Cards, as and when they arise and to 

continue in the ordinary course the usage of the Employee Cards as described herein. 

Payment of the Reimbursable Expenses is an exercise of sound business judgment and 

necessary to facilitate a successful reorganization because any other treatment of would be highly 

inequitable. Employees and Directors who have incurred Reimbursable Expenses on behalf of the 

Debtors should not be forced to bear the cost of such expenses personally, especially because the 

Reimbursable Expenses were incurred for the Debtors’ benefit, in the course of their employment or 

service, and with the understanding that they would be reimbursed. In addition, as stated, substantial 

obligations with respect to the Employee Cards have been pre-funded prior to the Petition Date to 

cover charges. 

D. Withholding Obligations 

As employers, the Debtors are required by law to withhold from their Employees’ salaries, 

wages, and other compensation amounts related to federal, state, and local income taxes, as well as 

Social Security and Medicare taxes (collectively, the “Withholding Taxes”) and to remit them to the 

appropriate taxing authorities (collectively, the “Taxing Authorities”). The Debtors also are required 

to make payments from their own funds on account of Social Security and Medicare taxes and to pay, 

based on a percentage of gross payroll (and subject to state-imposed limits), additional amounts to the 

Taxing Authorities for, among other things, state and federal unemployment insurance (collectively, 

the “Employer Payroll Taxes” and, together with the Withholding Taxes, the “Payroll Tax 

Obligations”). In the aggregate, the Debtors’ monthly Payroll Tax Obligations total approximately 

$95,000,000. As of the Petition Date, the Debtors estimate that they owe approximately $22,000,000 

on account of Payroll Tax Obligations relating to the prepetition period, all of which will come due 

during the Interim Period. 

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In the ordinary course of processing payroll for the Employees, the Debtors also may be 

required by law, in certain circumstances, to withhold from certain Employees’ wages amounts for 

various garnishments, such as tax levies, child support, and other court-ordered garnishments 

(collectively, the “Garnishments”). Each pay cycle, the Debtors withhold Garnishments from 

applicable Employees’ paychecks and remit them to the appropriate authorities or entities. On 

average, the Debtors withhold approximately $1,000,000 in Garnishments per month from Employees’ 

wages and salaries. As of the Petition Date, the Debtors estimate that they currently have withheld 

approximately $300,000 on account of Garnishments that have not been remitted. 

Further, at Employees’ request, the Debtors withhold certain amounts from Employees’ wages 

and salaries for transmittal to third parties, including for the following categories: (i) the payment of 

dues that Represented Employees owe to the Unions (collectively, the “Union Obligations”), (ii) 

amounts to be transferred via a third-party non-profit administrator, YourCause LLC, to charitable 

organizations selected by Employees pursuant to the Campaign for the Community (collectively, the 

“Community Campaign Obligations”), (iii) amounts to be transferred to various employee-funded 

political action committees (“PAC”), as selected by the Employee (collectively, the “PAC 

Obligations”), and (iv) amounts to be transferred to the Pacific Service Employees Association, a notfor-profit mutual benefit organization for dues and other benefits (“PSEA Obligations” and together 

with Union Obligations, Community Campaign Obligations, and PAC Obligations, the “Employee 

Elective Deduction Obligations” and together with the Payroll Tax Obligations and Garnishments, 

the “Withholding Obligations”). 

The Debtors withhold the Employee Elective Deduction Obligations from participating 

Employees’ paychecks and remit them to the applicable recipient as described above. On average, the 

Debtors withhold approximately $3,000,000 in Employee Elective Deduction Obligations each month 

from participating Employees’ wages and salaries. As of the Petition Date, the Debtors estimate that 

they are currently withholding but have not yet remitted approximately $2,000,000 on account of 

Employee Elective Deduction Obligations. Additionally, the Debtors also pay approximately $16,000 

per month in administrative fees to YourCause LLC. The Debtors estimate that, as of the Petition 

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Date, they owe approximately $32,000 in such administrative fees, all of which will come due during 

the Interim Period. 

Pursuant to the Employee Wages and Benefits Motion, the Debtors seek authority to continue 

remitting and paying the Withholding Obligations (whether pre- or postpetition) to the appropriate 

authorities and entities in the ordinary course of business and to pay any administrative fees with 

respect to the Withholding Obligations. 

E. Payroll Maintenance Fees 

To manage the efficient processing and payment of the various obligations described above, the 

Debtors rely on the services of certain third-party vendors (collectively, the “Payroll Maintenance 

Vendors”), including, but not limited to, Concur, ADP, Inc. (“ADP”), and TALX Corp. (“TALX”). 

As discussed above, the Debtors rely on Concur to administer their expense reimbursement portal. 

The Debtors use ADP to administer wage garnishments and TALX for employment verification. The 

Debtors pay each of the Payroll Maintenance Vendors on a monthly basis for the aforementioned 

services (the “Payroll Maintenance Fees”). 

On average, the Debtors pay Payroll Maintenance Vendors approximately $75,000 in the 

aggregate, on a monthly basis on account of Payroll Maintenance Fees. As of the Petition Date, the 

Debtors estimate that they owe approximately $75,000 on account of Payroll Maintenance Fees 

relating to the prepetition period, all of which will come due during the Interim Period. Failure to pay 

the Payroll Maintenance Fees could lead to delayed disbursement of payments to the Debtors’ 

Employees, to the detriment of the Employees and the Debtors’ operations. In addition, replacing any 

of the Payroll Maintenance Vendors would take a significant amount of time and expense and result in 

a disruption to normal employee payment practices. Accordingly, pursuant to the Employee Wages 

and Benefits Motion, the Debtors seek authority to pay Payroll Maintenance Fees in the ordinary 

course of business, including all prepetition amounts on account of such Payroll Maintenance Fees. 

F. Severance Programs and Obligations 

In the ordinary course of business, the Debtors maintain three severance programs for the 

benefit of all Employees except Represented Employees. Severance for Represented Employees is 

covered by their respective labor agreements (the “Represented Employee Severance Obligations”). 

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The three programs are: (i) the DCPP Severance Program, (ii) the Senior Officer Severance Program, 

and (iii) the General Severance Program (each as defined below, and collectively, the “Severance 

Programs”). Although Employees are eligible to receive benefits under the Severance Programs, the 

level of benefits that a particular eligible Employee receives varies. 

Under the Senior Officer Severance Program, the forty (40) eligible Employees are entitled, 

upon a qualifying termination, to receive (i) a lump-sum payment equal to one year’s base pay and 

target STIP payout; (ii) a lump-sum payment which is the equivalent of 18-months of COBRA 

coverage to cover transition expenses, which may include items such as medical benefits and life 

insurance coverage; and (iii) career counseling services, which include outplacement services for the 

length of their severance consideration period (the “Senior Officer Severance Obligations”). Absent 

further order of the Court, and, based upon discussions with counsel, consistent with section 503 of the 

Bankruptcy Code, the Debtors will not make any severance payments to the Insiders. 

Pursuant to the General Severance Program, eligible Employees, upon termination, are entitled 

to receive benefits which vary based on the Employees’ experience and title. Eligible Employees who 

are in non-director positions are eligible to receive: (i) a lump-sum payment equal to three weeks’ pay 

per year of credited service, with a 12-week minimum and a 52-week maximum; (ii) a lump-sum 

payment of $9,000 to cover transition expenses, which may include items such as medical benefits and 

life insurance coverage; and (iii) career counseling services, which include outplacement services for 

the length of their severance consideration period. Eligible Employees in director positions are entitled 

to receive (i) a lump-sum payment equal to three weeks’ base pay per year of credited service, with a 

12-week minimum and a 52-week maximum, plus a similar ratable share of their STIP Award; (ii) a 

lump-sum payment of $16,650 to cover transition expenses, which may include items such as medical 

benefits and life insurance coverage; and (iii) career counseling services, which include outplacement 

services for the length of their severance consideration period (collectively, the “General Severance 

Obligations”). 

Employees at DCPP are covered by a separate severance program (the “DCPP Severance 

Program”). The DCPP Severance Program is similar in all respects to the General Severance Program 

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except for the maximum lump-sum payment, which is 78 weeks (the “DCPP Severance Obligations” 

and together with the Senior Officer Severance Obligations and the General Severance Obligations, the 

“Severance Obligations”). The Debtors have not made any payments on account of the DCPP 

Severance Program in the past two years and do not anticipate making any payments under this 

program in 2019. 

In addition to the foregoing, less than ten (10) Employees whose positions are eliminated 

because of automated meter reading are eligible to select a transitional leave program where they 

receive the same applicable General Severance Obligations but such obligations are payable on an 

ongoing basis for the designated time period. 

The Debtors have substantial business justification for continuing the Severance Programs in 

the ordinary course as requested in the Employee Wages and Benefits Motion. The Debtors’ ability to 

provide terminated Employees with their severance is critical to maintaining positive Employee morale 

and loyalty. Increased instability in the Debtors’ workforce will only undermine the Debtors’ 

reorganization efforts and their long-term viability. The Severance Programs have been designed with 

a specific focus on the utility industry which is highly specialized and less saturated, which may result 

in challenges for Employees seeking new employment in the same or other industries. Additionally, as 

a condition to receiving benefits under the Severance Programs, the Debtors require each severed 

Employee to release all potential claims against the Debtors. As stated, no authority for severance 

payments to Insiders is being sought pursuant to the Employee Wages and Benefits Motion. 

Pursuant to the Employee Wages and Benefits Motion, the Debtors are seeking authority 

(except as indicated above) to continue the Severance Programs and to pay all Severance Obligations 

and all Represented Employee Severance Obligations in the ordinary course of business, whether 

arising prior to or after the Petition Date. On average, the Debtors pay approximately $500,000 each 

month on account of Severance Obligations. Additionally, the Debtors pay approximately $70,000 

each month on account of Represented Employee Severance Obligations. As of the Petition Date, 

because the Severance Programs provide for largely lump sum payments, the Debtors estimate that 

there are no amounts outstanding under the DCPP Severance Program or the Senior Officer Severance 

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Program. The Debtors also estimate that there is approximately $600,000 owed under the General 

Severance Program, all of which is payable during the Interim Period. Additionally, as of the Petition 

Date, the Debtors estimate that they owe approximately $220,000 on account of existing Represented 

Employee Severance Obligations, and expect that approximately $30,000 in Represented Employee 

Severance Obligations will be required to be paid during the Interim Period. 

G. Employee Benefits Programs 

In the ordinary course of business, the Debtors maintain various employee benefits plans, 

policies, and programs (collectively, the “Employee Benefits Programs” and, all amounts required 

and payable under or relating thereto, the “Benefits Program Obligations”). These Employee 

Benefits Programs generally fall into the following categories: (i) Paid Leave, (ii) Health Insurance 

Programs, (iii) Retirement Programs, (iv) Life and Disability Insurance Programs, and (v) Work/Life 

Benefits (each as defined and discussed in further detail below). Pursuant to the Employee Wages and 

Benefits Motion, the Debtors request authority to continue the Employee Benefits Programs and to pay 

all Benefits Program Obligations in connection therewith in the ordinary course of business, whether 

related to the period prior to or after the Petition Date. 

1. Paid Leave 

In the ordinary course of business, the Utility maintains a policy for providing Employees paid 

leave (collectively, “Paid Leave”) in the form of paid vacation (“Vacation”) and paid holidays11 

(“Paid Holidays”) as well as certain other items, such as sick pay (“Sick Time”). The Utility provides 

Vacation to most Employees, which may be used for any reason. Vacation generally accrues at 

specified rates up to a maximum amount based on an Employee’s length of service and whether an 

Employee is a Represented Employee. For most Utility Employees, the maximum yearly Vacation is 

thirty (30) days per year. 

PG&E Corp. maintains a separate Paid Leave policy for its Employees (including all 

management and administrative and technical Employees, which includes paid time off (“PTO”) and 

paid holidays. 

 

11 Paid holidays include twenty four (24) hours of paid leave in the form of “floating holidays” in 

addition to 10 specific holidays. 

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Although significant accrued Vacation, PTO, and Paid Holidays exist as of the Petition Date, 

Employees only are entitled to cash payouts for their accrued and unused Vacation, PTO and Paid 

Holidays upon termination of their employment or on an annual basis pursuant to a lump-sum payment 

each February for unused Vacation or PTO that exceeds the maximum amounts that Employees are 

permitted to carry over into the next calendar year. Pursuant to the Employee Wages and Benefits 

Motion, the Debtors seek authority to pay any “cash out” amounts due or that may come due with 

respect to accrued but unused Vacation, PTO, Paid Leave or Paid Holidays and to continue 

administering such policies and programs and making payments thereunder in the ordinary course of 

business. 

In addition, the Debtors also provide certain other forms of Paid Leave to Employees in the 

form of: 

(a) leave under the Family and Medical Leave Act and other similar statutes; and 

(b) other leave for personal reasons, many of which are required by law, including statutory 

sick leave, workers’ compensation leave, missed work time in the ordinary course of 

business for bereavement leave, jury duty or court attendance, and time spent voting. 

These other forms of Paid Leave do not involve incremental cash outlays beyond standard 

payroll obligations, and, therefore, no amounts are outstanding as of the Petition Date. 

The Debtors’ Paid Leave policies are broad-based programs upon which all Employees have 

come to depend and are an integral element of their compensation. Continuation of the Paid Leave 

policies in accordance with the Debtors’ prior practice is essential to maintaining positive Employee 

morale during the Chapter 11 Cases and maximizing the value of the Debtors’ business enterprise. 

As of the Petition Date, the Debtors estimate that they owe approximately $6,200,000 on 

account of excess unused Vacation, all of which will be required to be paid during the Interim Period. 

2. Health Insurance Programs 

Employees are eligible to participate in a number of health insurance programs, including the 

Medical Plans, the Dental Plan, the Vision Plan, the Health Account, and the Flexible Spending 

Accounts (each as defined below and, collectively, the “Health Insurance Programs”). The Debtors 

also subsidize or continue to provide health benefits to certain former Employees, including health 

benefits provided in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985 

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(“COBRA”). Each of the Health Insurance Programs is described in further detail below. Pursuant to 

the Employee Wages and Benefits Motion, the Debtors seek authority to pay all obligations in 

connection with the Health Insurance Programs and to pay all obligations in connection with COBRA 

in the ordinary course of business, including all prepetition amounts on account of such obligations, 

and to continue to administer and pay all amounts payable under the Health Insurance Programs and 

under COBRA in the ordinary course of business. 

a) Medical Plans 

The Debtors offer medical and prescription-drug insurance coverage (the “Medical Plans”) to 

Employees. The Medical Plans primarily are administered by Blue Cross of California, Inc. d/b/a 

Anthem Blue Cross (“Anthem”) and Kaiser Foundation Health Plan, Inc. (“Kaiser”). Certain 

prescription drug benefits are administered by Express Scripts Holding Company (“Express Scripts”) 

and Willis Towers Watson (“WTW”), and certain mental health benefits are administered by Beacon 

Health Options, Inc. (“Beacon” and, together with Anthem, Kaiser, and Express Scripts, the “Medical 

Plan Administrators”). The coverage provided to eligible Employees under the Medical Plans differs 

depending on the level of coverage an Employee elects to receive, and monthly healthcare premiums 

differ depending on the Medical Plan in which an Employee is enrolled and whether the Employee has 

dependents covered by the applicable plan. The total cost of the Medical Plans is approximately 

$33,200,000 per month, of which approximately $2,600,000 is covered by Employee contributions. 

The Debtors self-insure their portion and, after accounting for Employee contributions, spend 

approximately $29,400,000 per month on medical and prescription-drug claims asserted under the 

Medical Plans (collectively, the “Medical Claims”). The Debtors make payments on account of such 

Medical Claims on a weekly basis. Employees typically submit Medical Claims forty–six (46) days 

after incurring the relevant expenses, and, thus, the Debtors are unable to ascertain with certainty the 

prepetition amounts due and outstanding on account of the Medical Claims. Based on historical 

trends, the Debtors estimate that, as of the Petition Date, they owe approximately $53,000,000 on 

account of prepetition Medical Claims, approximately $32,000,000 of which will come due during the 

Interim Period. 

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The Debtors also maintain an account for each Employee who is enrolled in one of the Medical 

Plans (each, a “Health Account”). Health Accounts do not have cash values; rather, Health Accounts 

hold “credits” that can be redeemed to cover out-of-pocket medical expenses incurred by Employees. 

In essence, each credit in an Employee’s Health Account represents a commitment by the Debtors to 

reimburse such Employee for out-of-pocket expenses up to a certain dollar amount. On January 1 of 

each year, the Debtors contribute the equivalent of $500 per Employee or $1,000 per family of credits 

to each eligible Employee’s Health Account. If eligible Employees participate in health screenings 

and/or verify that they are not tobacco users, the Debtors contribute up to $500 per Employee or 

$1,000 per family of additional credits for each of these activities to each eligible Employee’s Health 

Account. The full balance of credits remaining in an Employee’s Health Account is carried over into 

the next calendar year. Employees redeem the credits in their Health Accounts by submitting a claim 

with the Debtors. The Health Accounts for 2019 have been funded. 

The Debtors also pay approximately $1,900,000 per month in administrative fees payable to the 

Medical Plan Administrators. The Debtors estimate that, as of the Petition Date, they owe 

approximately $1,900,000 in such administrative fees, all of which will come due during the Interim 

Period. 

Additionally, the Debtors pay monthly administrative fees of approximately $315,000 to 

Mercer Benefits Administration, which manages the eligibility- and enrollment-related processes for 

the Medical Plans, as well as the Dental Plan and the Vision Plan (as discussed below). The Debtors 

estimate that, as of the Petition Date, they owe approximately $315,000 in such administrative fees, all 

of which will come due during the Interim Period. 

b) Dental Plan 

The Debtors offer dental insurance coverage (the “Dental Plan”) to Employees. The Dental 

Plan is administered by Delta Dental of California (the “Dental Plan Administrator”). The total cost 

of the Dental Plan is approximately $2,700,000 per month, of which approximately $80,000 is covered 

by Employee contributions. 

The Debtors self-insure their portion and make payments on account of claims asserted under 

the Dental Plan (the “Dental Claims”) on a weekly basis. Dental Claims are typically submitted 

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approximately twenty (20) days after the relevant expense is incurred, and, thus, the Debtors are unable 

to ascertain with certainty the prepetition amounts due and outstanding on account of the Dental 

Claims. Based on historical trends, the Debtors estimate that, as of the Petition Date, they owe 

approximately $2,100,000 on account of prepetition Dental Claims, all of which will come due during 

the Interim Period. 

In addition, the Debtors pay administrative fees of approximately $120,000 per month to the 

Dental Plan Administrator. The Debtors estimate that, as of the Petition Date, they owe the Dental 

Plan Administrator approximately $120,000 in such administrative fees, all of which will come due 

during the Interim Period. 

c) Vision Plan 

The Debtors offer vision insurance coverage (the “Vision Plan”) through a plan administered 

by Vision Service Plan, Inc. (the “Vision Plan Administrator”). The Debtors spend approximately 

$300,000 per month on claims asserted under the Vision Plan (collectively, the “Vision Claims”). The 

Debtors make payments on account of the Vision Claims on a monthly basis. Vision Claims are 

typically submitted approximately fifteen (15) days after the relevant expense is incurred, and, thus, 

the Debtors are unable to ascertain with certainty the prepetition amounts due and outstanding on 

account of the Vision Claims. Based on historical trends, the Debtors estimate that, as of the Petition 

Date, they owe approximately $240,000 on account of prepetition Vision Claims, all of which will 

come due during the Interim Period. 

The Debtors pay administrative fees of approximately $30,000 per month to the Vision Plan 

Administrator. The Debtors estimate that, as of the Petition Date, they owe approximately $30,000 in 

such administrative fees, all which will come due during the Interim Period. 

d) Flexible Spending Accounts 

In addition to offering the medical benefits described above, the Debtors offer Employees the 

option to enroll in certain flexible spending accounts, including a healthcare flexible spending account 

and a dependent care flexible spending account (collectively, the “Flexible Spending Accounts”). 

Participating Employees can make pre-tax payroll contributions (the “Flexible Spending Account 

Contributions”) to the Flexible Spending Accounts up to the maximum amounts permitted by the 

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Internal Revenue Service. Employees then may use the proceeds of Flexible Spending Accounts to 

cover the cost of eligible health care expenses incurred by such Employees and/or their dependents, 

depending on the Flexible Spending Account in which they are enrolled. Employees who participate 

in the Flexible Spending Accounts may use such proceeds by, among other means, utilizing a 

designated debit card provided to participating Employees or submitting claims for reimbursement. 

The Debtors withhold approximately $1,000,000 per month from Employees’ compensation on 

account of the Flexible Spending Account Contributions and transfer such amounts to either Wage 

Works, Inc. or Kaiser Foundation Health Plan Inc. SF (together, the “Flexible Spending Account 

Administrators”), depending on the Medical Plan in which an Employee is enrolled. As of the 

Petition Date, the Debtors estimate that they currently are withholding approximately $1,000,000 on 

account of Flexible Spending Account Contributions. Pursuant to the Employee Wages and Benefits 

Motion, the Debtors seek authority to transfer all withheld amounts and to continue to withhold 

amounts on account of the Flexible Spending Account Contributions and to transfer such amounts to 

the Flexible Spending Account Administrators in the ordinary course of business. 

The Debtors pay administrative fees of approximately $30,000 per month to the Flexible 

Spending Account Administrators. The Debtors estimate that, as of the Petition Date, they owe 

approximately $30,000 in such administrative fees, all of which will come due during the Interim 

Period. 

3. Retirement Programs 

The Debtors offer various programs to help current Employees and retired Employees 

(“Retirees”) to plan for and manage their retirements (collectively, the “Retirement Plans”). The 

Retirement Plans are comprised of the Pension Plan, 401(k) Plan, Retiree Health Care Plan, the 

Retirement Excess Benefit Plan, the Supplemental Retirement Savings Plan, and Postretirement Life 

Insurance Plan (each as defined below).12 Participation in particular Retirement Plans is based on a 

number of criteria, including the nature of an Employee’s job responsibilities and duties, whether an 

 

12 The Debtors offer Supplemental Executive Retirement Plans (“SERPs”) and a Defined Contribution 

Executive Supplemental Retirement Plan (“DC-ESRP”) for officers and certain key employees of the 

Debtors and their subsidiaries. The Debtors are not requesting authority at this time to make any 

payments pursuant to the SERPs and DC-ESRP. 

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Employee is a Represented Employee, and an Employee’s date of hire and length of service. Each of 

the Retirement Plans is discussed in further detail below. Pursuant to the Employee Wages and 

Benefits Motion, the Debtors seek authority to pay all obligations in connection with the Retirement 

Plans in the ordinary course of business, including all prepetition amounts on account of such 

obligations, and to continue to administer the Retirement Plans in the ordinary course of business. 

a) Qualified Defined Benefit Pension Plan 

The Utility provides a tax-qualified defined benefit plan for the benefit of all of the Debtors’ 

Employees and Retirees (the “Pension Plan”). The assets in the Pension Plan are not assets of the 

Debtors’ estates. Participants in the Pension Plan receive a fixed pension benefit upon retirement 

(collectively, the “Pension Obligations”), in the form of a final average pay benefit or a cash balance 

benefit. An Employee’s final average pay benefit is calculated by utilizing formulas that reflect, 

among other things, an Employee’s length of service, pay, age upon retirement, and the date when 

retirement benefits begin. The cash balance benefit was added to the Pension Plan on January 1, 

2013. Employees hired on or after that date participate in the cash balance benefit and Employees 

hired prior to that date were given a one-time opportunity to irrevocably select to switch from the final 

average pay benefit to the cash balance benefit on a go-forward basis. For the cash balance benefit, on 

the last day of each year (or on the date of benefit commencement, if earlier), an Employee’s cash 

balance account is credited with pay credits based on a point system of age plus service and eligible 

pay during the year. At the end of each calendar quarter, the account is credited with interest credits, 

based on an average of the 30-year Treasury rates for the three months before the calendar quarter. 

Additionally, a cash balance participant may elect a lump-sum payout that is eligible for rollover into 

an Individual Retirement Account or other tax-advantaged employer plan. Cash balance participants 

may elect to receive their vested benefit when they leave employment, regardless of whether they have 

attained age 55.13 Approximately 23,000 Employees and 4,000 former Employees are enrolled in the 

Pension Plan, and approximately 26,000 Retirees, previously-deferred pensioners, and beneficiaries 

receive benefits in connection with the Pension Plan. To fund the Pension Obligations, the Debtors 

 

13 The availability of the lump sum may be impacted by the chapter 11 filings. 

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contribute, on a quarterly basis, amounts (collectively, the “Pension Contributions”) into a trust (the 

“Pension Trust”), from which the Pension Obligations are satisfied. 

On average, the Debtors make Pension Contributions to the Pension Trust in the amount of 

approximately $81,750,000 each fiscal quarter. In addition, the Debtors pay for certain administrative 

costs associated with the Pension Plan, such as actuarial studies (the “Pension Administrative 

Costs”). These costs are approximately $200,000 per year. On average, approximately $62,000,000 is 

paid each month from the Pension Trust on account of Pension Obligations to eligible participants. As 

of the Petition Date, the Debtors estimate that there will be no amounts outstanding with respect to the 

Pension Obligations, excluding Pension Administrative Costs. 

As of the Petition Date, the Debtors are current with respect to the Pension Contributions and 

the Debtors intend to make future quarterly Pension Contributions as and when they become payable. 

The Debtors estimate that outstanding Pension Administrative Costs relating to the prepetition 

period are in the amount of approximately $20,000, which they seek authority to pay pursuant to the 

Employee Wages and Benefits Motion 

b) 401(k) Plan 

The Debtors maintain a qualified defined contribution savings plan for the benefit of most of 

their Employees (the “401(k) Plan”), which is designed to meet the requirements of sections 401(a) 

and 401(k) of title 26 of the United States Code. The 401(k) Plan is administered by Fidelity 

Management Trust Company (the “401(k) Plan Administrator”). Approximately 22,000 active 

Employees are enrolled in the 401(k) Plan. Employees who are enrolled in the 401(k) Plan contribute 

approximately $25,000,000 per month in the aggregate to the 401(k) Plan, which contributions are 

withheld by the Debtors from such Employees’ compensation. The Debtors “match” Employees’ 

contributions by contributing $0.75 per dollar that an Employee contributes, with such “matches” 

capped at up to either 6% or 8% of an Employee’s gross pay, depending on certain characteristics of 

the Employee, such as an Employee’s date of hire, Union membership, and their participation in the 

Pension Plan (the “401(k) Matching Obligations”). 

The Debtors pay approximately $9,100,000 each month on account of 401(k) Matching 

Obligations. As of the Petition Date, the Debtors estimate that they owe approximately $1,400,000 on 

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account of 401(k) Matching Obligations relating to the prepetition period, all of which will come due 

during the Interim Period. 

In addition, the Debtors pay administrative fees and independent fiduciary fees of 

approximately $140,000 per month to the 401(k) Plan Administrator and Gallagher Fiduciary 

Advisors, LLC (“Gallagher”). The Debtors estimate that, as of the Petition Date, they owe 

approximately $140,000 in such administrative fees, all of which will come due during the Interim 

Period. In addition, the Debtors pay an annual fee of approximately $90,000 to Financial Engines, 

which provide employees with access to additional financial planning tools, information, and services 

to better manage their 401(k) investments. The Debtors estimate that, as of the Petition Date, there 

will be no amounts outstanding on account of fees to the Financial Engines. Pursuant to the Employee 

Wages and Benefits Motion, the Debtors seek authority to pay all amounts withheld from Employees’ 

paychecks as contributions to the 401(k) Plan, and all outstanding prepetition 401(k) Matching 

Obligations and administrative fees. 

c) Retiree Health Care Plans 

The Debtors offer medical and prescription-drug insurance coverage (the “Retiree Health 

Care Plans”) to Retirees who satisfy age and service requirements, which coverage is administered by 

the Medical Plan Administrators, as well as Blue Cross of California, Inc. d/b/a Anthem Blue Cross 

(“Anthem”) and Kaiser Foundation Health Plan, Inc. (“Kaiser”), Blue Shield of California, and 

Health Net. Certain prescription drug benefits are administered by Express Scripts Holding Company 

(“Express Scripts”), and certain mental health benefits are administered by Beacon. Some of the 

Debtors’ Obligations under the Retiree Health Care Plans are self-insured, while others are covered by 

insurance as to which the Debtors pay the premiums. The total cost of the Retiree Health Care Plans is 

approximately $12,500,000 per month, of which approximately $10,000,000 is covered by Retiree 

contributions, which is deducted from their pension benefit payments. To fund their self-insured 

portion of the Retiree Health Care Plans, the Debtors contribute, on an annual basis, amounts into a 

trust (the “Postretirement Medical Plan Trust”), from which the costs of the Retiree Health Care 

Plans are paid. In 2018, the Debtors contributed approximately $28,300,000 into the Postretirement 

Medical Plan Trust. The vast majority of the Debtors’ contributions to the Postretirement Medical 

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Plan Trust are made at the end of the calendar year. The money contributed by the Debtors to the 

Postretirement Medical Plan Trust, the Postretirement Life Insurance Plan Trust, and the Utility LongTerm Disability Plan Trust (as discussed and defined below), is received from ratepayers for the 

specific purpose of funding the trusts. It is my understanding based upon discussions with counsel that 

these trusts are segregated funds that do not constitute assets of the Debtors’ estates. 

The medical and prescription-drug claims submitted under the Retiree Health Care Plans 

(collectively, the “Retiree Medical Claims”) are funded from the Postretirement Medical Plan Trust. 

Payments are made from the Postretirement Medical Plan Trust on account of the Retiree Medical 

Claims on a weekly basis. Retirees typically submit Retiree Medical Claims thirty-seven (37) days 

after incurring the relevant expenses, and thus the Debtors are unable to ascertain with certainty the 

prepetition amounts due and outstanding on account of the Retiree Medical Claims. In addition, as 

stated, the Debtors pay insurance premiums on account of some of the Retiree Health Care Plans 

(collectively, the “Retiree Health Care Premiums”), which are also funded from the Postretirement 

Medical Plan Trust. Based on historical trends, the Debtors estimate that, as of the Petition Date, 

approximately $13,900,000 is outstanding on account of prepetition Retiree Medical Claims and the 

Retiree Health Care Premiums, $12,500,000 of which will come due during the Interim Period and all 

of which will be funded by the funds in the Postretirement Medical Plan Trust. As of the Petition 

Date, the Debtors’ contributions to the Postretirement Medical Plan Trust and insurance premiums 

related thereto are current. 

d) Retirement Excess Benefit Plan 

The Debtors provide certain Retirees and Employees whose pension benefit under the Pension 

Plan is reduced by reason of the application of Section 415 and/or Section 401(a)(17) of the Internal 

Revenue Code, the ability to participate in a retirement excess benefit plan (the “Retirement Excess 

Benefit Plan”). The Retirement Excess Benefit Plan provides participants with the monthly benefit 

which would be payable under the Pension Plan if the limitation under Section 415 and/or Section 

401(a)(17) of the Internal Revenue Code had not applied. Currently, ten (10) Retirees (none of whom 

were officers) are receiving benefits under this plan in an aggregate monthly amount of $6,000. 

During the Interim Period, $6,000 will become payable to such Retirees. 

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e) Supplemental Retirement Savings Plan 

The Debtors also maintain Supplemental Retirement Savings Plans (“SRSP”) for the benefit of 

officers and other key Employees. The SRSPs are unfunded deferred compensation plans, which both 

(1) permit participants to defer certain of their compensation and earn investment returns on those 

deferred amounts, and (2) allow participants to receive matching amounts that were elected under the 

401(k) Plan, but were not provided due to tax code limitations. The SRSP is funded primarily by 

eligible Employee contributions and by certain amounts funded by the Debtors. The SRSP has 

approximately 300 active Employee participants (the “Active Participants”), and approximately 90 

inactive participants, comprised largely of Retirees or those who have been terminated without cause 

(the “Inactive Participants”). Under the SRSP, most distributions are not made until seven months 

after a participant retires, although minimal distributions may be made while the participant is active. 

Pursuant to the Employee Wages and Benefits Motion, the Debtors are not seeking authority to make 

any distributions with respect to the SRSP to currently Inactive Participants. Additionally, no further 

funds are being contributed to the SRSP by the Debtors. 

The balances in the SRSP as to Active Participants aggregate approximately $29,000,000, of 

which 85% represents funds contributed directly by the Active Participants. Under the SRSP, no 

amounts will be paid to Active Participants in 2019 unless any of such participants retire. Assuming 

the same level of retirements of Active Employees that occurred in 2018, the Debtors estimate that an 

aggregate of approximately $2,000,000 would be distributed to Active Employees who retire in 2019, 

or an average of approximately $60,000 per person. Based on the fact that 85% of the funds in the 

SRSP attributable to Active Employees constitutes their contributions, approximately $51,000 of such 

average distribution would be comprised of Active Employee contributions. The Debtors seek 

authority pursuant to the Employee Wages and Benefits Motion to continue the SRSP only for Active 

Employees on the Petition Date and to make all distributions thereunder. Because the Active 

Employees are an integral part of the Debtors’ ongoing operations and because most of the funds to be 

distributed under the SRSP consist of contributions made by the Active Employees, the Debtors 

believe the relief requested is fair and appropriate. In addition, the Debtors pay for certain 

administrative costs associated with the SRSP (the “Retirement Plan Administrative Costs”). These 

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costs are approximately $200,000 per quarter. As of the Petition Date, the Debtors estimate that they 

owe approximately $200,000 on account of Retirement Plan Administrative Costs, all of which will 

come due during the Interim Period. 

f) Postretirement Life Insurance Plan 

The Debtors provide life insurance coverage (the “Postretirement Life Insurance Plan”) to 

Retirees who satisfy an age requirement through Metropolitan Life Insurance Company (the “Life 

Insurance Administrator”). All Employees of the Debtors and certain subsidiaries are eligible to 

receive a life insurance coverage benefit under the Postretirement Life Insurance Plan. For eligible 

Retirees who have more than fifteen (15) years of service, the Postretirement Life Insurance Plan 

provides coverage in an amount equal to twelve (12) months of a Retirees’ base salary prior to 

retirement. Coverage for certain of these Retirees, due to their position at the time of their retirement 

or the date on which they were promoted to a management position, is capped at $50,000. Separately, 

coverage for a small number of these Retirees, who were eligible to make an election prior to 2005, is 

payable seven months after retirement as a cash lump sum, rather than as life insurance. For eligible 

Retirees who have less than fifteen (15) years of service, the Postretirement Life Insurance Plan 

provides coverage of $8,000. To fund the insurance premiums for the coverage, the Debtors 

contributed approximately $8,000 into a trust (the “Postretirement Life Insurance Plan Trust”). In 

addition, in 2018, the Debtors paid directly approximately $3,200,000 in costs in the form of life 

insurance premiums for coverage over $50,000 and life insurance coverage converted to a lump sum 

payment at retirement per the election of eligible Employees, and fiduciary and compliance costs. As 

of the Petition Date, the Debtors estimate that approximately $10,000 is owed in administrative costs 

with respect to the Postretirement Life Insurance Plan related to the prepetition period, all of which 

will come due during the Interim Period. It is my understanding based upon discussions with counsel 

that the Postretirement Life Insurance Plan Trust is a separate trust and is not an asset of the Debtors’ 

estates. Absent further order of the Court, no life insurance coverage will be converted to a lump sum 

payment at retirement nor will any outstanding lump sum payments be made. 

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4. Life and Disability Insurance Programs 

The Debtors offer active Employees life insurance and various programs to aid Employees 

during periods in which they are physically unable to perform their duties (collectively, the “Life and 

Disability Insurance Programs”), including (i) the Short-Term Disability Plans, (ii) the Supplemental 

Wage Continuation Plans, (iii) the Long-Term Disability Plan, (iv) the Supplemental Industrial Injury 

Plan, (v) the Life Insurance Plan, (vi) the AD&D Insurance Plan, (vii) the Voluntary AD&D Plan, and 

(viii) the Business Travel Insurance Plan (each as defined below). Pursuant to the Employee Wages 

and Benefits Motion, the Debtors seek authority to pay all obligations in connection with the Life and 

Disability Insurance Programs in the ordinary course of business, including all prepetition amounts due 

on account of such programs, and to continue to administer the Life and Disability Insurance Programs 

in the ordinary course of business. Each of the Life and Disability Insurance Programs is described in 

further detail below. 

The Utility Long-Term Disability Plan, Supplemental Wage Continuation Benefits, Voluntary 

Plan (each as defined below), and the leave of absence plans are administered by Sedgwick Claims 

Management Services, Inc. (the “Leave of Absence and Disability Plan Administrator”). The 

Debtors pay administrative fees of approximately $280,000 per month to the Leave of Absence and 

Disability Plan Administrator. As of the Petition Date, the Debtors estimate that approximately 

$280,000 is owed to the Leave of Absence and Disability Plan Administrator related to the prepetition 

period, all of which will come due during the Interim Period. 

a) Short-Term Disability Plans 

Since January 1, 2018, the Utility has provided short-term disability payments and paid family 

leave benefit payments to its eligible Employees located in California pursuant to the Voluntary 

Disability and Paid Family Leave Benefit Plan (the “Voluntary Plan”). The Utility’s Voluntary Plan 

is an alternative to the assistance that would otherwise be provided to Utility Employees by the 

California State Disability Insurance (SDI) plan (the “State Plan” and together with the Voluntary 

Plan, the “Short-Term Disability Plans”) and is provided to Employees in the event they become 

disabled due to a short-term illness or must take leave for certain familial reasons (“Paid Family 

Leave”). More than 85% of the Utility’s eligible workforce has elected to be covered under the 

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Voluntary Plan, including both non-Represented and Represented Employees. Employees also have 

the option to remain covered by the State Plan. There is also an assessment fee imposed by the 

California Employment Development Department to be paid by employers for administrative costs 

arising out of the Voluntary Plan. This fee is paid quarterly and calculated based on taxable wages for 

Employees covered under the Voluntary Plan. 

Both the Voluntary Plan and State Plan are funded by mandatory Employee contributions that 

are withheld from Employees’ paychecks. For both of the Short-Term Disability Plans, the Debtors 

withhold 1% of Employees’ taxable earnings, up to a specified maximum (set at $1,149.67 for 2018 

and $1,183.71 for 2019). Employees of the Utility contributed approximately $25,000,000 to the 

Voluntary Plan in 2018. Employees covered under the State Plan contributed approximately $820,000 

to the State Plan in 2018. With the exception of the case of a shortfall under the Voluntary Plan (as 

described below), all benefits under the Short-Term Disability Plans are funded through Employee 

contributions, which are deducted from Employee payroll and contributed to either the State Plan trust 

or the Voluntary Plan trust. 

The State Plan pays disability and paid family benefits of 60-70% up to a specified maximum 

weekly benefit. The Voluntary Plan provides the greater of (i) 55-60% of base pay without a capped 

weekly benefit amount or (ii) the State Plan weekly benefit amount. Employees may be eligible for up 

to 52 weeks of disability benefits under the Voluntary Plan or the State Plan. For Employees of the 

Utility, all Sick Time must be exhausted prior to eligibility for the disability benefits under the ShortTerm Disability Plans. In addition, under the State Plan, eligible Employees may receive up to six 

weeks of Paid Family Leave benefits within a 12-month period. Under the Voluntary Plan, eligible 

Employees may receive up to eight weeks of Paid Family Leave benefits within a 12-month period. 

To the extent there are not sufficient amounts contributed to the Voluntary Plan from Employee 

contributions to compensate an Employee if they become disabled due to a short-term illness or are on 

Paid Family Leave or to cover the assessment fee paid to the State, the Utility will fund the shortfall. 

Employee contributions to the Voluntary Plan in 2018 did not fully cover the disability and Paid 

Family Leave benefits paid by the Voluntary Plan or the assessment fee paid to the State. The Utility 

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funded the shortfall, which to date has totaled $4,000,000. As of the Petition Date, the Debtors 

estimate that an additional approximately $620,000 is owed in connection with funding the shortfall 

for the Voluntary Plan related to the prepetition period, all of which will come due during the Interim 

Period. 

All California PG&E Corp. Employees participate in the State Plan. PG&E Corp. also 

provides a separate supplemental short-term disability program (the “Corporation Short-Term 

Disability Plan”) for its Employees. The Corporation Short-Term Disability Plan is insured by the 

Standard Insurance Company. PG&E Corp. pays the premiums on such insurance monthly. The total 

cost in 2018 was approximately $20,000. As of the Petition Date, the Debtors estimate that they owe 

approximately $1,000 on account of the Corporation Short-Term Disability Plan, all of which will 

come due during the Interim Period. 

PG&E Corp. also provides supplemental disability benefits (“PG&E Corp. Short-Term 

Supplemental Benefits”) if the Corporation Short-Term Disability Plan benefit of 66 2/3% of base 

pay is limited by the maximum insured benefit. These supplemental benefits are not insured benefits 

and are paid for by PG&E Corp directly. No payments were made on account of PG&E Corp. ShortTerm Supplemental Benefits in 2018 and no amounts are currently outstanding. 

In addition, the PG&E Corp. provides a supplemental paid family leave payment (“Paid 

Family Leave Wage Continuation”) which increases the six weeks of State Plan benefit payments up 

to a total of 100% of base pay, fully taxable, within a 12-month period. Employees may be eligible for 

an additional two weeks of Paid Family Leave Wage Continuation benefits for up to a total of eight 

weeks of Paid Family Leave benefits within a 12-month period. No payments were made on account 

of Paid Family Leave Wage Continuation in 2018 and no amounts are currently outstanding. 

Beginning on July 1, 2019, contributions to fund a new paid leave program through the District 

of Columbia will be withheld from Employees’ paychecks who work in the District of Columbia. The 

contributions are made by covered employers who are required to contribute quarterly an amount equal 

to 0.62% of the total wages of each of its covered employees to implementation of the universal paid 

leave. Covered Employees become eligible for benefits starting in 2020. 

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b) Supplemental Wage Continuation Plans 

The Utility provides eligible Employees who are covered under the Voluntary Plan with 

additional benefits to increase the percentage of base pay that such Employees receive when disabled 

due to a short-term illness or when on Paid Family Leave. 

For California non-Represented and ESC-Represented eligible Employees covered by the 

Voluntary Plan, the Utility provides a supplemental disability payment (the “Supplemental Wage 

Continuation”) which increases the benefit payment from 60% up to a total benefit of 70% of base 

pay, after tax. The Utility provides eligible non-Represented and ESC-Represented Employees who do 

not work in California supplemental wage continuation benefits and may supplement any state 

disability or paid family leave program for which the Employee may be eligible. The IBEW and SEIU 

Represented Employees are not eligible for Supplemental Wage Continuation. 

In addition, for Employees in California covered in the Voluntary Plan, the Utility provides a 

supplemental Paid Family Leave payment (“Paid Family Leave Wage Continuation” and together 

with the Supplemental Wage Continuation, the “Supplemental Wage Continuation Plans”), which 

increases the benefit payments from 60% up to a total of 100% of base pay for up to eight weeks 

within each 12-month period. 

Amounts payable under the Supplemental Wage Continuation Plans are paid for by the Utility. 

The total annual cost of the Supplemental Wage Continuation Plans is approximately $10,400,000. As 

of the Petition Date, the Utility estimates that it owes approximately $860,000 on account of the 

Supplemental Wage Continuation Plans, all of which will come due during the Interim Period and 

which is included in the Compensation Obligations described above. 

c) Long-Term Disability Plans 

The Debtors provide long-term disability benefits, including partial income replacement and 

continued medical and life insurance coverage (the “Long-Term Disability Plans”), to certain of their 

Employees in the event that they become disabled due to an accident or a long-term illness. The 

Utility and PG&E Corp. provide separate Long-Term Disability Plans for their Employees 

(respectively, the “PG&E Corp. Long-Term Disability Plan” and the “Utility Long-Term 

Disability Plan”). 

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The PG&E Corp. Long-Term Disability Plan is insured and administered by The Standard 

Insurance Company (the “PG&E Corp. Long-Term Disability Plan Administrator”). PG&E Corp. 

pays the full cost of all premiums for the PG&E Corporation Long-Term Disability Plan monthly. The 

total cost in 2018 was approximately $25,000. Employees may be eligible for benefits after six (6) 

months of disability (the “PG&E Corp. Long-Term Disability Contributions”). PG&E Corp. also 

provides supplemental disability benefits (“PG&E Corp. Long-Term Supplemental Benefits”) if the 

PG&E Corp. Long-Term Disability Plan benefit of 66 2/3% of base pay is limited by the maximum 

insured benefit. These supplemental benefits are not insured benefits and are paid for by PG&E Corp. 

As of the Petition Date, PG&E Corp. estimates that it owes approximately $2,000 on account of the 

PG&E Corp. Long-Term Disability Plan insurance premiums, all of which will come due during the 

Interim Period. Additionally, P&E Corp. estimates that there are no amounts outstanding on account 

of PG&E Corp. Long-Term Supplemental Benefits. 

The Utility Long-Term Disability Plan provides that an eligible Employee may receive 70% of 

base pay during the period of disability for a maximum of two (2) years (unless the Employee qualifies 

for Social Security Disability Insurance). An Employee’s benefit amount is offset by any benefits the 

Employee receives from government programs. To fund the payments made to eligible Employees 

under the Utility Long-Term Disability Plan, the Utility contributes an annual amount of 

approximately $32,000,000 into a trust, from which the benefits are paid (the “Utility Long-Term 

Disability Trust”). Payments are made out of the Utility Long-Term Disability Trust on account of 

claims under the Utility Long-Term Disability Plan on a weekly basis (the “Long-Term Disability 

Claims”). In 2018, approximately $45,400,000 was paid from the Long-Term Disability Trust on 

account of Long-Term Disability Claims, including certain administrative costs associated with the 

Utility Long-Term Disability Plan. Based on historical trends, the Debtors estimate that, as of the 

Petition Date, approximately $3,800,000 is outstanding on account of prepetition Long-Term 

Disability Claims, all of which will come due during the Interim Period and all of which will be paid 

from funds in the Utility Long-Term Disability Trust. As discussed above, the moneys contributed by 

the Utility to the trust are received from ratepayers for the specific purpose and the Utility has made 

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the entire contribution for 2018. In addition, as stated above, it is my understanding based upon 

discussions with counsel that the Utility Long-Term Disability Trust is a separate trust and is not an 

asset of the Debtors’ estates. 

d) Supplemental Industrial Injury Plan 

The Debtors provide supplemental insurance coverage (the “Supplemental Industrial Injury 

Plan”) to Employees, which provides Employees with a source of income—above Employees’ income 

received in connection with workers’ compensation coverage—in the event that they sustain an injury 

or illness on the job. Depending on the Employee’s job title and the date of the onset of his or her 

injury or illness, when combined with other benefits, an eligible Employee may receive between 50% 

and 85% of his or her basic weekly wage rate. The Debtors bear the entire cost of the Supplemental 

Industrial Injury Plan. 

The Debtors spend approximately $100,000 per month on claims asserted under the 

Supplemental Industrial Injury Plan (collectively, the “Supplemental Industrial Injury Claims”). 

The Debtors make payments on account of the Supplemental Industrial Injury Claims on a daily basis. 

Based on historical trends, the Debtors estimate that, as of the Petition Date, they owe approximately 

$100,000 on account of prepetition Supplemental Industrial Injury Claims, all of which will come due 

during the Interim Period. 

e) Life Insurance Plan 

The Debtors provide life insurance coverage (the “Life Insurance Plan”) to Employees 

through the Life Insurance Administrator. The Life Insurance Plan provides the vast majority of 

Employees with $10,000 in coverage, although some Employees have selected higher coverage limits 

under the Life Insurance Plan, with the cost of the coverage over $10,000 paid by the Employees 

through payroll deductions. The Debtors withhold approximately $800,000 per month from Employee 

paychecks for those Employees who have selected the higher coverage limit. The total annual cost to 

the Debtors of the Life Insurance Plan is approximately $450,000, all of which is paid by the Debtors 

in the form of premiums remitted to the Life Insurance Administrator (collectively, the “Life 

Insurance Obligations”). Premiums for the Life Insurance Plan are paid monthly. As of the Petition 

Date, the Debtors estimate that they owe approximately $40,000 on account of Life Insurance 

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Obligations, all of which will come due during the Interim Period. The Debtors also seek by the 

Employee Wages and Benefits Motion to remit all amounts withheld from Employee paychecks, which 

have not yet been remitted. 

f) AD&D Insurance Plan 

The Debtors provide accidental death and dismemberment insurance coverage (the “AD&D 

Insurance Plan”) to Employees through the Life Insurance Administrator. The AD&D Insurance Plan 

provides the vast majority of Employees with $10,000 in coverage; certain members of the Debtors’ 

management team receive $250,000 in coverage. The total annual cost of the AD&D Insurance Plan is 

approximately $80,000, all of which is paid by the Debtors in the form of premiums remitted to the 

Life Insurance Administrator (collectively, the “AD&D Insurance Obligations”). AD&D Insurance 

Obligations are paid monthly. As of the Petition Date, the Debtors estimate that they owe 

approximately $10,000 on account of AD&D Insurance Obligations, all of which will come due during 

the Interim Period. 

g) Voluntary AD&D Insurance Plan 

The Debtors provide eligible Employees with the option to purchase additional accidental death 

and dismemberment coverage (the “Voluntary AD&D Insurance Plan”) through the Life Insurance 

Administrator. The benefits provided pursuant to the Voluntary AD&D Insurance Plan are funded 

entirely by amounts withheld from Employees’ paychecks and then transferred as premium payments 

to the Life Insurance Administrator. The Debtors withhold and transfer approximately $100,000 per 

month on account of the Voluntary AD&D Insurance Plan. As of the Petition Date, the Debtors 

estimate that they are currently withholding approximately $100,000 on account of the Voluntary 

AD&D Insurance Plan. Pursuant to the Employee Wages and Benefits Motion, the Debtors seek 

authority to transfer amounts withheld to the Life Insurance Administrator in the ordinary course of 

business, including all prepetition amounts withheld on account of the Voluntary AD&D Insurance 

Plan. 

h) Business Travel Insurance Plan 

The Debtors provide business travel insurance coverage (the “Business Travel Insurance 

Plan”) to Employees through Life Insurance Company of North America (the “Business Travel 

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Insurance Administrator”). In the event that an Employee suffers an injury during work-related 

travel, the Business Travel Insurance Plan provides an eligible Employee between $125,000 and 

$1,000,000 in coverage, in addition to any benefits payable from the Life Insurance Plan, the AD&D 

Insurance Plan, or the Voluntary AD&D Insurance Plan. The total annual cost of the Business Travel 

Insurance Plan is approximately $300,000, all of which is paid by the Debtors in the form of premiums 

remitted to the Business Travel Insurance Administrator (the “Business Travel Insurance 

Obligations”). The Debtors pay Business Travel Insurance Obligations on an annual basis. As of the 

Petition Date, the Debtors estimate that they owe no amounts on account of Business Travel Insurance 

Obligations relating to the prepetition period. 

5. Work/Life Benefits Programs 

The Debtors offer Employees the opportunity to participate in a number of ancillary benefits 

programs (collectively, the “Work/Life Benefits Programs”), including (i) the Employee Assistance 

Program, (ii) the Wellness Programs, (iii) Compliance Programs, (iv) the Employee Discount Program, 

(v) the Adoption Expense Reimbursement Program, (vi) the Tuition Reimbursement Program, (vii) the 

Commuter Transit Program, (viii) the Relocation Program, and (ix) the Child Care Program (each as 

defined below). Pursuant to the Employee Wages and Benefits Motion, the Debtors seek authority to 

pay all obligations in connection with the Work/Life Benefits Programs in the ordinary course of 

business, including all prepetition amounts on account of such obligations, and to continue to 

administer the Work/Life Benefits Programs in the ordinary course of business. Each of the Work/Life 

Benefits Programs is described in further detail below. 

a) Employee Assistance Program 

The Debtors offer three services through a program administered by Beacon (the “Employee 

Assistance Program”). The Debtors provide Employees with professional counseling, consultation, 

and referral services which services are intended to assist Employees to cope with issues such as 

family and relationship problems, workplace concerns, alcohol- and substance-abuse issues, depression 

and anxiety, stress, and financial or legal concerns (collectively, the “Counseling Services”). The 

Counseling Services are provided at no cost to Employees. Additionally, the Debtors offer Employees 

the opportunity to speak with licensed attorneys and certified financial advisors by telephone if such a 

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need arises. Employees can obtain cost-free advice relating to legal and financial topics such as 

alimony and child support, adoptions, living wills, powers of attorney, foreclosures, savings strategies, 

debt management, retirement planning, and credit scores. The Debtors also offer consultation services 

for Employees who need assistance locating quality child-care or elder-care services. 

The Debtors pay administrative fees of approximately $200,000 per month to Beacon to 

administer the Employee Assistance Program, which administrative fees cover the entire cost of the 

Employee Assistance Program. The Debtors estimate that, as of the Petition Date, they owe 

approximately $200,000 in such administrative fees, all of which will come due during the Interim 

Period. 

b) Wellness Programs 

The Debtors maintain programs to offer various services to Employees with the aim of 

increasing their general wellness (the “Wellness Programs”). Pursuant to the Wellness Programs, 

Employees have access to, among other things, health advocacy services, health screenings, an 

industrial athlete program, telephonic health coaching, onsite clinics in San Francisco, Fresno, San 

Carlos, and at the DCPP (the “Onsite Clinics”), an online health risk questionnaire, an online health 

and wellness portal, a tobacco cessation program, and discounted gym and health club memberships. 

The Debtors pay administrative and other fees of approximately $750,000 per month in 

connection with the Wellness Programs. As of the Petition Date, the Debtors estimate they owe 

approximately $750,000 in administrative and other fees, all of which will come due during the Interim 

Period. 

c) Compliance Programs 

As part of the Debtors’ ongoing operations, the Debtors require that certain current and all 

prospective employees be subject to random drug screening tests (the “Drug Screening Program”). 

These tests are performed pursuant to Department of Transportation requirements and the Debtors’ 

internal policies. Approximately 740 drug screens are conducted on a monthly basis. The Debtors pay 

approximately $60,000 per month to EScreen for administration of the drug screens. The Debtors 

estimate that, as of the Petition Date, they owe approximately $120,000 to EScreen related to the 

prepetition period, all of which will come due during the Interim Period. EScreen has the capacity to 

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provide screening throughout the Debtors’ service area and its service would be extremely difficult to 

replicate on a timely basis to meet Department of Transportation screening requirements. 

The Debtors also maintain a Department of Motor Vehicle Pull Notice Program, as required by 

California Vehicle Code section 1808.1 (the “DMV Compliance Program”). The DMV Compliance 

Program is administered by SambaSafety, which monitors the safety of the Debtors’ approximately 

3,500 commercial drivers on a daily basis. The Debtors pay SambaSafety approximately $4,000 per 

month. The Debtors estimate that as of the Petition Date, they owe approximately $4,000 on account of 

prepetition obligations under the DMV Compliance Program, all of which will come due during the 

Interim Period. The DMV Compliance Program is mandatory and, as a practical matter, it is not 

feasible to obtain another party to administer the program in a timeframe necessary for ongoing 

operations. 

d) Employee Discount Program 

Pursuant to tariffs adopted by the CPUC, the Utility offers its Employees and Retirees a 25% 

discount on Utility-supplied gas and electric service (the “Employee Discount Program”). Generally, 

discounts under the Employee Discount Program only may be applied to gas and electric service at a 

Utility Employee’s primary residence. Utility Employees are eligible for the Employee Discount 

Program after six months of continuous service. The Employee Discount Program is not available to 

Employees of any subsidiary of the Utility or to Employees of PG&E Corp. 

e) Adoption Expense Reimbursement Program 

The Debtors reimburse Employees for up to $2,000 of expenses related to the adoption of a 

child under the age of eighteen (18), including any stepchildren (the “Adoption Expense 

Reimbursement Program”). Expenses eligible for reimbursement under the Adoption Expense 

Reimbursement Program include legal, court, adoption agency, and placement fees; medical expenses 

for the adopted child that are not covered by a health insurance plan; and transportation expenses 

associated with picking up the adopted child. 

The Debtors spend approximately $2,000 per month on account of obligations associated with 

the Adoption Expense Reimbursement Program (the “Adoption Expense Reimbursement 

Obligations”). Employees have up to one year following the Decree of Final Adoption to submit an 

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application for reimbursement of eligible fees, and thus the Debtors are unable to ascertain with 

certainty the prepetition amounts due and outstanding on account of the Adoption Expense 

Reimbursement Obligations. Based on historical trends, the Debtors estimate that, as of the Petition 

Date, they owe approximately $2,000 on account of prepetition Adoption Expense Reimbursement 

Obligations, all of which will come due during the Interim Period. 

f) Tuition Reimbursement Program 

The Debtors reimburse Employees for expenses related to their enrollment in approved 

educational courses that are designed to assist Employees in performing their current duties and/or 

provide Employees with additional skills to advance their careers within the Debtors’ organizational 

structure (the “Tuition Reimbursement Program”). Under the Tuition Reimbursement Program, the 

Debtors reimburse Employees for 100% of their tuition, registration fees, laboratory and technology 

fees, program and academic fees, and the costs of textbooks associated with approved educational 

courses up to a maximum of between $5,250 and $8,000 per year. 

The Debtors spend approximately $300,000 per month on account of the Tuition 

Reimbursement Program. Employees have up to 90 days after they complete a course to submit a 

claim for reimbursement of relevant expenses, and thus the Debtors are unable to ascertain with 

certainty the prepetition amounts due and outstanding on account of the Tuition Reimbursement 

Program. Based on historical trends, the Debtors estimate that, as of the Petition Date, they owe 

approximately $300,000 on account of prepetition obligations associated with the Tuition 

Reimbursement Program, all of which will come due during the Interim Period. 

g) Commuter Transit Program 

The Debtors offer Employees the opportunity to purchase transit passes and pay for certain 

parking expenses with pre-tax contributions (the “Commuter Transit Program”). Under the 

Commuter Transit Program, a portion of Employees’ wages is withheld and contributed into accounts 

on a pre-tax basis. Employees then utilize the proceeds of such accounts to purchase transit passes and 

pay for certain parking expenses. Approximately 2,400 Employees participate in the Commuter 

Transit Program. 

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The Commuter Transit Program is administered by WageWorks, Inc. (the “Commuter Transit 

Program Administrator”). The Debtors pay administrative fees of approximately $10,000 per month 

to the Commuter Transit Program Administrator. The Debtors estimate that, as of the Petition Date, 

they owe approximately $10,000 in such administrative fees, all of which will come due during the 

Interim Period. Pursuant to the Employee Wages and Benefits Motion, the Debtors also seek authority 

to remit to the accounts all withheld amounts as of the Petition Date. 

h) Relocation Program 

The Debtors offer a relocation program to new or transferring Employees whose work location 

is fifty (50) miles or greater than the distance from the Employees’ former residence to the previous 

work location (the “Relocation Program”). The services that are offered under the Debtors’ 

Relocation Program, which vary based on the level of the Employee, include temporary housing, 

movement of household goods, reimbursement of certain moving related expenses, assistance with the 

sale and purchase of a home, and in some cases a lump sum cash payment. Eligible Employees have 

up to twelve (12) months to complete their relocation from the time they begin their position. In 2018, 

the Debtors paid approximately $4,400,000 under the Relocation Program. 

The Relocation Program is administered by Altair Global (the “Relocation Program 

Administrator”). The Debtors pay administrative fees of approximately $10,000 per month to the 

Relocation Program Administrator. The Debtors estimate that, as of the Petition Date, they owe 

approximately $1,400,000 on account of prepetition obligations associated with the Relocation 

Program, inclusive of administrative fees, approximately $100,000 of which will come due during the 

Interim Period. 

i) Child Care Program 

The Debtors offer on-site child care services at their San Francisco corporate headquarters for a 

limited number of Employees’ children who are between the ages of six weeks and five years (the 

“Child Care Program”). The Child Care Program is paid for in part by participating Employees and 

is subsidized by the Debtors and administered by Bright Horizons Family Solutions LLC (the “Child 

Care Program Administrator”). The Debtors withhold approximately $1,500,000 from Employee 

payroll annually in connection with the Child Care Program. The Debtors subsidy contribution is 

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approximately $1,000,000 annually. The Debtors estimate that, as of the Petition Date, they owe 

approximately $250,000 on account of the Child Care Program, which includes amounts withheld from 

payroll and the Debtors’ contributions, all of which will come due during the Interim Period. 

H. Supplemental Workforce Obligations 

As set forth above, in addition to their Employees, the Debtors use the services of 

approximately 3,200 Supplemental Workers. To compensate the Supplemental Workforce, the 

Debtors either pay members of the Supplemental Workforce directly or pay Staffing Agencies, which 

then make payments to the Supplemental Workforce on the Debtors’ behalf (collectively, the 

“Supplemental Workforce Obligations”). It is critical that the Debtors be able to continue honoring 

their obligations with respect to the Supplemental Workforce Obligations. Staying current with respect 

to the obligations owed to the Supplemental Workforce will minimize unnecessary disruption to the 

Debtors’ businesses. This is particularly important, given that the Debtors heavily rely on members of 

the Supplemental Workforce to perform specialized tasks that, for various reasons, the Employees 

cannot perform on their own in connection with the Debtors’ operation and maintenance of their 

generation units, electric transmission and distribution and natural gas facilities. For example, 

members of the Supplemental Workforce perform tasks for which Employees otherwise lack the 

training or licensure, as well as tasks for which there are a shortage of Employees, including 

maintenance and repair work on transmission lines following weather-related events. If the Debtors 

fail to pay the Supplemental Workforce Obligations, members of the Supplemental Workforce may 

refuse to continue to perform services for the Debtors. Thus, failure to make timely payments on 

account of the Supplemental Workforce Obligations could interrupt the Debtors’ ability to provide 

electric and natural gas service to their customers in northern and central California. 

The Debtors average approximately $180,000,000 in annual aggregate Supplemental 

Workforce Obligations. As of the Petition Date, the Debtors estimate that they owe approximately 

$35,000,000 on account of Supplemental Workforce Obligations relating to the prepetition period, 

$25,000,000 of which will come due during the Interim Period. Pursuant to the Employee Wages and 

Benefits Motion, the Debtors seek authority to pay the Supplemental Workforce Obligations in the 

ordinary course of business, including all prepetition amounts on account of such obligations. 

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Accordingly, I respectfully submit that it is an exercise of sound business judgment and necessary to 

facilitate a successful reorganization to pay the Supplemental Workforce Obligations. 

Payment of the Prepetition Employee Obligations, including the Employee Program 

Administrative Obligations, is an exercise of sound business judgment and necessary to facilitate a 

successful reorganization. The Employees—many of whom possess unique skills, licenses, or 

certifications—are vital to the continued operation of the Debtors’ businesses and vital to the success 

of the Chapter 11 Cases. The Debtors believe that the majority of the Employees rely exclusively on 

their compensation and, as applicable, the benefits provided under the Employee Wage and Benefits 

Programs to satisfy their daily living expenses and other basic needs such as access to health, dental, 

and vision care coverage. Consequently, Employees will be exposed to significant financial 

difficulties if the Debtors are not permitted to honor obligations with respect to the Prepetition 

Employee Obligations. Moreover, honoring the Prepetition Employee Obligations and continuing the 

Employee Wage and Benefits Programs will help maintain morale and minimize the adverse effect of 

the commencement of these Chapter 11 Cases on the Debtors’ ongoing business operations, as well as 

their relationships with the Unions. The failure to honor the Prepetition Employee Obligations could 

lead to turnover, attrition, and instability at this critical time in the Chapter 11 Cases, which is a risk 

that is especially consequential in these Chapter 11 Cases due to the highly specialized nature of many 

of the duties that the Employees perform and the critical nature of the Debtors’ business as the sole 

utility provider to approximately 16 million customers. 

The Debtors also believe that it is an exercise of sound business judgment and necessary to 

facilitate a successful reorganization to pay the Employee Program Administrative Obligations, 

including administrative costs and expenses owed to the Payroll Maintenance Vendors, which provide 

compensation and other benefit-related services and products and which have institutional knowledge 

of the Debtors’ operations that would be difficult and costly to replace. Absent the relief requested the 

Debtors would be unable to maintain their Employee Wage and Benefits Programs in an efficient and 

cost-effective manner. 

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The Debtors cannot risk the damage to their businesses, and the potential disruption of their 

ability to provide essential utility service to 16 million Californians, that would follow any decline in 

Employee morale and the resulting attrition that likely would occur if the Debtors are not granted the 

relief requested herein. Accordingly, the Debtors respectfully request that the Court authorize them to 

pay the Prepetition Employee Obligations including the Employee Program Administrative 

Obligations, and continue the Employee Wage and Benefits Programs in the ordinary course of 

business, consistent with past practice. 

Accordingly, I respectfully submit that the relief requested in the Employee Wages and 

Benefits Motion is necessary and appropriate, is in the best interests of their estates and all parties in 

interest, is necessary to avoid immediate and irreparable harm to the Debtors, and should be granted. 

V. MOTION OF DEBTORS PURSUANT TO 11 U.S.C. §§ 105(a), 363(b), AND 507(a)(7) 

AND FED. R. BANKR. P. 6003 AND 6004 FOR INTERIM AND FINAL ORDERS 

(I) AUTHORIZING DEBTORS TO (A) MAINTAIN AND ADMINISTER CUSTOMER

PROGRAMS, INCLUDING PUBLIC PURPOSE PROGRAMS, AND (B) HONOR ANY 

PREPETITION OBLIGATIONS RELATING THERETO; AND (II) AUTHORIZING 

FINANCIAL INSTITUTIONS TO HONOR AND PROCESS RELATED CHECKS AND 

TRANSFERS (THE “CUSTOMER PROGRAMS MOTION”) 

Pursuant to the Customer Programs Motion, the Debtors request interim and final authority, in 

the ordinary course of business and consistent with past practices, to (a) maintain and administer their 

Customer Programs (as defined below) including the (i) Deposit and Reimbursement Programs (as 

defined below), (ii) Public Purpose Programs (as defined below), (iii) Environmental Cleanup 

Programs (as defined below), (iv) Third-Party Programs (as defined below), (v) GHG Credit Programs 

(as defined below), and (vi) Customer Support Programs (as defined below), and (b) pay and otherwise 

honor all obligations relating to each of the foregoing, whether arising prior to, or after, the Petition 

Date, as necessary and appropriate in the Debtors’ business judgment. Additionally, the Debtors seek 

authority to issue new postpetition checks or effect new electronic funds transfer requests on account 

of such obligations to replace any prepetition checks or electronic funds transfer requests that may be 

lost, dishonored, or rejected as a result of the commencement of these Chapter 11 Cases. 

As a regulated, investor-owned utility, the bulk of the Debtors’ business operations are subject 

to oversight by the CPUC. The complex regulatory and statutory framework within which the Debtors 

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operate mandates that, in the ordinary course of business, the Debtors maintain certain programs and 

initiatives for the benefit of a customer base that includes, in the aggregate, over 16 million residential 

and non-residential customers (collectively, the “Customers”). It is my understanding based on 

discussions with counsel that, as virtually all of such programs are mandated pursuant to state or local 

laws, federal law, regulations, tariffs, and regulatory decisions14 the failure of the Debtors to continue 

to honor and maintain these programs would result in noncompliance with such laws, regulations, and 

tariffs, and could materially disrupt the Debtors’ operations and jeopardize their ability to successfully 

reorganize. Additionally, applicable legislation requires that the projected costs associated with 

several of the programs discussed in the Customer Programs Motion be funded through various 

surcharges and fees collected by the Debtors through rates from Customers and earmarked to pay the 

costs of such programs. In other words, in many instances the Debtors act as a conduit for collected 

funds, which the Debtors pass through to the programs’ beneficiaries and use to pay other program 

costs. 

A. The Customer Programs. 

As set forth below, these programs include the following: (a) programs made available to and 

measures taken for Customers in the ordinary course of providing utility services including the 

Security Deposit Programs, the MLX Programs, the UG Programs, and the Other Customer Programs 

(each, as defined below) (collectively, the “Deposit and Reimbursement Programs”); (b) programs 

designed to advance public policy goals such as local and state energy efficiency, renewable energy, 

carbon reduction, and energy conservation (collectively, the “Public Purpose Programs”); (c) 

programs designed to manage the Debtors’ environmental cleanup and nuclear power plant 

decommissioning efforts (collectively, the “Environmental Cleanup Programs”); (d) third-party 

programs pursuant to which the Debtors invoice Customers on behalf of third parties that have 

 

14 Such statutes, regulations, tariffs, and decisions include, without limitation: Cal. Pub. Util. Code 

§§ 379, 380.5, 381, 381.1, 382, 399.4, 399.8, 454.55, 454.56, 890-899, 2790, and 8326; Cal. Water 

Code § 80110a; PG&E Elec. Rules 6, 7, 9G, 15, 16, 17, 17.1, 17.2, and 20; PG&E Gas Rules 6, 7, 9G, 

15, 16, 17, 17.1, and 17.2 (available at https://www.pge.com /tariffs/index.page); and California Public 

Utilities Commission Decision Nos. 94-05-020, 01-03-073, 06-01-024, 07-11-045, 08-10-036, 10-01-

022, 14-12-024, 16-01-044, 17-12-022, 18-01-004, 18-06-027, and 18-12-015. See also, the California 

Global Warming Solutions Act of 2006, Cal. Health and Safety Code §§ 38500, et. seq.; Low Carbon 

Fuel Standard (LCFS), Cal. Code of Regs. tit. 17, §§95480-95503. 

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purchased and provide electricity or natural gas to Customers using the Debtors’ transmission and 

distribution facilities (collectively, the “Third-Party Programs”); (e) greenhouse gas (“GHG”) 

emissions reduction programs required by the California Air Resources Board that provide certain 

credits to customers (collectively, the “GHG Credit Programs”); and (f) customer support programs 

pursuant to which the Debtors support Customers by engaging contractors and other third parties to 

complete certain Customer projects (collectively, the “Customer Support Programs” and, all such 

programs collectively, including the Deposit and Reimbursement Programs, the Public Purpose 

Programs, the Environmental Cleanup Programs, the Third-Party Programs, the GHG Credit Programs, 

and the Customer Support Programs collectively, the “Customer Programs,” and any and all fees, 

costs, reimbursement obligations, credits, refunds, or expenses incurred, whether prior to or after the 

Petition Date, in connection with the Customer Programs, the “Customer Program Obligations”). 

Each of the aforementioned Customer Programs is discussed in further detail below.15

1. The Deposit and Reimbursement Programs 

 The Security Deposit Programs. Pursuant to the Debtors’ security deposit 

programs, which have been approved by the CPUC and, as I understand based on 

discussions with counsel, have the effect of state law16 (the “Security Deposit 

Programs”), Customers must demonstrate sufficient creditworthiness before the 

Debtors begin providing gas and electric services. In some cases, the existence of a 

third-party guarantor or a demonstrable ability to pay will satisfy the Debtors’ 

creditworthiness requirements. In many cases, however, if a potential Customer’s 

gas and/or electric services were discontinued in the past due to non-payment, or if a 

Customer has no previous service history with the Debtors, the Debtors will require 

such Customers, pursuant to the Security Deposit Programs, to provide a security 

deposit to the Debtors before initiating service (“Security Deposit”). Certain of the 

Debtors’ nonresidential Customers provide letters of credit to the Debtors to fulfill 

such creditworthiness requirements. In the ordinary course of business, upon 

discontinuance of service and payment of all obligations owed to the Debtors, the 

Debtors return the letters of credit back to such Customers. The Debtors intend to 

continue such practice in the ordinary course. 

 

15 The Debtors are also obligated to perform under other miscellaneous customer-benefiting programs 

and services, including, without limitation, certain customer-benefiting programs and obligations 

required in connection with settlements entered into by the Debtors and approved by the Bankruptcy 

Court in their prior chapter 11 case, such as the payment of certain disputed claims from escrowed 

funds and donation of land and land conservation easements to public agencies or non-profit 

conservation organizations. The Debtors intend to continue to comply with such obligations. 

16 See PG&E Electric Rules 6 and 7; PG&E Gas Rules 6 and 7. All tariffs applicable to the Debtors 

are available at https://www.pge.com/tariffs/index.page. 

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In the ordinary course of business, the Debtors refund Security Deposits with 

accrued interest (the “Security Deposit Refunds”) to Customers if (a) a Customer 

has no more than two past-due bills during the twelve-month period after 

commencing service and/or has not had service otherwise discontinued for nonpayment during such twelve-month period; (b) a Customer voluntarily discontinues 

service; or (c) a Customer otherwise meets the Debtors’ criteria for creditworthiness 

and requests the return of a Security Deposit. Once the Debtors determine that the 

Customer is entitled to a Security Deposit Refund, the deposit is first used to satisfy 

the Customer’s outstanding bill or credited to the Customer’s open account. The 

Debtors also issue Security Deposit Refunds in the form of a check or through an 

automated clearinghouse transfer directly into a Customer’s bank account. 

Customers may also elect to receive a refund in the form of a credit to another 

account held with the Debtors. 

In 2018, the Debtors issued approximately $52.3 million in Security Deposit 

Refunds to approximately 240,000 residential Customers (on average, 

approximately $220 per identified residential Customer) and approximately $41.5 

million in Security Deposit Refunds to approximately 20,000 non-residential 

Customers. As of the Petition Date, the Debtors hold an aggregate of approximately 

$181.2 million in Security Deposits. 

Based on historical averages, the Debtors estimate that they will be obligated to 

refund or credit on a monthly basis approximately $5 million in Security Deposit 

Refunds to approximately 20,000 residential Customers (on average $250 per 

identified residential Customer) and approximately $4 million in Security Deposit 

Refunds to approximately 1,600 non-residential Customers. 

 The MLX Programs. The Debtors have mainline extension and interconnection 

(“MLX”) programs (collectively, the “MLX Programs”) approved by the CPUC 

that, as I understand based on discussions with counsel, are required by law. 

Generally speaking, an MLX is an electric line or a gas main that is typically 

installed to provide permanent gas and electricity service to premises that otherwise 

lack connection to the Debtors’ extensive natural gas and electric network.17 As 

used herein, an MLX may also be used to add load capacity to otherwise gridconnected premises in anticipation of increased energy usage or to interconnect 

customer generation facilities.18 The MLX Programs generally work in the 

following manner: either the Customer builds the MLX and pays for associated 

construction costs, or the Debtors build the MLX and the Customer provides the 

Debtors with an up-front deposit corresponding to estimated construction costs. As 

the Debtors may benefit from an MLX through Customer revenues associated with 

such MLX over time, the Debtors issue (i) payments to the Customer who built the 

MLX, and (ii) refunds to Customers who provided the Debtors with up-front 

deposits (collectively, including refunds of Engineering Advances (as defined 

below) in excess of remaining project costs, the “MLX Deposit Refunds”). The 

Debtors also receive engineering advances when Customers apply for new line 

 

17 See PG&E Electric Rules 15 and 16; PG&E Gas Rules 15 and 16. 

18 See PG&E Electric Rule 21. 

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extension or relocation projects (the “Engineering Advances”) which are applied to 

the cost of the project. 

In 2018, the Debtors paid approximately $55 million in MLX Deposit Refunds 

(excluding refunds for Engineering Advances) to approximately 2,100 Customers 

and approximately $11.1 million in refunds of Engineering Advances to 

approximately 5,300 Customers. As of the Petition Date, the Debtors hold an 

aggregate of approximately $112.7 million in MLX deposits and Engineering 

Advances. Based on historical averages, the Debtors estimate that they will be 

obligated to refund or credit on a monthly basis approximately $4.6 million in MLX 

Deposit Refunds (excluding refunds for Engineering Advances) to approximately 

150 Customers and $1 million in refunds of Engineering Advances to approximately 

440 Customers. 

 The Underground Programs. The Debtors undertake programs that are approved 

by the CPUC and are required by law to convert existing overhead electric 

distribution facilities to underground (“UG Programs”).19 In order for a project to 

qualify under the program, the project must meet specific criteria outlined in the 

Debtors’ Rule 20 tariff. Under the UG Programs, the Debtors undertake projects at 

the request of governmental entities that cover the costs of the conversions (the “UG 

Costs”). The governmental entities have the option of covering the conversion 

costs either through direct payment to the Debtors or, more commonly, through the 

use of work credits that are allocated to communities according to a formula that is 

set forth in Debtors’ tariffs. In 2018, the Debtors expended approximately $33 

million in connection with the UG Programs. As of the Petition Date, the Debtors 

estimate that approximately $5.4 million in UG Costs owed to third parties in 

connection with the UG Programs are accrued and unpaid, all of which the Debtors 

estimate will come due within thirty (30) days after the Petition Date. 

 The Other Customer Programs. In the ordinary course of business, the Debtors 

also provide credits to Customers (i) as a result of corrections in rates, metering and 

other charges,20 (ii) in connection with the Debtors’ budget billing plan, which is 

intended to normalize Customer payments over the course of a year21 and the 

Debtors’ solar tariffs22 which compensate Customers for surplus energy delivery, 

and (iii) to address other similar Customer concerns and issues (collectively, the 

“Other Customer Programs” and the obligations related thereto, the “OCP 

Costs”). The Debtors’ monthly Other Customer Program activity is irregular. In 

the eleven (11) month period ending November 30, 2018, the Debtors incurred 

monthly OCP Costs up to approximately $4 million. 

 

19 See PG&E Electric Rule 20. 

20 See PG&E Electric Rules 17, 17.1 and 17.2; PG&E Gas Rules 17, 17.1 and 17.2. 

21 See PG&E Electric Rule 9G; PG&E Gas Rule 9G. 

22 See PG&E Electric Rate Schedule NEM2. 

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2. The Public Purpose Programs. 

The Debtors administer, both directly and indirectly, a host of separate Public Purpose 

Programs across the Debtors’ service area in California pursuant to a series of statutory mandates, 

including those set forth in the California Public Utilities Code, and regulatory mandates and decisions 

issued by the CPUC and local and regulatory agencies.23 The Public Purpose Programs are tailored to 

effectuate public policies supporting energy efficiency (“EE”), carbon reduction, renewable energy, 

and energy management and conservation by (a) providing direct financial incentives (including 

rebates) to individuals, businesses, and local governments to install, sell, or manufacture energy 

efficient and renewable energy equipment, (b) implementing education and outreach initiatives that 

promote and support the widespread adoption of EE, renewable energy, reductions in GHG emissions, 

and energy conservation practices, (c) supporting research and development aimed at improving 

existing and developing new EE, clean energy technologies, and renewable energy technologies, and 

(d) administering and supporting demand response programs which seek to maximize grid-wide 

efficiencies through targeted increases and decreases in electricity consumption. A non-exhaustive list 

and general description of the types of Public Purpose Programs follows. 

The Debtors administer mandated programs that cover nearly every market sector and customer 

type, across all technology families, and use a variety of market intervention strategies, including 

rebates targeted at manufacturers and distributors. These programs support California’s “Long-Term 

Energy Efficiency Strategic Plan,” a framework created by the CPUC that is designed to integrate EE 

into the everyday activities of ratepayers, to provide a more integrated EE experience for Customers 

and to provide Customers with access to information and greater financing opportunities. 

 Energy Efficiency. The Debtors’ CPUC-mandated EE programs (collectively, the 

“EE Programs”) offer incentives, services, education and tools aimed to assist 

residential, commercial, industrial, and agricultural Customers and local 

government partners in eliminating unnecessary energy use and saving money. 

Through strategic energy planning support, technical support services, and financial 

support through rebates, incentives, education, and financing options, the EE 

Programs empower Customers to better understand, manage, and eliminate 

 

23 Such statutes and Commission Decisions include without limitation: Cal. Pub. Util. Code §§ 380.5, 

381, 381.1, 382, 399.4, 399.8, 454.55, 454.56, 890-899 and 2790; and California Public Utilities 

Commission Decision Nos. 01-03-073, 06-01-024, 07-11-045, 08-10-036, 10-01-022, 14-12-024, 16-

01-044, 17-12-022, 18-01-004, 18-06-027, and 18-12-015. 

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unnecessary energy use. A general description of the types of EE Programs follows. 

o Energy Efficiency: Residential Programs. The Debtors administer twelve 

(12) residential EE programs (collectively, the “Residential Programs”) 

designed to achieve energy savings for residential Customers. For example, 

the Debtors provide rebates to residential Customers who purchase energy 

efficient products like washing machines, dishwashers, and water heaters. In 

addition, the Debtors offer incentives to Customers who work with 

contractors to perform home retrofits and who do air conditioning 

installation and maintenance. Through the Residential Programs, property 

owners and Customers can receive incentives to install efficient equipment 

in multifamily housing units, ranging from central systems like boilers to 

simple lighting fixtures. The Residential Programs offer incentives to 

manufacturers, distributors, and retailers to manufacture, stock, and sell 

energy efficient consumer electronics (such as televisions and computers) 

and lighting. In addition, the Debtors provide audit and energy savings 

equipment installation services to moderate income residential Customers. 

Through home energy management tools the Debtors provide residential 

Customers tools and information to help them maximize energy savings. 

o Energy Efficiency: Commercial Programs. The Debtors administer a variety 

of commercial EE programs (collectively, the “Commercial Programs”) 

that target Customers in new and existing facilities and in a variety of sectors 

including healthcare, hospitality, large office, high tech, and retail. Through 

the Commercial Programs, the Debtors provide incentives and financing to 

encourage investment in energy efficient products and services. Typical 

commercial EE projects focus on equipment upgrades in lighting, HVAC, 

food service, refrigeration, water heating, and general plug loads. The 

Debtors also offer strategic energy planning, technical support services, 

calculation or design assistance, and benchmarking tools to their commercial 

Customers. The Debtors deliver this suite of Commercial EE Programs 

through a network of trade professionals, third-party partners, and local 

government partnerships. The Debtors also offer in-house engineering and 

project development support to commercial Customers. 

o Energy Efficiency: Industrial Programs. The Debtors administer a variety 

of industrial EE programs (collectively, the “Industrial Programs”) that are 

designed to reduce energy consumption, lower GHG emissions, and increase 

Customers’ profitability by lowering energy costs. The Industrial Programs 

include rebates, incentives, and financing for efficient equipment and 

systems; technical support such as facility audits and energy savings 

analysis; and strategic energy planning. Typical industrial EE projects focus 

on lighting, pumps, fans, motors, boilers, insulation, heat recovery, process 

heating, drip irrigation, low pressure sprinkler nozzles, and refrigeration 

equipment. The Industrial Programs target various facility types including 

oil production, lumber and paper mills, cement and quarries, metals 

processing, petroleum refineries, chemical industries, assembly plants, and 

water and wastewater treatment plants. The Debtors deliver their suite of 

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Industrial Programs through a network of trade professionals and third-party 

partners. The Debtors also offer in-house engineering and project 

development support to industrial Customers. 

o Energy Efficiency: Agricultural Programs. The Debtors administer a variety 

of agricultural EE programs (collectively, the “Agricultural Programs”) 

that help agricultural producers and processors manage energy costs and 

make informed investments in new energy-saving equipment. The Debtors 

offer a full suite of tools to position agricultural Customers to eliminate 

unnecessary energy use. Key offerings include rebates, incentives, and 

financing for efficient equipment and systems; technical support such as 

facility audits and energy savings analysis; and pump efficiency education. 

The Agricultural Programs target agricultural growers, post-harvest 

processors, dairies, irrigation districts/agencies, fruit and vegetable 

processors, agricultural service providers, wineries, and other beverage 

manufacturers. The Debtors deliver their suite of Agricultural Programs 

through a network of trade professionals and third-party partners. The 

Debtors also offers in-house engineering and project development support to 

agricultural Customers. 

o Energy Efficiency: Local, State, and Federal Government (Public Sector) 

Programs. The Debtors administer a variety of EE programs focused on the 

public sector (collectively, the “Public Sector Programs”). Through 

Debtors’ government and community partnerships, the Debtors collaborate 

with public entities to shape EE and sustainability at the local, regional, and 

statewide levels. These partnerships aim to meet the needs of local and state 

governments and schools and educational institutions to offer comprehensive 

solutions that are flexible, innovative, and a reflection of the communities’ 

needs. The Public Sector Programs also focus on K-12 public schools and 

offer energy planning services for public entities interested in benchmarking 

their facilities and pursuing local energy reach codes and ordinances. In 

addition, the Debtors offer a light emitting diode (“LED”) streetlights 

program serving public sector customers. 

o Energy Efficiency: Financing Programs. The Debtors administer the on-bill 

financing program (the “OBF Program”) that provides zero-interest loans 

to help commercial customers invest in efficient products and pay for these 

investments through their utility bill. The OBF Program is offered in 

conjunction with other EE Programs to stimulate and enable higher levels of 

customer participation. Additionally, the Debtors support the California 

Alternative Energy and Advanced Transportation Financing Authority 

(CAEATFA) in the development of statewide finance pilots, which include 

on and off-bill financing options. 

o Energy Efficiency: Codes and Standards Program. The Debtors administer 

the codes and standards program (the “C&S Program”), which saves 

energy on behalf of ratepayers by influencing regulatory bodies such as the 

California Energy Commission and the U.S. Department of Energy to 

strengthen EE regulations. The C&S Program conducts efforts to increase 

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compliance with existing codes, standards, and regulations to ensure that the 

State of California realizes the savings from new codes and standards and 

support local governments that include reach codes as a climate strategy. 

The C&S Program also provides for planning and coordination with other 

California investor-owned utilities to optimize collaboration, and code 

readiness activities to prepare for future codes. The C&S Program advocacy 

and compliance improvement activities extend to virtually all buildings and 

appliances sold in California in support of the state’s climate and energy 

goals. 

o Energy Efficiency: Workforce Education and Training Program. The 

Debtors administer a workforce education and training program (the 

“WE&T Program”), which provides professionals who design, build, and 

operate buildings the relevant skills needed to help eliminate unnecessary 

energy use in buildings. The WE&T Program provides technical advice to 

local workforce development organizations, postsecondary educational 

institutions, and training programs for various trades. The Debtors operate 

three energy centers that offer courses, technical consultations, and events. 

The centers include the Pacific Energy Center in San Francisco, which 

focuses on building design, the Stockton Energy Training Center, which 

focuses on workforce training, and the Food Service Technology Center in 

San Ramon. Through the WE&T Program, the Debtors work with 

educational institutions, community-based organizations and state education 

agencies to offer energy education to K-12, community colleges, adult 

education, and higher education institutions. 

o Energy Efficiency: Emerging Technologies Program. The Debtors 

administer an emerging technologies program (the “ETP”), which evaluates 

new and/or promising EE technologies, showcases these technologies, and 

facilitates the entry of such technologies to market. Through the ETP, the 

Debtors communicate and collaborate with entrepreneurs and technology 

providers to increase the supply of EE technology solutions and identify and 

assesses the performance of emerging EE technology solutions through lab 

and field testing and demonstration showcases. The ETP is focused on the 

following areas across all customer segments: lighting, HVAC, building 

shells, energy management systems, appliances, plug loads, and food 

services technologies. 

 Statewide, Marketing and Education. The Debtors serve as the fiscal manager for a 

joint utility statewide marketing, education, and outreach program that is performed 

under contracts with third-party advertising and media firms. The statewide 

marketing, education, and outreach program motivates Customers to take action on 

EE and energy conservation measures, increases Customer awareness of such 

measures, and facilitates Customers’ ability to act and incorporate technological 

advances. 

 Low-Income. The Debtors serve as program administrator for programs aimed at 

helping income-qualified Customers pay their energy bills. Over 1.4 million 

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Customers are receiving a bill discount through the California Alternative Rates for 

Energy (CARE) program and Family Electric Rate Assistance Program (FERA) 

program. 

 Energy Savings Assistance Program. The Debtors administer the energy savings 

assistance program which provides income-qualified residential Customers with 

home energy-saving improvements at no charge. The program supports the EE and 

weatherization of approximately 100,000 homes per year. 

 Self-Generation Incentive Program. The Debtors serve as program administrators 

for the self-generation incentive program (the “SGIP”) and provide rebates to 

Customers and renewable energy providers for the installation of new qualifying 

technologies that meet all or a portion of the electric needs of a facility. The 

purpose of the SGIP is to achieve GHG emission reductions, electricity demand 

reductions, and reduced Customer electricity usage. 

 California Solar Initiative and Other Solar Programs. The Debtors administer 

California solar initiative and other solar programs by providing financial incentives 

for installation of qualifying photovoltaic systems for multi-family and singlefamily affordable housing and solar thermal technology. These programs include 

without limitation, the California Solar Initiative Program; the California Solar 

Initiative Multifamily Affordable Solar Housing Program; the California Solar 

Initiative Thermal Program; the Single Family Affordable Solar Housing Program; 

the Multifamily Affordable Housing Solar Roofs Program; the Net Energy Metering 

Program; the Community Solar Green Tariff Program; the Disadvantaged 

Communities—Green Tariff Program, and the Disadvantaged Communities—

Single Family Solar Homes Program. Under these programs, the Debtors provide 

financial incentives and other customer assistance including through a contract with 

a third-party administrator for the installation of solar energy systems on qualifying 

properties throughout California. The goal of the programs is to encourage the 

development and installation of solar systems including in California’s 

disadvantaged communities. 

 Demand Response Programs. The Debtors administer demand response programs 

designed to enable Customers to contribute to energy load reduction during peak 

times of demand. Demand response programs are designed to be both fiscally and 

environmentally responsible by responding to occasional and temporary peak 

demand. The programs offer incentives to businesses that volunteer and participate 

by temporarily reducing their energy use when demand could outpace supply. 

 San Joaquin Valley Disadvantaged Communities Pilot Projects. In December 2018, 

the CPUC authorized the Debtors and other investor-owned utilities to implement 

and administer a variety of pilots and various support programs to provide improved 

utility services to disadvantaged communities in the San Joaquin Valley. The 

Debtors are responsible for certain of these pilots as well as providing credits and 

education for impacted customers. The Debtors are also responsible for facilitating 

the hiring of an independent administrator to oversee the pilots. 

 Clean Energy Transportation Programs. The Debtors have been authorized to 

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implement multiple electric vehicle programs, including the “Electric Vehicle 

Charging Network Program,” which will increase access to charging for electric 

vehicles within the Debtors’ service territory; the “Electric Vehicle Fleet Ready 

Program,” which serves to build electric vehicle charging infrastructure for 700 sites 

to support medium and heavy duty vehicle fleets; the “Priority Review Projects 

Program,” which pilots new methods and projects to promote deployment of electric 

vehicles; and the “Electric Vehicle Fast Charge Program,” which targets transit 

corridors and urban areas to provide them with charging infrastructure that allows 

electric vehicles to fully charge quickly.24

 Residential Rate Reform. The Debtors implement residential rate plan changes and 

increase customer awareness of rate options in preparation for the mandated 

transition of approximately 2.7 million Customers to “time-of-use” rate plans 

starting in October 2020 under which energy costs will be directly related to the 

time of day energy is used. Customer awareness includes an extensive multi-media 

statewide campaign informing Customers of the importance of energy management 

and the time of day that energy is used. 

 Mobile Home Park Utility Upgrade Program. The Debtors participate in a program 

to replace mobile home park (“MHP”) operated utility systems with direct public 

utility natural gas and electric service for MHP residents. The goal of the program 

is to provide safe, reliable, and clean energy to MHP residents. 

On an annual basis, the CPUC commissions studies of California’s residential and commercial 

buildings, equipment and processes, and industrial and agricultural sectors with the objective of 

developing energy savings and conservation objectives and determining the annual budget for the 

Public Purpose Programs. Following approval by the CPUC, the projected costs associated with the 

Public Purpose Programs (the “PPP Costs”) are funded through various surcharges and fees collected 

by the Debtors through rates from Customers (the “PPP Funds”).25 In order to meet the objectives of 

the Public Purpose Programs, the CPUC has approved approximately $950 million in PPP Costs for 

2019. As of the Petition Date, the Debtors estimate that approximately $131 million in PPP Costs 

owed to third parties are accrued and unpaid, all of which the Debtors estimate will come due within 

thirty (30) days after the Petition Date. 

 

24 These clean energy transportation programs have been authorized by Decision Nos. 16-12-065, 18-

01-024 and 18-05-040 of the CPUC. 

25 For a list of examples of such balancing accounts, see PG&E Advice Letter 5376-E, Annual Electric 

True-Up Submittal – Change to PG&E’s Electric Rates on January 1, 2019, filed with CPUC on 

September 4, 2018; PG&E Advice Letter 4053-G, Annual Gas True-Up of Gas Transportation 

Balancing Accounts for Rates Effective January 1, 2019, filed with CPUC on December 21, 2018. 

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The funds collected, allocated, and distributed by the Debtors on account of the Public Purpose 

Programs are typically tracked by the Debtors through regulatory “balancing accounts” required by the 

CPUC for legal ratemaking purposes. All costs recorded in these accounts are reserved for the 

payment of PPP Costs as approved by the CPUC. Surplus funds remaining in these accounts at the end 

of the year are either rolled over and allocated to Public Purpose Programs for the next fiscal year or 

refunded to Customers through rate adjustments. 

3. The Environmental Cleanup Programs 

The Debtors’ operations include or have included nuclear power plants, manufactured gas plant 

sites, natural gas gathering system sites, natural gas compressor station sites, electric transmission and 

distribution facilities, steam-electric power plant sites, and hydroelectric power plant sites. As a result 

of current and historical operations, that state and federal statutes and agencies such as the Federal 

Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), the 

NRC, and the CPUC nuclear safety and cost recovery regulations require the Debtors to administer and 

maintain the Environmental Cleanup Programs described below.26 The Debtors operate such programs 

under state and federal regulatory oversight. 

As a necessary part of their business, the Debtors use, or have used, a variety of different 

hazardous or radioactive materials in a number of their sites, the cleanup of which is an ordinary and 

recurring part of the Debtors’ business. In connection therewith, the Debtors (a) evaluate existing and 

historical operating sites for potential releases of hazardous materials by performing site investigations 

and conducting human health and ecological assessments, and (b) design, implement, and perform 

remedial measures at designated sites to address ongoing or potential exposure risks. The Debtors use 

a number of third-party environmental contracting and consulting firms in the administration of the 

Environmental Cleanup Programs, as well as outside legal firms to provide guidance and direction on 

 

26 Such authorities include: Cal. Pub. Util. Code §§ 379, 8325 and 8326, and PG&E’s Electric 

Preliminary Statement DB (Nuclear Decommissioning Adjustment Mechanism), https://www.pge. 

com/tariffs/assets/pdf/tariffbook/ELEC_PRELIM_DB.pdf; and CPUC Decision 94-05-020, and 

PG&E’s Electric Preliminary Statement Part S (Hazardous Substance Mechanism), https://www.pge. 

com/tariffs/assets/pdf/tariffbook/ELEC_PRELIM_S%20(Prelim).pdf.

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legal and regulatory issues, to manage regulatory and third-party claims with respect to environmental 

issues, and to assist in the development of environmental policies. 

Additionally, the Debtors’ routine work includes active decommissioning of the Debtors’ 

Humboldt Bay nuclear facility and decommissioning planning activities of the Debtors’ DCPP. I 

understand based on discussion with counsel that federal law requires all operators of nuclear facilities 

to create and fund a nuclear decommissioning trust fund with adequate funds to decommission those 

facilities such that they present no risk to public health and safety or the environment when they are 

removed from service.27

The Debtors collect and recover hazardous substance clean up and litigation costs, net of 

related insurance recoveries, as approved by the CPUC. The CPUC allows for the recovery of eligible 

costs at CPUC-approved manufactured gas plant sites, federal superfund sites, and other specified 

sites. Additionally, I understand based on discussions with counsel that Section 8326 of the California 

Public Utilities Code and CPUC decisions and orders require that the Debtors periodically estimate the 

costs associated with the Debtors’ nuclear decommissioning efforts, seek CPUC authorization for the 

funding of such costs, and deposit such funding into externally managed and segregated nuclear 

decommissioning trusts (collectively, the “Decommissioning Trusts”).28 The Debtors routinely seek 

reimbursement from the Decommissioning Trusts for prudent decommissioning expenditures approved 

by the CPUC. 

Following approval by the CPUC, the projected costs associated with the Environmental 

Cleanup Programs (the “ECP Costs”) are funded through various surcharges and fees collected by the 

Debtors through rates from Customers (the “ECP Funds”). In order to meet the objectives of the 

Environmental Cleanup Programs, the CPUC has approved $130.8 million in ECP Costs for 2019. As 

of the Petition Date, the Debtors estimate that approximately $39.4 million in ECP Costs owed to third 

parties are accrued and unpaid, all of which the Debtors estimate will come due within thirty (30) days 

after the Petition Date. 

 

27 10 CFR 50.82 and 50.75. 

28 See Cal. Pub. Util. Code §§ 8325-26. 

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The funds collected, allocated, and distributed by the Debtors on account of the Environmental 

Cleanup Programs are tracked by the Debtors through regulatory “balancing accounts” or ratemaking 

adjustments required by the CPUC for legal ratemaking purposes. The ratemaking accounts and 

mechanisms which recover the costs associated with these activities include the “Hazardous Substance 

Mechanism’s Hazardous Substance Cost Recovery Account” and the “Nuclear Decommissioning 

Adjustment Mechanism.”29 All costs recorded in these accounts are reserved for the payment of ECP 

Costs as approved by the CPUC. Surplus funds remaining in the Hazardous Substance Cost Recovery 

Account at the end of the year are either rolled over and allocated to Environmental Cleanup Programs 

for the next fiscal year or refunded to Customers through rate adjustments. 

4. The Third-Party Programs 

Under programs authorized by statute and CPUC decisions, the Debtors act as servicing and 

billing agents to third parties (e.g., private utility providers) that sell electricity or natural gas directly 

to retail customers using the Debtors’ transmission and distribution facilities.30 Under such 

arrangements, the Debtors send invoices to, and collect money from, Customers on behalf of the third 

parties and then remit such payments to the third parties. 

The programs under which such third parties provide this electricity or natural gas are known 

as Community Choice Aggregation, Direct Access, and Core Gas Aggregation. The third-party 

entities providing service under these programs are known, as Community Choice Aggregators 

(“CCAs”), Energy Service Providers (“ESPs”), and Core Transport Agents (“CTAs”), respectively. 

In addition, the Debtors act as billing agent for the California Department of Water Resources 

(“DWR”), which has purchased energy on behalf of Customers and recovers financing costs from 

Customers using the Debtors’ billing system and other facilities. The Third-Party Programs that 

deliver electricity serve over 3 million customers and are anticipated to account for approximately 40% 

of the electricity load in the Debtors’ territory. 

 

29 PG&E’s Electric Preliminary Statement Part S (Hazardous Substance Mechanism), https://www.pge. 

com/tariffs/assets/pdf/tariffbook/ELEC_PRELIM_S%20(Prelim).pdf.; and PG&E’s Electric 

Preliminary Statement DB (Nuclear Decommissioning Adjustment Mechanism), https://www.pge. 

com/tariffs/assets/pdf/tariffbook/ELEC_PRELIM_DB.pdf. 

30 Such statutes include Cal. Pub. Util. Code §§ 365.1 and 366 (direct access), 366.2 (community 

choice aggregation), and Cal. Water Code § 80110a. 

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The Debtors receive fees and revenues from Customers of the third parties to reimburse the 

Debtors for their costs of delivering the electricity and natural gas over the Debtors’ utility 

transmission and distribution system and for acting as servicing and billing agent. In addition to 

amounts owed to the Debtors from such Customers, the Debtors also collect from such Customers 

amounts owed to the third parties for the electricity and natural gas supplied by the third parties (the 

“TPP Funds”). Remittance of such pass-through revenues by the Debtors to the third parties in 

connection with the Third-Party Programs (the “TPP Costs”) ranges from daily to weekly. 

Failure to provide third party providers with revenue owed to them under the Third Party 

Programs for purchases of their electricity and natural gas would improperly interfere with their 

relationships with their Customers and could jeopardize the continued supply of electricity and natural 

gas to their Customers who rely on the same. With over 3 million Customers serviced with electricity 

pursuant to the Third-Party Programs—which is anticipated to account for approximately 40% of the 

electricity load in the Debtors’ territory in 2019—the normal and uninterrupted remittance of Customer 

payments through the Debtors to CCAs, ESPs, CTAs, and DWR is of the utmost importance in order 

for such entities to meet their obligations to such customers and their suppliers, contractors, and 

lenders. 

Based on historical averages, on a monthly basis the aggregate amount of the TPP Funds 

received by the Debtors is approximately $181.2 million. As of the Petition Date, the Debtors estimate 

that approximately $52.6 million in TPP Costs are payable to third parties, all of which the Debtors 

estimate will come due during the Interim Period. 

5. The GHG Credit Programs 

I understand based on discussion with counsel that, pursuant to statutes enacted by the 

California Legislature and regulations issued by the California Air Resources Board,31 California 

 

31 Such statutes and regulations include Assembly Bill (AB) 32, the California Air Resources Board 

regulations implementing AB 32, and the Low Carbon Fuel Standard regulation issued by the 

California Air Resources Board. See California Global Warming Solutions Act of 2006, Cal. Health &

Safety Code §§ 38500, et. seq.; Low Carbon Fuel Standard (LCFS), Cal. Code of Regs. tit. 17, §§ 

95480- 95503. Decisions of the California Public Utilities Commission authorize PG&E to issue CC 

Credits (as defined below) to retail customers under AB 32, and also authorize PG&E to participate in 

the LCFS (as defined below) program and distribute LCFS Credits to customers. 

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businesses that emit GHGs, such as the Debtors, are mandated to reduce their emissions of GHGs and 

provide credits to Customers to give them incentives to do the same. For example, the Debtors issue 

semi-annual California Climate Credits for electric Customers and annual California Climate Credits 

for natural gas Customers (“CC Credits”). In addition, the Debtors administer the Low Carbon Fuel 

Standard (“LCFS”) credit program. Pursuant to such program, the Debtors administer and distribute 

point of purchase rebates to Customers who switch from a gasoline-powered vehicle to an electric 

vehicle (“LCFS Credits”). 

 Following approval by the CPUC, the projected costs associated with the CC Credits (the “CC 

Costs”) are funded through various surcharges and fees collected by the Debtors through rates from 

Customers and revenues accrued from the monetization of credits by the Debtors. The CPUC has 

approved approximately $443.1 million in CC Costs for the Debtors’ issuance of CC Credits for 2019. 

The LCFS Credits provided to Customers are funded by the Debtors’ monetization of LCFS credits 

earned by the Debtors from the ARB for their GHG compliance. The Debtors sell their LCFS credits 

in the open market to other GHG emitting businesses who buy them to offset their own compliance 

costs (the funds collected through rates and revenues from the monetization of CC Credits and LCFS 

credits collectively, the “GHG Funds” and the CC Credits and LCFS Credits provided using the GHG 

Funds including administrative costs, the “GHG Costs”). The GHG Funds are typically tracked by the 

Debtors through regulatory “balancing accounts” required by the CPUC for legal ratemaking purposes. 

As of the Petition Date, the Debtors estimate that approximately $128.9 million in GHG Costs are 

accrued and unpaid. The Debtors do not expect that any of such amounts will come due during the 

Interim Period. 

6. The Customer Support Programs 

In the ordinary course of business, the Debtors support Customers through a variety of product 

offerings, which provide the Debtors with additional revenue to offset and reduce the rates paid by gas 

and electric Customers. For example, the Debtors license and lease space on the Debtors’ assets (such 

as towers, conduit, and fiber network), to enable Customers to install equipment to provide 

telecommunications services in California. If Customers request installation of or modifications to 

such equipment, the Debtors engage with contractors and other vendors to perform such work for the 

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benefit of the Customers. The Debtors also support private and public sector Customers seeking 

sustainable solutions by acting as a general contractor for Customer projects that range from replacing 

heating systems for large institutional or government Customers to replacing street lights with LED 

lights for municipalities. The Debtors subcontract such projects to completion. In 2018, the Debtors 

estimate that they supported more than 100 Customers through their Customer Support Programs. 

The subcontractors and other vendors engaged by the Debtors to complete Customer Support 

Program projects perform their work under work authorizations with the Debtors. The Debtors receive 

invoices from the subcontractor first and then invoice the Customer for the same amount plus a 

markup. If the Debtors do not remit payment to a subcontractor, the subcontractor may refuse to 

complete the project and may result in the imposition of liens by the contractors on Customer property. 

Such refusal could jeopardize the Customer’s project, the Debtors’ relationship with the Customer, any 

financing obtained by the Customer to fund the project and, as a result, the Debtors’ revenue associated 

therewith. In addition, a contractor’s refusal to perform could result in a breach of the Debtors’ 

performance obligations under its agreement with the Customer. As of the Petition Date, the Debtors 

estimate that they owe approximately $12.7 million to contractors and vendors pursuant to the 

Customer Support Programs (the “CSP Costs”), and that approximately $5.3 million will come due 

within thirty (30) days after the Petition Date. As noted above, all of such amounts will be recovered 

from Customers. 

As indicated above, I understand based on discussions with counsel that most of the Customer 

Programs are the subject of statutory or regulatory mandates. Additionally, with respect to the Public 

Purpose Programs and the GHG Credit Programs, California statutes and regulations mandate that all 

PPP Funds and GHG Funds be set aside for the express purpose of funding public interest programs 

and issuing credits to Customers that are designed to benefit the broader public interests. Failure to 

fund the Public Purpose Programs and the GHG Credit Programs with the proceeds specifically 

designated therefor, including payment of prepetition costs, would be in direct conflict with regulatory 

requirements and unwarranted under the circumstances. With respect to the Environmental Cleanup 

Programs, any suspension or delay in administering the Environmental Cleanup Programs is contrary 

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to public health and welfare and may exacerbate not only existing circumstances but the ultimate costs 

of cleanup as well. 

Furthermore, because of the unique nature and scale of their business operations, the Debtors’ 

Customers will be particularly vulnerable to any suspension of the Debtors’ obligations under the 

Deposit and Reimbursement Programs, and the ripple effects of any suspension could be far reaching. 

If lower-income residential Customers, for example, are unable to receive their Security Deposit 

Refunds, they may be deprived of necessary funds and be subject to undue hardship. Customers who 

have budgeted for the use of the Security Deposit Refunds may be unable to meet their day-to-day 

financial commitments, including, for Customers who have left the utility’s service area, establishing 

credit with another utility using the funds from their Security Deposit Refund. 

Accordingly, I respectfully submit that honoring all Customer Program Obligations, including 

payment of Security Deposit Refunds, MLX Deposit Refunds, UG Costs, OCP Costs, PPP Costs, ECP 

Costs, TPP Costs, GHG Costs, and CSP Costs in the ordinary course as they come due, including all 

prepetition amounts, is a prudent and sound exercise of the Debtors’ business judgment and should be 

approved. 

I respectfully submit that payment of the Customer Program Obligations is necessary to avoid 

immediate and irreparable harm because (a) failure to make such payments may cause the Debtors to 

violate statutory and regulatory mandates, (b) failure to pay the Security Deposit Refunds, and MLX 

Deposit Refunds, may inflict a significant hardship on the Debtors’ Customers, (c) failure to pay the 

prepetition OCP Costs, UG Costs, PPP Costs, ECP Costs, GHG Costs, and CSP Costs will threaten the 

viability of the UG Programs, Other Customer Programs, Public Purpose Programs, Environmental 

Cleanup Programs, GHG Credit Programs, and Customer Support Programs and undermine public 

confidence in the Debtors, and (d) failure to pay the pass-through TPP Costs will threaten the viability 

of certain third party entities and the continued supply of electricity and natural gas to certain 

customers. 

VI. MOTION OF DEBTORS PURSUANT TO 11 U.S.C. §§ 105(a), 363(b), AND 503(b) AND 

FED. R. BANKR. P. 6003 AND 6004 (I) FOR INTERIM AND FINAL AUTHORITY TO 

PAY PREPETITION OBLIGATIONS OWED TO SHIPPERS, WAREHOUSEMEN, 

AND OTHER LIEN CLAIMANTS, AND (II) GRANTING ADMINISTRATIVE 

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EXPENSE PRIORITY STATUS FOR CLAIMS ARISING FROM GOODS 

DELIVERED TO THE DEBTORS POSTPETITION (THE “LIEN CLAIMANTS 

MOTION”) 

Pursuant to the Lien Claimants Motion, the Debtors request (i) interim and final authority to 

pay the prepetition claims (the “Lien Claims”) of certain third-party shippers, warehousemen, 

vendors, and other service providers or contractors that may be permitted to assert statutory or 

possessory liens against the Debtors’ property and equipment if the Debtors fail to pay the prepetition 

amounts owed to those parties for their various goods and services (collectively, the “Lien 

Claimants”), and (ii) granting administrative priority status to all undisputed obligations of the 

Debtors owing to third-party vendors and suppliers arising from the postpetition delivery of goods 

ordered prior to the Petition Date and authorizing the Debtors to pay such obligations in the ordinary 

course of business. 

A. The Lien Claimants. 

The Debtors routinely transact business with a number of entities that provide goods and 

services that may be permitted to assert statutory or possessory liens against the Debtors’ property and 

equipment if the Debtors fail to pay for those parties’ various goods or services. The Lien Claimants 

generally fall into the following categories: (i) Shippers, (ii) Warehousemen, and (iii) Maintenance and 

Repairmen (each as defined below). Each of these categories of Lien Claimants is discussed in further 

detail below. 

As of the Petition Date, the Debtors estimate that they owe approximately $65,500,000 on 

account of Lien Claims, of which approximately $25,800,000 will come due during the Interim 

Period.32 A chart outlining the various categories and approximate amounts of the Lien Claims that the 

Debtors are seeking authority to pay pursuant to the Lien Claimants Motion on an interim and final 

basis is set forth below: 

 

32 Concurrently with the Lien Claimants Motion, the Debtors have filed the Operational Integrity 

Suppliers Motion (as defined below). Although the Debtors have endeavored to provide accurate 

figures and calculations herein, there may, in some instances, be overlap between the amounts sought 

to be paid pursuant to the Lien Claimants Motion and the amounts sought to be paid pursuant to the 

Operational Integrity Suppliers Motion. 

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Categories

Approx. Amount 

Seeking to Pay on 

Interim Basis 

Approx. Amount 

Seeking to Pay on 

Final Basis 

Shippers $1,800,000 $6,000,000 

Warehouseman $4,800,000 $4,800,000 

Maintenance and Repairmen $19,200,000 $54,700,000 

Total Approx. Lien Claims $25,800,000 $65,500,000 

Shippers. In the ordinary course of business, the Debtors purchase natural gas (the “Purchased 

Natural Gas”) from entities operating in all of the major natural gas basins in western North America, 

including basins in western Canada, the Rocky Mountains, and the southwestern United States. 

Although the Debtors own and operate over 6,400 miles of transmission pipelines, these pipelines do 

not connect directly to the Debtors’ natural gas sources. Therefore, it is necessary for the Debtors to 

rely on third-party transportation service providers (the “Shippers”) to transport Purchased Natural 

Gas from their sources to the Debtors’ transmission pipelines so that the Debtors may deliver natural 

gas to their residential, commercial, industrial, and agricultural customers and to fuel the Utility’s gasfired electric generation facilities in northern and central California. The Debtors’ ability to operate in 

the ordinary course, therefore, depends on their ability to take delivery of and transport Purchased 

Natural Gas in a timely fashion. Additionally, the Debtors also rely on Shippers for the transportation 

of piping supplies, valves, replacement parts and other materials, all of which are integral to the day to 

day operations of their business. 

It is my understanding based upon discussions with counsel that, if the Debtors fail to pay their 

Shippers in a timely manner, the Shippers may seek to assert statutory or possessory liens against 

Purchased Natural Gas or other materials and property that is in their possession with respect to any 

delinquent charges, potentially blocking the Debtors’ access to the Purchased Natural Gas and such 

materials and property that is in transport.33 Further, in many cases, only one third-party transportation 

 

33 For example, section 7307 of California’s Commercial Code provides in pertinent part that: 

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service provider is capable of transporting Purchased Natural Gas or other materials from a given 

source, leaving the Debtors with no choice but to rely on a particular Shipper. With millions of 

dollars’ worth of Purchased Natural Gas and other materials and property in transit at any given time, 

the cost of a disruption to the Debtors’ operations that could be caused by the Shippers’ exercising 

their rights likely far outweighs the prepetition amounts owed to the Shippers. 

The Debtors estimate that the aggregate amount owed to Shippers for services provided during 

the period before the Petition Date is approximately $6,000,000, of which the Debtors are requesting 

authority to pay approximately $1,800,000 on an interim basis. 

Warehousemen. In the ordinary course of business, the Debtors store natural gas that they 

purchase in various storage facilities (the “Stored Natural Gas”). The Debtors procure gas storage 

capacity as a tool to ensure reliability, in order to inject and withdraw gas to ensure compliance with 

system requirements, and to balance their position and serve load. Additionally, the Debtors store 

large diameter pipes used for natural gas pipelines, valves, natural gas replacement pipes and fittings, 

cables, wiring, and other parts for the electrical grid, and other property in certain third party 

warehouse facilities. Because the Debtors operate only three storage facilities of their own, all of 

which have limited capacity, they rely on the services of these third-party storage providers (the 

“Warehousemen”). 

It is my understanding based upon discussions with counsel that, if the Debtors fail to pay their 

Warehousemen in a timely manner, the Warehousemen may seek to assert statutory or possessory liens 

against the Debtors’ property that is in their possession; potentially blocking the Debtors’ access to the 

 

A carrier has a lien on the goods covered by a bill of lading or on the 

proceeds thereof in its possession for charges after the date of the 

carrier’s receipt of the goods for storage or transportation, including 

demurrage and terminal charges, and for expenses necessary for 

preservation of the goods incident to their transportation or reasonably 

incurred in their sale pursuant to law. 

California Code, Commercial Code – COMM § 7307. 

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Stored Natural Gas and other materials that are necessary for the business operations.34 The Debtors 

estimate that the aggregate amount owed to Warehousemen for services provided during the period 

before the Petition Date is approximately $4,800,000, all of which is estimated to come due during the 

Interim Period. 

Maintenance and Repairmen. Certain of the Lien Claimants provide maintenance and repair

services on the Debtors’ vast network of production, transmission, and distribution facilities, including 

the Debtors’ generation units and gas facilities (the “Maintenance and Repairmen”). The 

Maintenance and Repairmen, among other things, maintain, repair, refurbish, and replace components 

of the Debtors’ facilities and equipment and provide fuel and parts for the Debtors’ generation units. 

Many of the Maintenance and Repairmen are not under contract to perform future services, but rather 

perform work and related services on an order-by-order basis. If the Debtors become delinquent in 

their payments for such goods provided or services rendered, the Maintenance and Repairmen may 

assert liens, including mechanics’ liens and materialman’s liens, against the Debtors’ property for the 

amounts owed. Additionally, those Maintenance and Repairmen that do have contracts with the 

Debtors may have been granted liens or other interests pursuant to such agreements to secure amounts 

owed to them under their relevant agreements. The Debtors estimate that the aggregate amount owed 

to Maintenance and Repairmen for goods and services provided during the period before the Petition 

Date is approximately $54,700,000, of which the Debtors are requesting authority to pay 

approximately $19,200,000 on an interim basis. 

In addition to having secured claims, if the Debtors are unable to satisfy the Lien Claims as 

requested in the Lien Claimants Motion, the Lien Claimants may refuse to provide critical ongoing 

goods or services to the Debtors or may seek to enforce their rights and liens on account of such 

claims. Accordingly, the Debtors seek authority to pay and discharge, on a case-by-case basis, the 

Lien Claims that the Debtors believe have created, or could give rise to, a lien against the Debtors’ 

 

34 See California Code, Commercial Code – COMM § 7209 (“A warehouse has a lien against the bailor 

on the goods covered by a warehouse receipt or storage agreement or on the proceeds thereof in its 

possession for charges for storage or transportation, including demurrage and terminal charges, 

insurance, labor, or other charges, present or future, in relation to the goods, and for expenses 

necessary for preservation of the goods or reasonably incurred in their sale pursuant to law.”) 

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property or equipment, regardless of whether such Lien Claimants already have actually perfected their 

interests. 

B. The Prepetition Orders 

In addition to the relief requested with respect to the Lien Claimants, as of the Petition Date, 

the Debtors have certain prepetition purchase orders outstanding with various third-party vendors and 

suppliers (the “Vendors”) for goods ordered by the Debtors that have not yet been delivered by the 

Vendors to the Debtors’ facilities (the “Prepetition Orders”). These Vendors may be concerned that, 

because the Debtors’ obligations under the Prepetition Orders arose prior to the Petition Date, such 

obligations will be treated as general unsecured claims in the Chapter 11 Cases. Accordingly, certain 

Vendors may refuse to provide goods purchased (or may recall shipments thereof) pursuant to the 

Prepetition Orders unless the Debtors issue substitute purchase orders postpetition or obtain an order of 

the Court confirming that all undisputed obligations of the Debtors arising from the postpetition 

delivery of goods subject to Prepetition Orders are afforded administrative expense priority status 

under section 503(b) of the Bankruptcy Code. 

I respectfully submit that the relief requested in the Lien Claimants Motion represents an 

exercise of sound business judgment and is necessary to facilitate a successful reorganization. 

Authorizing the Debtors to pay the Lien Claims is in the best interests of the Debtors, their estates, and 

all parties in interest. The Lien Claimants provide valuable shipping, warehousing, and maintenance 

and repair services to the Debtors, and certain of the Lien Claimants currently hold goods and property 

that are necessary to the Debtors’ continued operations. It is my understanding based upon discussions 

with counsel that, if the Debtors do not pay the Lien Claims, the Shippers and Warehousemen likely 

will assert possessory liens on the Debtors’ property and thereby prevent access to goods necessary to 

the Debtors’ ongoing operations. Similarly, the Maintenance and Repairmen will assert mechanics’ 

and materialman’s liens on the Debtors’ properties, thereby securing the outstanding amounts they are 

owed. Under these circumstances, I respectfully submit that having the authority to satisfy these 

claims not only will avoid any disruptions to their operations and the ability to provide utility service 

to their customers, but should not prejudice any other parties in interest by reason of the lien rights 

held by the Lien Claimants. 

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Accordingly, I respectfully submit that the relief requested in the Lien Claimants Motion is 

necessary and appropriate, is in the best interests of their estates and all parties in interest, is necessary 

to avoid immediate and irreparable harm to the Debtors, and should be granted. 

VII. MOTION OF DEBTORS PURSUANT TO 11 U.S.C. §§ 105(a), 363(b), AND 503(b)(9) 

AND FED. R. BANKR. P. 6003 AND 6004 FOR INTERIM AND FINAL AUTHORITY 

TO PAY PREPETITION OBLIGATIONS OWED TO CERTAIN SAFETY AND 

RELIABILITY, OUTAGE, AND NUCLEAR FACILITY SUPPLIERS (THE 

“OPERATIONAL INTEGRITY SUPPLIERS MOTION”) 

Pursuant to the Operational Integrity Suppliers Motion, the Debtors are seeking interim and 

final authority to pay the prepetition claims (the “Operational Integrity Supplier Claims”) of certain 

vendors, suppliers, service providers, and other similar parties and entities that are essential to 

protecting the public health and maintaining the going-concern value and integrity of the Debtors’ 

businesses and operations (the “Operational Integrity Suppliers”). 

In the normal and day to day operation of their business, the Debtors rely heavily on 

Operational Integrity Suppliers for essential and specialized goods and services so that the Debtors can 

provide safe and reliable electric and natural gas service to their customers’ homes and businesses, 

while remaining in compliance with all applicable state and federal laws and regulations. 

The Debtors spend an average of approximately $1.9 billion per month on goods and services 

provided by third party vendors and suppliers. As of the Petition Date, the Debtors estimate that they 

owe approximately $116,200,000 on account of Operational Integrity Supplier Claims (the 

“Operational Integrity Supplier Cap”), of which approximately $30,100,000 will come due in the 

Interim Period.35 These amounts represent approximately 5.5% of the Debtors’ total outstanding trade 

debt as of the Petition Date. A chart outlining the representative categories and approximate amounts 

of the Operational Integrity Supplier Claims that the Debtors are seeking authority to pay pursuant to 

the Operational Integrity Suppliers Motion on an interim and final basis is set forth below. The 

estimated amounts of Operational Integrity Supplier Claims set forth herein and in the chart below are 

 

35 Concurrently with the Operational Integrity Suppliers Motion, the Debtors filed the Lien Claimants 

Motion. Although the Debtors have endeavored to provide accurate figures and calculations herein, 

there may, in some instances, be overlap between the amounts sought to be expended pursuant to the 

Operational Integrity Suppliers Motion and the amounts sought to be expended pursuant to the Lien 

Claimants Motion. 

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exclusive of any amounts that may be owed to Operational Integrity Suppliers that may be entitled to 

administrative expense priority pursuant to section 503(b)(9) of the Bankruptcy Code (the “503(b)(9) 

Claims”). Pursuant to the Operational Integrity Suppliers Motion, the Debtors also request authority 

to pay the 503(b)(9) Claims of any Operational Integrity Supplier to the extent the Debtors determine it 

is necessary and appropriate in accordance with the procedures and protocol set forth therein; 

provided, however, any amounts paid by the Debtors in satisfaction of such 503(b)(9) Claims shall not 

be included in or subject to the Operational Integrity Supplier Cap. 

Representative Categories of 

Operational Integrity Suppliers 

Approx. Amount 

Seeking to Pay on 

Interim Basis 

Approx. Amount 

Seeking to Pay on 

Final Basis 

Safety and Reliability Vendors and 

Service Providers $28,600,000 $110,600,000 

Outage Vendors and Service Providers $1,200,000 $4,500,000 

Nuclear Facility Vendors and Service 

Providers $300,000 $1,100,000 

Total Estimated Operational 

Integrity Supplier Claims $30,100,000 $116,200,000 

 

A. The Debtors’ Operational Integrity Suppliers 

In order to fulfill their obligations to provide safe electric and natural gas service to their 

approximately 16 million customers in northern and central California, the Debtors rely on the goods 

and services provided by the Operational Integrity Suppliers to maintain and safely and reliably 

operate their vast network of production, transmission, and distribution facilities. Due to the complex, 

technical, and potentially hazardous nature of the Debtors’ facilities, the Debtors often do business 

with a select vendor for particular goods or services and rely on such vendor as the Debtors’ primary 

supplier or service provider (i.e., the supply source for certain complex parts and specialty equipment, 

specifically designed systems, and specialized labor necessary to the Debtors’ operations). 

Additionally, certain of the Operational Integrity Suppliers have developed capabilities and expertise 

specific to the Debtors’ needs that cannot be easily or cost-effectively replaced, if at all, and which 

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would be lost if the Debtors were forced to seek similar services elsewhere. Further, due to the myriad 

of federal and state regulations under which the Debtors operate, many of the Operational Integrity 

Suppliers are required to possess certain certifications, permits, or licenses in order to provide goods or 

services to the Debtors. The universe of vendors that possess such certifications, permits, or licenses is 

limited, and, thus, the Debtors are likely to encounter significant difficulty replacing such Operational 

Integrity Suppliers on a timely basis, if at all. 

The Operational Integrity Suppliers generally fall into three primary categories: (i) entities that 

provide goods and services necessary for safe and reliable electric and natural gas service (the “Safety 

and Reliability Vendors”); (ii) entities that provide goods and services related to planned and 

unplanned outages (the “Outage Vendors”); and (iii) entities that provide goods and services in 

connection with the Debtors’ operation and decommissioning of their nuclear reactor power units (the 

“Nuclear Facility Vendors”). Each of these categories of Operational Integrity Suppliers is discussed 

in further detail below. 

1. Safety and Reliability Vendors 

Safety is a core value for a utility company. The potentially hazardous nature of the 

transmission and distribution of electricity and natural gas and the generation of electricity mandates a 

focus on the safety of the public, the Debtors’ workforce, and the Debtors’ contractors. Further, 

reliable electric and natural gas service is of the utmost importance to the safety, health, and welfare of 

the Debtors’ customers and their communities, as well as to the efficiency of the economy of central 

and northern California. 

The Safety and Reliability Vendors generally fall into one or more of the following 

subcategories: (i) entities that provide goods and services that are highly specialized (the “Specialized 

Vendors”) and/or closely integrated with the Debtor’s business operations and customer relationships 

(the “Integrated Vendors” and, together with the Specialized Vendors, the “Specialized and 

Integrated Vendors”); (ii) select, pre-qualified, or geographically limited providers of critical goods 

(the “Critical Goods Vendors”); and (iii) entities that provide goods and services related to the 

Debtor’s regulatory compliance obligations (the “Regulatory Compliance Vendors”). 

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a) Specialized and Integrated Vendors 

The Debtors rely on Specialized and Integrated Vendors to provide specialized services that are 

closely integrated with the Debtors’ transmission, distribution, generation, and retail business 

operations. In certain cases, the Debtors must obtain the services of a Specialized Vendor because 

state and federal laws and regulations require vendors to possess certain certifications, permits, 

licenses, particular knowledge, or technical “know-how.” Consequently, certain services (e.g., 

electrical, line-related, welding, waste-removal, earth-moving, information-technology, security, and 

cybersecurity services) may only be performed by Specialized Vendors due to the risks posed by the 

nature of the Debtors’ facilities, which expose Specialized Vendors to, among other things, highvoltage electricity, high-pressure gas, high-speed rotation motors, and potentially hazardous or 

radioactive substances. A very limited number of vendors possess the certifications, permits, licenses, 

knowledge, technical “know-how,” experience, or safety qualifications necessary to perform the 

services that are provided by the Specialized Vendors, and, therefore, such vendors cannot be easily 

replaced. 

For example, the Debtors rely on Specialized Vendors such as wildland firefighting and rescue 

servicers to provide onsite fire suppression services. The Debtors also rely on Specialized Vendors to 

provide base camp services for the Debtors’ personnel. These base camp services include providing 

materials to support the Debtors’ fleet operations, and providing telecommunications, electrical 

support, housing, and meals for the Debtors’ personnel on the field. 

Integrated Vendors provide the Debtors with certain customer-facing services, such as 

customer outreach and account management (e.g., establishing and disconnecting service, metering, 

billing, and collecting payments). These services are crucial to maintaining the Debtors’ customer 

relationships and executing their business strategies. Even if the Debtors could identify substitute or 

replacement vendors in a timely fashion that possess the necessary qualifications, experience, and skill 

to provide these customer-facing services, the Integrated Vendors have specific knowledge of the 

Debtors’ business operations, facilities, and customer demands, which knowledge has been developed 

over the course of the Debtors’ longstanding relationships with the Integrated Vendors and which 

cannot be easily replaced. Moreover, attempting to replace the Integrated Vendors during this critical 

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early period of the Chapter 11 Cases likely would cause significant disruption to the Debtors’ 

operations and relationships with their customers, to the detriment and prejudice of all parties in 

interest. 

b) Critical Goods Vendors 

The Debtors rely on Critical Goods Vendors to supply essential electrical and gas equipment, 

specialized materials and replacement parts, operations consumables, raw materials, fuels, and certain 

other goods required to operate the Debtors’ electric and natural gas transmission and distribution 

systems and generation units. In some cases, there is no alternative provider for certain of these 

critical goods. For example, certain Critical Goods Vendors supply the Debtors with specialized 

electrical equipment, transformers, specially fabricated repair and replacement parts, and other 

equipment necessary for the Debtors’ transmission, distribution, generation, and gas assets. These 

parts and materials are based on patented or trade-secreted designs and are available only from limited 

sources. 

In other cases, alternative vendors cannot supply the requisite critical goods in sufficient 

quantity or with sufficient reliability, or such vendors are unable to supply critical goods of sufficient 

quality on a cost-effective or timely basis in the appropriate geographic areas. For example, the 

modern electrical grid relies on switch gear, transformers, and other state-of-the-art equipment to 

manage advanced electronic metering, communications, and control technologies. Maintaining the 

reliability of the electrical transmission and distribution system, therefore, requires the immediate 

availability of replacement parts for this critical equipment when such equipment is out of service. 

Similarly, certain of the Debtors’ electricity generation facilities are designed to utilize bulk quantities 

of specialized chemicals as part of their energy-production and pollution-control activities. Due to the 

chemical specifications and the quantities involved, the Debtors are dependent on a few Critical Goods 

Vendors to keep the electricity generation facilities in operation. Certain raw materials and fuels used 

in the Debtors’ generation facilities and gas assets are sourced locally because of the expense and 

inefficiency associated with transporting such materials and fuels. In many cases, there may be limited 

capacity to provide critical equipment, materials, or fuels within the general vicinity of a given electric 

or natural gas transmission or distribution asset or generation facility. 

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c) Regulatory Compliance Vendors 

The Debtors rely on Regulatory Compliance Vendors to assist in complying with various state 

and federal laws and regulations. For example, among other things, the Debtors rely on certain 

Regulatory Compliance Vendors to (i) manage the vegetation that grows near the Debtors’ 

transmission and distribution lines, (ii) perform safety checks and quality-assurance monitoring on 

electric transmission and distribution equipment, (iii) test emissions from the Debtors’ facilities to 

ensure compliance with environmental laws and regulations, and (iv) remove regulated waste and 

chemicals from the Debtors’ facilities for proper disposal. 

The services provided by the Regulatory Compliance Vendors are critical to maintaining the 

safety and compliance of the Debtors’ operations. Proper vegetation management reduces the risk of 

creating dangerous or hazardous conditions within the Debtors’ service area. Even the briefest 

disruption in the services provided by the Regulatory Compliance Vendors could cause significant 

disruption to the Debtors’ operations or increase the risk to the public. In addition, proper disposal of 

regulated waste and chemicals not only protects the environment and benefits the public health, but 

also ensures the safety of the Debtors’ employees. Further, absent the services provided by the 

Regulatory Compliance Vendors, governmental entities may attempt to take various actions that would 

have severe negative consequences on the Debtors’ operations, including levying fines or penalties 

against the Debtors, disallowing cost recovery for such services, requiring that certain of the Debtors’ 

facilities be idled or closed, or potentially revoking the Debtors’ permits or licenses. 

2. Outage Vendors 

The Debtors regularly plan outages of certain of their electric transmission and distribution 

assets, generation units, and gas facilities. During such planned outages, Outage Vendors perform 

maintenance on and repair, replace, upgrade, refuel, refurbish, and stress-test the Debtors’ generation 

and gas assets in an effort to ensure that such assets perform optimally during periods when electricity 

and gas consumption are at their peak. The Debtors schedule the planned outages for the least amount 

of time possible. 

Additionally, certain unplanned outages occur, oftentimes as a result of natural hazards or 

mechanical failures, particularly during storm season. To restore service to their customers as quickly 

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as possible, the Debtors utilize Outage Vendors to assist their crews in repairing power lines, poles, 

and transmission equipment. Certain of the Outage Vendors also provide critical monitoring services 

during storms or periods of high wind to reduce the occurrence and/or impact of unplanned outages. 

The Debtors’ Outage Vendors are skilled professionals and have specialized knowledge 

necessary to safely and reliably perform the required tasks during both planned and unplanned outages. 

It would be difficult for the Debtors to replace the Outage Vendors in a quick, safe, and cost-efficient 

manner and, therefore, the Outage Vendors are necessary and critical to the Debtors’ operations. 

Any delay in obtaining goods and services from the Outage Vendors likely would extend the 

duration of both planned and unplanned outages, which, in addition to increasing the cost of the 

outages, would adversely impact the reliability of the Debtors’ electric transmission and distribution 

assets, generation units, and gas facilities, as well as the supply of electricity and gas to the Debtors’ 

customers. 

3. Nuclear Facility Vendors 

The Nuclear Facility Vendors provide goods and services in connection with the Debtors’ 

operation and decommissioning of their nuclear reactor power units located at the DCPP and 

Humboldt Bay Power Plant. The Nuclear Facility Vendors maintain, repair, inspect, and refurbish the 

equipment located at these facilities and provide fuel and parts, as well as disposal, quality-control, 

physical-plant-security, and cybersecurity services. The Debtors’ nuclear operations and 

decommissioning activities are subject to extensive oversight by the United States Nuclear Regulatory 

Commission and other regulatory bodies. The Nuclear Facility Vendors are highly skilled and have 

specialized knowledge in the nuclear reactor space. Replacing Nuclear Facility Vendors would be 

difficult, time-consuming, and expensive. Any disruption with respect to the Debtors’ current nuclear 

assets could have significant regulatory consequences for the continued operation of those assets and 

adversely affect the public safety and health, as well as the reliability of the California electricity 

market. 

The Operational Integrity Suppliers are essential to the Debtors’ businesses and the lack of any 

of their particular goods, services, or skills, even for a short duration, could present public health and 

safety risks, would disrupt the Debtors’ operations, and would cause irreparable harm to the Debtors 

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and their reorganization efforts under chapter 11. In addition, many of the Operational Integrity 

Suppliers are smaller, independent, or regional operators and, given the already limited pool of such 

vendors and service providers in the geographic area, which pool has been further limited by the 

Debtors’ current financial situation, it would be difficult (and at times impossible) to replace such 

vendors or suppliers on a timely basis. 

B. Identification of the Operational Integrity Suppliers 

The Debtors, with the assistance of their advisors, spent significant time prior to the Petition 

Date analyzing and reviewing their operations, books and records, accounts payable systems, and 

prepetition vendor and service provider lists to identify those vendors, suppliers, and service providers 

that are in fact critical to the Debtors’ operations and public health and safety, the loss of which could 

materially harm the Debtors’ businesses and/or their customers and the public, in order to determine 

the Operational Integrity Suppliers. Through this process, the Debtors considered the following 

criteria: (i) whether a particular vendor or service provider is a select supplier or service provider; (ii) 

whether the services provided by the vendor are so vital, or the vendors’ operations are so intertwined 

with the Debtors’ businesses, that even the briefest disruption would raise safety or reliability risks or 

cause significant harm to the Debtors’ operations; (iii) whether the Debtors would be unable to obtain 

comparable goods or services from alternative sources on a cost-effective basis within a reasonable 

timeframe; (iv) whether the Debtors’ current inventory levels or service coverage is sufficient to meet 

customer demands while an alternative vendor or service provider could be located or qualified; (v) 

whether a vendor is party to an executory contract with the Debtors; and (vi) whether the vendor or 

service provider might be able to obtain (or has obtained) mechanics’ liens, possessory liens, shippers’ 

liens, or similar state-law trade liens on property necessary for the Debtors’ ongoing operations. 

After evaluating the information relevant to the above criteria, the Debtors have and, upon 

approval of the Court, will continue to designate, in their discretion, certain vendors as critical to the 

Debtors’ operations and, therefore, as Operational Integrity Suppliers. To do so, the Debtors have 

designated a centralized, high-level team comprised of representatives of the Debtors’ supply chain, 

finance, treasury, and in-house legal departments (collectively, the “Supplier Management 

Committee”) to review, assess, and (if the relief requested in the Operational Integrity Suppliers 

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Motion is granted), authorize payment to Operational Integrity Suppliers. The Debtors and their 

advisors have already implemented a detailed protocol (the “Payment Protocol”) to route all requests 

for Operational Integrity Supplier treatment through the Supplier Management Committee and to 

educate procurement, payables, and operations personnel on the process. 

1. Proposed Conditions to Receiving Payment 

To minimize the amount of payments required if the relief sought in the Operational Integrity 

Suppliers Motion is granted, the Debtors will utilize the Payment Protocol to identify particular 

Operational Integrity Suppliers and pay Operational Integrity Supplier Claims. The Debtors’ Payment 

Protocol can be generally summarized as follows: 

i. All aspects of any proposed payment of an Operational Integrity Supplier Claim 

will be scrutinized for, among other things, the amount of payment at issue, the 

terms offered by the particular vendor, whether the supplier is party to an 

executory contract, and the business need for the goods or services at issue. 

ii. All requests for Operational Integrity Supplier treatment, or vendors refusing 

shipment of goods or the provision of services due to non-payment of 

prepetition claims, will be received and reviewed by the Debtors’ Supplier 

Management Committee. Operational Integrity Supplier Claims will not be paid 

unless approved by the Supplier Management Committee. Additionally, the 

Supplier Management Committee will consult with the Debtors’ outside legal 

and financial advisors, as necessary, to ensure compliance with the Payment 

Protocol and that only those claims that are essential to maintaining the Debtors’ 

operations are paid pursuant to the Operational Integrity Suppliers Motion. 

iii. In addition to approval from the Supplier Management Committee, any request 

for payment of an Operational Integrity Supplier Claim in excess of $5,000,000 

must be approved by the Debtors’ Chief Financial Officer. 

iv. The Debtors shall endeavor to document all proposed payments pursuant to an 

executed Vendor Agreement (as defined below). 

v. Payments may be executed by specifically designated members of the Debtors’ 

Supplier Management Committee when the Payment Protocol has been 

completed and upon presentation of completed documentation. 

Although the Debtors and their advisors have effectively “pre-screened” certain vendors that 

have satisfied the criteria for Operational Integrity Supplier treatment, the Debtors are keenly aware 

that they must be prepared to address new or additional exigencies should they emerge, particularly in 

light of the size and scope of the Debtors’ operations. Thus, the Debtors’ Payment Protocol includes 

specific processes by which suppliers and vendors, including suppliers and vendors that may provide 

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essential goods or services outside of the aforementioned representative categories, may be designated 

as “Operational Integrity Suppliers” on a case-by-case and ongoing basis. 

2. Vendor Agreements 

The Debtors propose to condition the payment of Operational Integrity Supplier Claims on the 

agreement of individual Operational Integrity Suppliers to supply goods and services to the Debtors (i) 

on the normal and customary trade terms, practices, and programs (including credit limits, pricing 

rebates, cash discounts, timing of payments, coupon reconciliation, and other applicable terms and 

programs) that were in effect between such Operational Integrity Supplier and the Debtors within the 

twenty-four (24) month period prior to the Petition Date (the “Customary Trade Terms”), or (ii) such 

other trade terms as agreed to by the Debtors and an Operational Integrity Supplier. If the Debtors are 

unable to negotiate the continued supply of goods or the provision of services upon Customary Trade 

Terms, the Debtors seek authority, based on their business judgment, to pay Operational Integrity 

Suppliers all or a portion of their Operational Integrity Supplier Claims in return for the continued 

supply of critical goods or the provision of services. 

To ensure that Operational Integrity Suppliers continue doing business with the Debtors on 

Customary Trade Terms or on such other terms as agreed to by the Debtors and an Operational 

Integrity Supplier, the Debtors propose (i) that a letter substantially in the form attached to the 

Operational Integrity Suppliers Motion as Exhibit B (the “Vendor Agreement”) be delivered to, and 

executed by, the Operational Integrity Suppliers, along with a copy of the order granting the relief 

requested in the Operational Integrity Suppliers Motion, and (ii) that payment of Operational Integrity 

Supplier Claims include a communication of the following statement: 

By accepting this payment, the payee agrees to the terms of the order of 

the United States Bankruptcy Court for the Northern District of

California, dated _________, 2019, in the chapter 11 cases of PG&E 

Corporation and Pacific Gas and Electric Company (Case No. 19-

_____(__)), authorizing the Debtors to pay prepetition obligations of 

Operational Integrity Suppliers. 

If the Debtors, in their discretion, determine that an Operational Integrity Supplier has not 

complied with the terms and provisions of the Vendor Agreement or has failed to continue to comply 

with the Customary Trade Terms or such other terms that are individually agreed to by the Debtors and 

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such Operational Integrity Supplier, following the date of the agreement, the Debtors may terminate a 

Vendor Agreement. If a Vendor Agreement is so terminated, or if an Operational Integrity Supplier 

that has received payment of a prepetition claim later refuses to continue to supply goods or services in 

compliance with the Vendor Agreement or as otherwise agreed with the Debtors, the Debtors reserve 

their rights to and may seek approval from this Court to (i) deem such payment to apply to postpetition 

amounts payable to such Operational Integrity Supplier, if applicable, or (ii) take any and all 

appropriate steps to cause such Operational Integrity Supplier to repay payments made to it on account 

of its Operational Integrity Supplier Claim to the extent that such payments exceed the postpetition 

amounts then owing to such Operational Integrity Supplier. The Operational Integrity Supplier Claim 

shall then be reinstated in such an amount so as to restore the Debtors and the Operational Integrity 

Supplier to their original positions as if the payment of the Operational Integrity Supplier Claim had 

not been made. 

Some of the Operational Integrity Suppliers may also possess or have the right to assert Liens 

on the Debtors’ assets based upon the claims held by those Operational Integrity Suppliers. As a 

further condition of receiving payment of an Operational Integrity Supplier Claim, the Debtors propose 

that an Operational Integrity Supplier must agree to take whatever action is necessary to remove the 

Lien at the Operational Integrity Supplier’s sole expense. 

Finally, the Debtors propose to maintain a matrix summarizing (i) the name of each 

Operational Integrity Supplier paid, (ii) the amount paid to each Operational Integrity Supplier on 

account of its Operational Integrity Supplier Claim (and any 503(b)(9) Claims), and (iii) the type of 

goods or services provided by that Operational Integrity Supplier. This matrix will be provided, upon 

request, to the U.S. Trustee and the professionals retained by any official committee appointed in the 

Chapter 11 Cases; provided, that the professionals for any such committee shall keep the matrix 

confidential and shall not disclose any of the information in the matrix to anyone, including any 

member of such statutory committee, without the prior written consent of the Debtors. 

The Debtors have more than ample liquidity in the form of cash on hand and a commitment for 

approximately $5.5 billion in debtor-in-possession financing. I believe that some of the Operational 

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Integrity Suppliers will demand that the Debtors satisfy their prepetition obligations as a condition of 

doing business on a go-forward basis as a result of the commencement of the Chapter 11 Cases. In the 

three weeks leading up to the Petition Date, the Debtors estimate that they have experienced 

approximately $811 million in trade contraction from vendors and suppliers that have demanded 

accelerated payment, cash-in-advance, new or additional cash collateral, or have stopped shipping 

altogether. Further trade contraction from additional vendors could irreparably harm the Debtors’ 

business operations. In addition, the Utility relies on goods and services supplied by certain of the 

Operational Integrity Suppliers to comply with the order appointing a third-party monitor issued by the 

U.S. District Court for the Northern District of California as part of the Utility’s compliance with the 

sentencing terms of its January 27, 2017 federal criminal convictions. The goal of the monitor is to 

help ensure that the Utility takes reasonable and appropriate steps to, among other things, maintain the 

safety of its gas and electric operations. 

Failure to pay the Operational Integrity Supplier Claims would severely inhibit the Debtors’ 

ability to acquire necessary materials and services and maintain their electric transmission and 

distribution system, generation units, and gas facilities in order to safely and reliably provide essential 

utilities to the population of northern and central California, as well as remain in compliance with state 

and federal laws and regulations, including the 2017 monitor order. Such failure would cause 

irreparable financial harm to the Debtors and may jeopardize the Debtors’ ability to operate in a safe 

and reliable manner. Thus, I believe that the goods and services provided by the Operational Integrity 

Suppliers are so vital that the costs associated with even the briefest of disruption in goods and services 

would exceed the Operational Integrity Suppliers’ prepetition claims and, therefore, that payment of 

the Operational Integrity Suppliers Claims as requested in the Operational Integrity Supplier Motion is 

plainly an exercise of sound business judgment and necessary to a successful reorganization. 

Moreover, as noted above, the Operational Integrity Supplier Claims are limited to approximately 

5.5% of the Debtors’ total outstanding trade debt as of the Petition Date. 

In addition, payment of any 503(b)(9) Claims of any Operational Integrity Supplier merely 

accelerates the timing of payment and not the ultimate treatment of such claims, especially here where 

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the Debtors have ample liquidity. Accordingly, the relief should be granted and the Debtors should be 

authorized to pay the 503(b)(9) Claims of any Operational Integrity Supplier in accordance with the 

procedures and protocols set forth herein. 

For the reasons set forth herein, I respectfully submit that the relief requested in the Operational 

Integrity Supplier Motion is necessary and appropriate, is in the best interests of their estates and all 

parties in interest, is necessary to avoid immediate and irreparable harm to the Debtors, and should be 

granted. 

VIII. MOTION OF DEBTORS PURSUANT TO 11 U.S.C. §§ 105(a), 362(d), 363(b), 363(c), 

AND 364 AND FED. R. BANKR. P. 4001, 6003, AND 6004 FOR INTERIM AND FINAL 

ORDERS (I) AUTHORIZING THE DEBTOR TO MAINTAIN INSURANCE 

POLICIES, WORKERS’ COMPENSATION PROGRAM, AND SURETY BOND 

PROGRAM AND PAY ALL OBLIGATIONS WITH RESPECT THERETO; AND (II) 

GRANTING RELIEF FROM THE AUTOMATIC STAY WITH RESPECT TO 

WORKERS’ COMPENSATION CLAIMS (THE “INSURANCE MOTION”) 

Pursuant to the Insurance Motion, the Debtors request entry of interim and final orders 

authorizing the Debtors to (i) (a) maintain their Insurance Policies, Workers’ Compensation Program, 

and Surety Bond Program (each as defined below) in accordance with their prepetition practices and 

pursuant to the policies and agreements related thereto, and perform their obligations with respect to 

the foregoing during the Chapter 11 Cases, and (b) pay any prepetition obligations arising under the 

Insurance Policies, Workers’ Compensation Program, and Surety Bond Program; (ii) modify the 

automatic stay to the extent necessary to permit the Debtors’ employees to proceed with any claims 

they may have under the Workers’ Compensation Program, and for related relief. 

In the ordinary course of their operations, including the transmission and distribution of natural 

gas and electricity to the Debtors’ commercial and retail customers and operating and maintaining 

power generation and storage facilities, the Debtors maintain a workers’ compensation program (the 

“Workers’ Compensation Program”) and various liability, property, and other insurance 

arrangements (collectively, the “Insurance Policies,” and all premiums and other obligations related 

thereto, including any broker or advisor fees, associated federal excise taxes and state taxes, other fees, 

and deductibles, collectively, the “Insurance Obligations”) through several insurance carriers (each, 

an “Insurer”). Certain of the Insurance Policies, including the Debtors’ nuclear property liability 

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policies, provide unique coverage or terms and it would be difficult for the Debtors to obtain 

replacement policies in the market. A list of the Insurance Policies is annexed to the Insurance Motion 

as Exhibit B.36 A description of the Workers Compensation Program and the various Insurance 

Policies is set forth below. 

A. The Workers’ Compensation Program 

California Labor Code §§ 3700-3823 mandate that the Debtors provide for payment of all 

injury claims suffered by the Debtors’ employees arising out of the course and scope of their 

employment (the “Workers’ Compensation Claims”), either by obtaining third-party insurance or 

obtaining a certificate to self-insure from the California Department of Industrial Relations. The 

Workers’ Compensation Program covers, among other things, workers’ compensation and employer 

liability for accidents, death, or disease sustained by employees. The Debtors generally self-insure 

Workers’ Compensation Claims and the annual cost of administering the Workers’ Compensation 

Program, including labor costs, medical payments, and costs associated with the investigation of 

claims, medical records, examinations and bills, is approximately $10.2 million. This does not 

encompass the payment of any Workers’ Compensation Claims. 

To maintain the Workers’ Compensation Program, the Debtors are required to participate in the 

California Self-Insurers’ Security Fund (the “CSISF”), which covers workers’ compensation claims 

when self-insured companies default on their obligations. The CSISF also has the right to require that 

participants provide cash or other collateral (the “Collateral”) to secure their obligations if they 

default. To participate in the CSISF for the period July 1, 2018 through June 30, 2019, the Debtors 

paid an annual fee of approximately $750,000 on July 14, 2018. The Debtors also are subject to an 

annual assessment of approximately $1,500,000, paid to the California State Division of Workers’ 

 

36 The Debtors have made an extensive and good-faith effort to identify all of their Insurance Policies 

and Insurers on Exhibit B to the Insurance Motion. However, due to the size and complexity of the 

Debtors’ operations, certain Insurance Policies and Insurers may not be listed therein. Accordingly, 

Exhibit B to the Insurance Motion is a non-exhaustive list of the Debtors’ Insurance Policies. Further, 

the Debtors may, in the future, enter into new Insurance Policies. To the extent that the Debtors 

identify additional Insurance Policies not listed on Exhibit B to the Insurance Motion, or enter into new 

Insurance Policies, pursuant to the Insurance Motion, the Debtors seek the authority to continue such 

Insurance Policies uninterrupted and honor, in the Debtors’ discretion, all Insurance Obligations 

relating thereto. 

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Compensation to cover costs associated with administering the CSISF. The Debtors paid this annual 

assessment on December 18, 2018 for the period July 1, 2018 through June 30, 2019. The Debtors’ 

Workers’ Compensation Program also includes coverage for certain employees (the “LHW 

Employees”) protected under the Longshore and Harbor Workers’ Compensation Act (the 

“LHWCA”), 33 U.S.C. §§ 901–950. Pursuant to the LHWCA, the Debtors posted collateral in the 

form of two evergreen letters of credit in the amounts of $800,000 and $300,000 (the “LHWCA 

LOCs”), respectively, with the United States Department of Labor. 

Although the Debtors generally self-insure and self-administer all Workers’ Compensation 

Claims under their Workers’ Compensation Program, the Debtors also obtain third-party insurance in 

connection with (i) their employees working outside of California through Employers Insurance 

Company of Wausau, with an annual policy premium of approximately $9,000 (the “Wausau 

Policy”), and (ii) claims that exceed $10 million per occurrence through AEGIS Insurance Services, 

Inc., with an annual premium of approximately $230,000 (the “AEGIS Policy”). As of the Petition 

Date, there are no outstanding premiums due under the Wausau Policy or the AEGIS Policy. 

In the ordinary course of business, because the Debtors are largely self-insured, the Debtors 

may be obligated to pay all or part of a Workers’ Compensation Claim directly to an employee, his or 

her medical providers, or his or her heirs or legal representatives. As of the Petition Date, the Debtors 

estimate that there were approximately 7,700 open claims under the Workers’ Compensation Program. 

The Debtors estimate that they pay an average of approximately $2.9 million per month on account of 

Workers’ Compensation Claims. The Debtors seek authority to maintain the Workers’ Compensation 

Program in the ordinary course of business and to pay all prepetition amounts related to the Workers’ 

Compensation Program as well as amounts that may become due and owing with respect to the 

Workers’ Compensation Program during these Chapter 11 Cases. Pursuant to the Insurance Motion, 

the Debtors also seek authority to provide Collateral to the CSISF to the extent required. 

B. Insurance Policies 

The Debtors maintain various liability and property Insurance Policies which provide the 

Debtors with insurance coverage for general commercial claims, property damage, nuclear property 

liability claims, cyber liability claims, crime, pollution and environmental-related claims, collision and 

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other liabilities arising from company-owned vehicles, claims relating to the administration of 

employee benefit plans and the Debtors’ employment practices, directors’ and officers’ liability, and 

other property-related and general liabilities, as well as excess policies related to the same. The 

Debtors maintain the Insurance Policies to, among other things, help manage the various risks 

associated with their electricity and natural gas business. Continuation of the Insurance Policies is 

essential to the ongoing operation of the Debtors’ business. 

Pursuant to each of the Insurance Policies, the Debtors are required to pay premiums based 

upon a fixed rate established and billed by each Insurer37 in addition to covering applicable 

deductibles. The Insurance Policies each have an annual premium that is paid prospectively. The 

annual premiums for the Insurance Policies currently in effect aggregate to approximately 

$439,000,000. The Debtors are not aware of any outstanding premiums or other amounts owed to the 

various Insurers for the Insurance Policies. 

C. The Debtors’ Surety Bond Program 

In the ordinary course of business, the Debtors are required to provide surety bonds (each, a 

“Surety Bond”) to certain third parties, including governmental units and other public agencies, to 

secure the Debtors’ payment or performance of certain obligations (the “Surety Bond Program”). 

These include, among other things, Surety Bonds related to various construction and environmental 

remediation projects and related permits and/or or licenses, self-insurance obligations, lease 

agreements with the State of California, land maintenance obligations, and certain tax obligations. 

Often, statutes or ordinances require the Debtors to post the Surety Bonds. A list of Surety Bonds in 

 

37 The Debtors purchase certain of their Insurance Policies through a participation agreement with 

Energy Insurance Services, Inc. (“EIS”), a “sponsored captive insurer”. Although EIS does not itself 

write any policies, EIS procures insurance coverage from third-party insurers, for the benefit of the 

Debtors, allowing the Debtors to take advantage of reinsurance markets (accessible to EIS but 

otherwise inaccessible to the Debtors), and thereby securing lower premiums and supplemental 

coverage that would otherwise be unavailable to the Debtors. With respect to Insurance Policies that 

are procured through EIS, the Debtors pay any related premiums directly to EIS. 

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the Surety Bond Program is attached as Exhibit C to the Insurance Motion.38 The Surety Bonds are 

issued by XL Specialty Insurance Company and Liberty Mutual Insurance Company and certain of its 

subsidiaries (each, a “Surety”). The Debtors estimate that as of the Petition Date, the total face 

amount of all outstanding Surety Bonds is approximately $166,000,000. 

As a condition to issuing the Surety Bonds, the Sureties require the Debtors to enter into 

indemnity agreements (collectively, the “Surety Indemnity Agreements”), pursuant to which the 

Debtors indemnify the Sureties from any loss, cost, or expense that the Sureties may incur on account 

of the issuance of the Surety Bonds on behalf of the Debtors (the “Indemnity Obligations”). Under 

the terms of the Surety Indemnity Agreements, the Sureties may demand cash collateral or letters of 

credit to secure the Indemnity Obligations at any point during the time the Surety Bonds remain 

outstanding. As of the Petition Date, the Debtors have not posted any cash collateral or letters of credit 

in connection with the Surety Indemnity Agreements. Just recently, however, Liberty Mutual, the 

Debtors’ principal Surety Bond provider, issued a notice of cancellation of certain Surety Bonds and a 

demand for security in the form of a letter of credit in the amount of $50,000,000. 

Pursuant to the Surety Bond Program, the Debtors pay premiums based upon a fixed rate 

established and billed by each Surety thereunder (collectively, the “Surety Premiums” and, together 

with the Indemnity Obligations, the “Surety Bond Obligations”). The Surety Premiums are generally 

determined on an annual basis and total in the aggregate approximately $820,000 per year. The 

Debtors remit Surety Premium payments when the bonds are issued or renewed, typically on an annual 

basis. The Debtors are not aware of any Surety Premiums that are outstanding as of the Petition Date. 

In addition, the Debtors are not aware of any Surety Bonds that have been drawn. 

To continue their business operations during these Chapter 11 Cases, the Debtors must be able 

to continue to provide financial and other assurances to state governments, regulatory agencies, and 

 

38 The Debtors have made an extensive and good-faith effort to identify all of their Surety Bonds on 

Exhibit C to the Insurance Motion. However, due to the size and complexity of the Debtors’ 

operations, Surety Bonds and Sureties may not be listed on Exhibit C to the Insurance Motion. 

Accordingly, Exhibit C to the Insurance Motion is a non-exhaustive list of the Debtors’ Surety Bonds. 

Further, the Debtors may, in the future, obtain new Surety Bonds not listed on Exhibit C. To the extent 

that the Debtors identify additional Surety Bonds not listed on Exhibit C or obtain new Surety Bonds, 

the Debtors seek the authority to continue such Surety Bonds uninterrupted and honor, in the Debtors’ 

discretion, all Surety Bond Obligations (as defined herein) relating thereto. 

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other third parties in the form of Surety Bonds. This requires the Debtors to maintain their existing 

Surety Bond Program, including the payment of Surety Bond Obligations as and when they come due, 

providing the Sureties with collateral, if required, renewing or potentially acquiring additional bonding 

capacity as needed in the ordinary course of their business, and executing other indemnity agreements, 

as needed, in connection with the Surety Bond Program. Accordingly, approval of the relief requested 

in the Insurance Motion with respect to the Surety Bond Obligations is warranted and the Debtors 

should be authorized to maintain and continue their Surety Bond Program and pay all Surety Bond 

Obligations, including, without limitation, any Surety Bond Obligations related to the period prior to 

the Petition Date. It is important to note that substantially all, if not all, of the outstanding Surety 

Bonds were provided in connection with ongoing projects and other matters that the Debtors will 

continue in the ordinary course of their business and, accordingly, the Debtors do not expect that any 

outstanding Surety Bonds will be called upon. The Debtors also expect that if the relief sought in the 

Insurance Motion is granted, it should address the concerns raised by Liberty Mutual and result in a 

withdrawal of its notice of cancellation of the Surety Bonds. 

D. The Debtors’ Insurance Service Providers 

The Debtors employ brokers (the “Brokers”), including Marsh, LLC, Price Forbes & Partners, 

and Guy Carpenter & Company, LLC, to coordinate the procurement and negotiation of certain 

Insurance Policies including, but not limited to, those related to workers’ compensation, directors’ and 

officers’ liability, fiduciary liability, general commercial liability, and first-party property liability 

policies. With respect to most of the Insurance Policies as to which the Brokers are involved, the 

Insurers charge the Brokers directly for all insurance premiums and other amounts due under such 

Insurance Policies. The Brokers then send the Debtors a statement for the payment of such insurance 

premiums, and, once paid by the Debtors, the Brokers submit the payments to the Insurers.39 The 

Brokers receive a fee (the “Broker Fees”) from the Debtors for administering certain of the Insurance 

Policies. 

 

39 With respect to Insurance Policies that are procured through EIS, the Debtors pay any related 

premiums directly to EIS and do not use Brokers. 

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The Debtors also employ a third-party administrator (the “Insurance Administrator”) to 

investigate, administer, and pay claims arising under their Insurance Policies. The Debtors pay fees for 

these services on a monthly basis (such fees, together with the Brokers’ Fees, the “Service Provider 

Fees”). The Service Provider Fees are budgeted based on a flat fee and total approximately 

$5,500,000 each year. 

Because the Brokers and Insurance Administrator are intimately familiar with the Debtors and 

the Insurance Policies, the Debtors request authority, but not direction, to pay any prepetition Service 

Providers’ Fees that may be owed, including as a result of any future reconciliations, and to continue to 

honor all of their obligations to them in the ordinary course. Based on the information currently 

available, the Debtors are not aware of any Service Provider Fees that are owed with respect to the 

period prior to the Petition Date. 

In light of the risks applicable to the Debtors’ operations and the critical need for the Debtors to 

protect their assets and operations from such risks and to provide Surety Bonds as required, it is 

essential that the Debtors maintain the Insurance Policies, and the Surety Bond Program and pay all 

Insurance Obligations, Surety Bond Obligations, and Service Provider Fees during the course of these 

Chapter 11 Cases. Without authority to maintain and pay amounts owing in connection with these 

programs, the ability of the Debtors to conduct operations in many locations could come to a halt to the 

detriment and prejudice of all parties in interest. Additionally, based on the Debtors’ current 

circumstances, it is not likely that the Debtors will be able to renew or replace their existing Insurance 

Policies or Surety Bonds on terms more favorable than those currently offered by the Insurers and 

Sureties. The process of establishing new programs would also be burdensome and costly to the 

Debtors. Additionally, the relief sought in the Insurance Motion will avoid the risk of any potential 

disruption of necessary coverage and the Debtors’ potential exposure to significant liability and to 

fines under various applicable federal and state laws and regulations. 

For the reasons set forth herein, I respectfully submit that the relief requested in the Insurance 

Motion is necessary and appropriate, is in the best interests of their estates and all parties in interest, is 

necessary to avoid immediate and irreparable harm to the Debtors, and should be granted. 

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IX. MOTION OF DEBTORS PURSUANT TO 11 U.S.C. §§ 105(a), 363(b), 507(a) AND 

541(d) AND FED. R. BANKR. P. 6003 AND 6004 FOR INTERIM AND FINAL 

AUTHORITY TO PAY CERTAIN PREPETITION TAXES AND ASSESSMENTS AND 

GRANTING RELATED RELIEF (THE “TAXES MOTION”) 

Pursuant to the Taxes Motion, the Debtors request entry of interim and final orders authorizing, 

but not directing, the Debtors to pay prepetition taxes, assessments, fees, and other charges in the 

ordinary course of business, including any such taxes, assessments, fees, and charges subsequently 

determined upon audit, or otherwise, to be owed (collectively, the “Taxes and Assessments”). 

In the ordinary course of their businesses, the Debtors collect, withhold, and incur a variety of 

Taxes and Assessments that they remit periodically to various federal, state, and local taxing, licensing, 

regulatory, and other governmental authorities (collectively, the “Taxing Authorities”). A list of the 

Taxing Authorities is annexed to the Taxes Motion as Exhibit B (the “Taxing Authorities List”).40

As set forth in further detail below, the Debtors generally pay the Taxes and Assessments bimonthly, monthly, quarterly or annually, in each case, as required by applicable laws and regulations. 

As of the Petition Date, the Debtors estimate that an aggregate amount of approximately $139,200,000 

in Taxes and Assessments are due and owing to the various Taxing Authorities, of which, 

approximately $11,300,000 will come due during the Interim Period. A chart outlining the various 

categories and approximate amounts of the Taxes and Assessments that the Debtors are seeking 

authority to pay pursuant to the Taxes Motion is set forth below. The amounts of the Taxes and 

Assessments set forth below are good faith estimates based on the Debtors’ books and records and 

remain subject to potential audits and other adjustments. As such, the Debtors also seek authority to 

pay any Taxes and Assessments due and owing following any such audit and adjustments. 

 

40 The Debtors have made an extensive and good-faith effort to identify all Taxing Authorities to 

which the Debtors owe any amount on Exhibit B to the Taxes Motion. However, due to the size and 

complexity of the Debtors’ operations, certain Taxing Authorities may not be listed therein. 

Accordingly, Exhibit B to the Taxes Motion is a non-exhaustive list of Taxing Authorities to which the 

Debtors may owe Taxes and Assessments. To the extent that the Debtors identify additional Taxing 

Authorities not listed on Exhibit B to the Taxes Motion, the Debtors seek the authority to pay any 

Taxes and Assessments due and owing to such Taxing Authorities.

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Categories of Taxes and 

Assessments 

Approx. Amount 

Seeking Authority 

to Pay on Interim 

Basis 

Approx. Amount 

Seeking Authority to 

Pay on Final Basis 

Sales and Use Taxes $1,100,000 $1,100,000

Property Taxes $0 $43,500,000

Income Taxes De minimis De minimis 

Excise Taxes $200,000 $200,000 

San Francisco Gross Receipts 

Tax and Payroll Tax 

$3,200,000 $5,500,000 

Pass Through Fees $6,800,000 $79,700,000

Regulatory Fees $0 $9,200,000

Other Taxes and Fees De minimis De minimis 

Total Taxes and 

Assessments: 

$11,300,000 $139,200,000 

A. Sales and Use Taxes 

The Debtors incur sales tax on account of the purchase of tangible personal property utilized by 

the Debtors in the ordinary course of business (collectively, the “Sales Taxes”). The Debtors incur use 

taxes on account of the purchase of tangible personal property utilized by the Debtors in the ordinary 

course of business from vendors who do not collect sales tax (collectively, the “Use Taxes” and, 

together with the Sales Taxes, the “Sales and Use Taxes”). 

The Debtors pay approximately $500,000 to $4,000,000 per month in aggregate Sales and Use 

Taxes depending on the volume of nuclear fuel purchases, which can be seasonal. Although the 

Debtors believe they are current with respect to their payment of Sales and Use Taxes, the Debtors 

estimate that, as of the Petition Date, they owe approximately $1,100,000 in Sales and Use Taxes, all 

of which will become due and payable during the Interim Period. 

B. Property Taxes 

The Debtors own real and personal property located in approximately fifty (50) counties within 

the State of California, as well as Texas and Nevada, that are subject to state and local real and 

personal property taxes (the “Property Taxes”). The California State Board of Equalization 

determines the aggregate value of all real and personal property owned by the Debtors in the state and 

allocates that value among each of the counties where property is located. The counties then tax the 

Debtors based on the allocated property values. Property Taxes accrue on an annualized basis and are 

paid twice a year. Property Taxes with respect to real property create a statutory first priority lien on 

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the taxed property to the extent not paid. In fiscal year 2018, the Debtors paid approximately 

$491,900,000 in aggregate Property Taxes to the relevant Taxing Authorities. The Debtors estimate 

that, as of the Petition Date, approximately $43,500,000 of Property Taxes have accrued or relate to the 

period prior to the Petition Date but have not yet been paid, none of which will become due and 

payable during the Interim Period. 

C. Income Taxes 

Under certain applicable laws, federal, state, and local Taxing Authorities levy taxes based on 

the Debtors’ income (the “Income Taxes”).41 The Debtors allocate income tax liability between 

themselves pursuant to that certain Tax Sharing Agreement dated as of January 1, 1997. In California, 

Taxing Authorities are entitled to assert statutory liens on the Debtors’ property that is located, or 

subject to tax, in the respective jurisdiction if these income taxes are not paid. Moreover, in California, 

directors and officers may be personally liable for failure to timely pay these taxes. The Debtors also 

pay a relatively minor amount of Income Taxes in several other states and in the District of Columbia. 

The Debtors are required to pay Income Taxes on a quarterly pre-payment basis (which is offset 

against amounts the Debtors are ultimately determined to owe on an annual basis). The Debtors have 

substantial net operating losses and do not anticipate the need to pay any federal or California Income 

Taxes for the period prior to the fiscal year ending December 31, 2017. The Debtors estimate that, as 

of the Petition Date, they owe a de minimis amount of state and local Income Taxes in jurisdictions 

other than California, which will come due during the Interim Period. 

D. Excise Taxes 

Under applicable laws, federal, state, and local Taxing Authorities levy taxes based on the 

Debtors’ purchases or sales of specific goods (e.g., alternative fuel excise tax) or services (e.g., 

insurance premiums paid to foreign insurance companies) (collectively, the “Excise Taxes”). The 

Debtors generally pay Excise Taxes on a quarterly basis or as otherwise required by applicable laws 

and regulations. The Debtors estimate that, as of the Petition Date, they owe approximately $200,000 

in Excise Taxes, all of which will become due and payable during the Interim Period. 

 

41 Income Taxes includes California franchise taxes, which are calculated based on income. 

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E. San Francisco Gross Receipts and Payroll Tax 

The Debtors incur a Gross Receipts and Payroll Tax assessed by the City of San Francisco (the 

“Gross Receipts Tax”) to operate their businesses in that city. The Gross Receipts Tax is generally 

remitted by the Debtors several times a year and is based on San Francisco gross receipts and payroll. 

In 2018, the Debtors’ aggregate liability for the Gross Receipts Tax was approximately $13,300,000. 

Although the Debtors believe they are current with respect to their payment of the Gross Receipts Tax, 

the Debtors estimate that, as of the Petition Date, they owe approximately $5,500,000 in Gross 

Receipts Tax, $3,200,000 of which will become due and payable during the Interim Period. 

F. Pass Through Fees 

The Debtors collect a variety of fees and taxes, including, but not limited to, utility users tax, 

excessive electric use tax, business license tax, and city franchise surcharges and other fees collected 

through customer billings and remitted to the applicable state and local municipalities (collectively, the 

“Pass Through Fees”). Pass Through Fees are generally remitted by the Debtors to the applicable 

Taxing Authorities several times a year. Pass Through Fees vary by county and are typically based on 

total revenues allocated based on public and private miles of electricity lines. Pass Through Fees paid 

to cities are either based on the Debtors’ revenues within the city’s boundaries or are calculated using 

the same formula that is used by the counties. In fiscal year 2018, the Debtors accrued approximately 

$690,500,000 in aggregate Pass Through Fees to the relevant Taxing Authorities. Although the 

Debtors believe that they are current with respect to their payment of Pass Through Fees, the Debtors 

estimate that, as of the Petition Date, they owe approximately $79,700,000 in Pass Through Fees, 

approximately $6,800,000 of which will become due and payable during the Interim Period. 

G. Regulatory Fees 

The Debtors collect and remit various regulatory fees to commissions that regulate public 

utility companies, including for audit costs incurred by such commissions (the “Regulatory Fees”). 

These commissions include, without limitation, the California Energy Resources Conservation and 

Development Commission the Federal Energy Regulatory Commission, Nuclear Regulatory 

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Commission, and the California Public Utilities Commission.42 Regulatory Fees are generally remitted 

by the Debtors to the applicable Taxing Authorities quarterly. The Debtors estimate that 

approximately $9,200,000 in Regulatory Fees have accrued and remain unpaid as of the Petition Date, 

none of which will become due and owing during the Interim Period. 

H. Other Taxes and Fees 

In addition to the foregoing, the Debtors collect, withhold, or incur certain other taxes, fees, and 

charges, including, but not limited to, taxes, license and registration fees, environmental permit fees, 

land fees, and encroachment fees paid on behalf of the Debtors and their subsidiaries (collectively, 

“Other Taxes and Fees”). Although the Debtors believe that they are current with respect to their 

payment of Other Taxes and Fees, the Debtors estimate that, as of the Petition Date, they owe a de 

minimis amount of Other Taxes and Fees, which will become due and payable during the Interim 

Period. 

The Debtors must continue to pay the Taxes and Assessments to continue operating in certain 

jurisdictions and to avoid the incurrence of unnecessary costs during the Chapter 11 Cases. 

Specifically, it is my understanding that the Debtors’ failure to pay the Taxes and Assessments may 

interfere with the Debtors’ continued operations and restructuring, and increase the scope of secured 

and priority claims held by the applicable Taxing Authorities against the Debtors’ estates. I further 

understand, based on discussions with counsel, that certain of the Taxes and Assessments (such as 

certain Pass Through Fees) may constitute “trust fund” taxes, which the Debtors are required to collect 

or hold in trust for payment to the Taxing Authorities. Moreover, failure to pay certain of the Taxes 

and Assessments may expose the Debtors’ directors and officers to personal liability, which would 

cause further distraction and delays and negatively impact the administration of these Chapter 11 

Cases. 

 

42 California Public Utilities Commission Regulatory Fees include not only direct regulatory fees, but 

also the costs of indirect regulatory expenses, such as directed contract costs for Commission auditors 

and consultants; and the costs of intervenor compensation awards pursuant to California Public 

Utilities Code §§ 1801-1812, which require Commission jurisdictional utilities to pay the reasonable 

costs of an intervenor's participation if that party makes a substantial contribution to the Commission's 

proceedings. The costs of these direct and indirect Regulatory Fees are recovered in the Debtors’ utility 

rates. 

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Accordingly, for the reasons set forth herein, I respectfully submit that the relief requested in 

the Taxes Motion is necessary and appropriate, is in the best interests of their estates and all parties in 

interest, is necessary to avoid immediate and irreparable harm to the Debtors, and should be granted. 

X. MOTION OF DEBTORS PURSUANT TO 11 U.S.C. §§ 366 AND 105(a) REQUESTING 

ENTRY OF AN ORDER (I) APPROVING DEBTORS’ PROPOSED FORM OF 

ADEQUATE ASSURANCE OF PAYMENT TO UTILITY PROVIDERS, (II) 

ESTABLISHING PROCEDURES PROVIDING ADEQUATE ASSURANCE AND 

RESOLVING OBJECTIONS OF UTILITY PROVIDERS, AND (III) PROHIBITING 

UTILITY PROVIDERS FROM ALTERING, REFUSING, OR DISCONTINUING 

UTILITY SERVICE (THE “UTILITIES MOTION”) 

Pursuant to the Utilities Motion, the Debtors are seeking entry of an order (i) approving the 

Debtors’ proposed form of adequate assurance of payment for postpetition Utility Services (as defined 

below), (ii) establishing procedures for providing adequate assurance and resolving objections of 

Utility Providers (as defined below) relating to the adequacy of the proposed adequate assurance, and 

(iii) prohibiting the Utility Providers from altering, refusing, or discontinuing service to, or 

discriminating against, the Debtors because of the commencement of the Chapter 11 Cases or a debt 

that is owed by the Debtors for Utility Services rendered prior to the Petition Date. 

A. The Debtor’s Utility Services 

1. Utility Providers 

In the ordinary course of their businesses, the Debtors incur expenses for electricity, natural 

gas, oil, water, sewer, telephone, and other utility services (collectively, the “Utility Services”). A list 

(the “Utility Service List”) of the approximately 150 utility providers (collectively, the “Utility 

Providers”) that provide Utility Services to the Debtors as of the Petition Date is attached to the 

Utilities Motion as Exhibit B.43

Historically, the Debtors have a good payment history with the Utility Providers. To the best of 

the Debtors’ knowledge, there are no defaults or material arrearages for the Debtors’ undisputed 

invoices for prepetition Utility Services other than payment interruptions that may be caused by the 

 

43 The Debtors reserve the right to amend or supplement the Utility Service List to include any Utility 

Provider omitted. The inclusion of any entity on the Utility Service List is not an admission that such 

entity is a utility within the meaning of section 366 of the Bankruptcy Code, and the Debtors reserve 

the right to contest any such characterization in the future. Additionally, the Debtors themselves 

provide significant Utility Services to their business operations. For obvious reasons those Utility 

Services are not included in the Utilities Motion. 

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commencement of the Chapter 11 Cases. Based on the monthly average for the twelve (12) months 

prior to the Petition Date, the Debtors estimate that their cost of Utility Services for the next thirty (30) 

days will be approximately $8,600,000. 

Uninterrupted Utility Services are essential to the Debtors’ ongoing operations and, therefore, 

the success of the Debtors’ reorganization. The Debtors coordinate their complex businesses through 

their headquarters in San Francisco, California and their other facilities located in Northern California, 

including without limitation, their numerous power generation facilities, distribution facilities, 

compressor stations, and storage facilities. Any interruption of Utility Services provided at these 

locations would disrupt the Debtors’ ability to communicate with, and provide the necessary support 

and services to, their employees, vendors, various regulatory authorities, and, most importantly, their 

customers. Should any Utility Provider alter, refuse, or discontinue service, even briefly, the Debtors’ 

business operations could be severely disrupted, which, in turn, could lead to subsequent power 

outages or other service disruptions for the Debtors’ customers. Any disruptions, therefore, would 

negatively impact the Debtors’ business operations, customers, and all parties in interest. 

B. Proposed Adequate Assurance 

The Debtors intend to pay all postpetition obligations owed to the Utility Providers in a timely 

manner and have sufficient funds to do so. The Debtors have a commitment for debtor in possession 

financing, which, together with existing cash and cash generated from operations, is more than 

adequate to fund their day to day expenses, including postpetition amounts for Utility Services. 

Notwithstanding the foregoing, to provide adequate assurance of payment to the Utility Providers 

pursuant to section 366(c) of the Bankruptcy Code, the Debtors propose to deposit into a segregated, 

interest-bearing bank account (the “Adequate Assurance Account”) a sum equal to the cost of two (2) 

weeks of Utility Services, calculated based on the historical average of the Debtors’ utility expenses 

over the twelve-month period prior to the Petition Date (the “Adequate Assurance Deposit”). The 

Adequate Assurance Deposit will not, however, include any amount on account of any Utility Provider 

that (a) agrees to a lesser amount, (b) already holds a deposit, letter of credit, surety bond, or other type 

of instrument securing the Debtors’ performance equal to or greater than two weeks of Utility Services, 

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or (c) is paid in advance for its Utility Services.44 Based on the foregoing calculation, the Debtors 

estimate that the total amount of the Adequate Assurance Deposit will be approximately $4,800,000. 

The Debtors shall, however, have the right to reduce the Adequate Assurance Deposit to the 

extent that any of the following occurs: (a) the Adequate Assurance Deposit includes any amount on 

account of a Utility Provider that the Debtors subsequently determine should be removed from the 

Utility Service List; (b) a Utility Provider properly serves an Additional Adequate Assurance Request 

(as defined below), and any settlement results in such Utility Provider’s removal from the Utility 

Service List or in the Debtors’ provision of alternate assurance to the Utility Provider; or (c) any 

Utility Provider has instead been provided with a letter of credit, cash deposit, or some other form of 

security acceptable to the Utility Provider. The Debtors submit that the Adequate Assurance Deposit, 

together with the Debtors’ ability to pay for future Utility Services in the ordinary course of business 

(the “Proposed Adequate Assurance”), constitutes sufficient adequate assurance to the Utility 

Providers. 

C. Proposed Adequate Assurance Procedures and the Resolution of Objections 

The Debtors propose that the procedures described below (the “Adequate Assurance 

Procedures”) be utilized in connection with the Proposed Adequate Assurance: 

a. The Debtors will fax, e-mail, serve by overnight mail, or otherwise 

expeditiously send a copy of the Proposed Order (as approved by the 

Bankruptcy Court), which includes the proposed Adequate Assurance 

Procedures, to each Utility Provider on the Utility Service List within three (3) 

business days after entry of the Proposed Order by the Bankruptcy Court. 

b. The Debtors will deposit the Adequate Assurance Deposit in the Adequate 

Assurance Account within five (5) business days of entry of the Proposed Order; 

provided, that to the extent any Utility Provider receives any additional 

assurance of payment as set forth herein, the Debtors may reduce the Adequate 

Assurance Deposit maintained in the Adequate Assurance Account by such 

amount. 

c. The portion of the Adequate Assurance Deposit attributable to each Utility 

Provider shall be returned to the Debtors on the earlier of (i) the date on which 

the Debtors have terminated the service from such provider and have satisfied in 

full all postpetition obligations due and owing to the applicable Utility Provider 

and (ii) the effective date of a plan of reorganization in the Chapter 11 Cases, if 

not applied earlier. 

 

44 To the extent that any Utility Provider is or will hold any cash deposit from the Debtors that is in 

excess of two (2) weeks’ worth of the average utility cost, the Debtors reserve their right to demand 

return of such excess amounts. 

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d. Any Utility Provider not satisfied with the Proposed Adequate Assurance must 

serve a written request for additional assurance (an “Additional Assurance

Request”) on the following parties: (i) the Debtors, 77 Beale Street, San 

Francisco, CA 94105 (Attn: Mari Becker and Nicholas Bijur); (ii) Weil, Gotshal 

& Manges LLP, 767 Fifth Avenue, New York, New York 10153 (Attn.: Stephen 

Karotkin, Esq. and Lisa Lansio, Esq.); and (iii) Keller & Benvenutti, 650 

California Street, Suite 1900, San Francisco, CA 94108 (Attn: Tobias S. Keller, 

Esq. and Jane Kim, Esq.) (collectively, the “Adequate Assurance Notice 

Parties”). 

e. Any Additional Assurance Request must (i) be made in writing, (ii) set forth the 

location for which Utility Services are provided, (iii) include a summary of the 

Debtors’ payment history relevant to the affected account(s), including the 

amounts of any security deposits, and (iv) set forth an explanation of why the 

Utility Provider believes the Proposed Adequate Assurance is not sufficient 

adequate assurance of future payment. 

f. Any Additional Assurance Request must be made and actually received by the 

Adequate Assurance Notice Parties by no later than twenty (20) days after entry 

of the Proposed Order by the Court, or such greater period as may be agreed to 

by the Debtors and the relevant Utility Provider. If a Utility Provider fails to 

timely file and serve an Additional Assurance Request, it shall: (i) be deemed to 

have received adequate assurance of payment “satisfactory” to such Utility 

Provider in compliance with section 366 of the Bankruptcy Code; and (ii) be 

forbidden to discontinue, alter, or refuse service to, or discriminate against, the 

Debtors on account of any unpaid prepetition charges, or require additional 

assurance of payment other than the Proposed Adequate Assurance. 

g. Upon receipt by the Adequate Assurance Notice Parties of any Additional 

Assurance Request as set forth above, the Debtors shall have the greater of (i) 

twenty (20) days from the receipt of such Additional Assurance Request, and (ii) 

thirty (30) days from entry of the Proposed Order (the “Resolution Period”) to 

negotiate with such Utility Provider to resolve such Utility Provider’s Additional 

Assurance Request, or such greater period as may be agreed to by the Debtors 

and the relevant Utility Provider. 

h. If the Debtors, in their sole discretion, determine that an Additional Assurance 

Request or any consensual agreement reached in connection therewith is 

reasonable, the Debtors may resolve any Additional Assurance Request without 

further order of the Court, and may, in connection with any such agreement, in 

their sole discretion, provide a Utility Provider with additional adequate 

assurance of future payment, including but not limited to cash deposits, 

prepayments, or other forms of security. 

i. If the Debtors determine that the Additional Assurance Request is not 

reasonable and are not able to reach a resolution with the Utility Provider during 

the Resolution Period, the Debtors, during or immediately after the Resolution 

Period, will schedule a hearing before this Court to determine the adequacy of 

assurances of payment with respect to such Utility Provider (the 

“Determination Hearing”) pursuant to section 366(c)(3) of the Bankruptcy 

Code. 

j. Pending resolution of a disputed Additional Assurance Request at the 

Determination Hearing, the relevant Utility Provider shall be prohibited from 

discontinuing, altering, or refusing service to the Debtors on account of unpaid 

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charges for prepetition services or on account of any objections to the Proposed 

Adequate Assurance. 

Absent compliance by the Utility Providers with the above Adequate Assurance Procedures, the 

Debtors request that the Utility Providers be prohibited from altering, refusing, or discontinuing 

service on account of any unpaid prepetition charges and be deemed to have received adequate 

assurance of payment in compliance with section 366 of the Bankruptcy Code. 

D. Subsequent Modifications of Utility Service List 

The Debtors have made an extensive and good-faith effort to identify all of their Utility 

Providers and include them on the Utility Service List. Nonetheless, to the extent that the Debtors 

subsequently identify additional Utility Providers, the Debtors seek authority, in their sole discretion, 

to amend the Utility Service List to add any Utility Provider. The Debtors further request that the 

Court’s order approving the Utilities Motion be deemed to apply to any such subsequently identified 

Utility Provider, regardless of when such Utility Provider is added to the Utility Service List. The 

Debtors will serve a copy of the Utilities Motion and the Proposed Order on any such Utility Provider 

subsequently added to the Utility Service List and deposit two weeks’ worth of estimated utility costs 

in the Adequate Assurance Account for the benefit of such Utility Provider (less any amounts already 

on deposit with any such subsequently added Utility Provider that exceed outstanding prepetition 

amounts). Subsequently added Utility Providers shall have twenty (20) days from the date of service 

of the Proposed Order to make an Additional Assurance Request in accordance with the Adequate 

Assurance Procedures. 

Any Utility Provider subsequently added to the Utility Service List that objects to the Proposed 

Order with respect to such Utility Provider must file an objection in accordance with the Federal Rules 

of Bankruptcy Procedure, the Bankruptcy Local Rules, and the Adequate Assurance Procedures. 

I respectfully submit that the relief requested will ensure that the Debtors’ operations will not 

be disrupted, which would severely impact their businesses and prospects for a successful 

reorganization. The relief requested provides the Utility Providers with fair and orderly procedures for 

determining requests for Additional Adequate Assurance, without which the Debtors could be forced 

to address in excess of one hundred requests by Utility Providers in a disorganized manner at a critical 

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period in the Chapter 11 Cases when the Debtors’ efforts should be more productively focused on 

operations for the benefit of all parties in interest. 

Accordingly, for the reasons set forth herein, I respectfully submit that the relief requested in 

the Utilities Motion is necessary and appropriate, is in the best interests of their estates and all parties 

in interest, and should be granted. 

XI. MOTION OF DEBTORS PURSUANT TO 11 U.S.C. §§ 105(a) AND 362 FOR INTERIM 

AND FINAL ORDERS ESTABLISHING NOTIFICATION PROCEDURES AND 

APPROVING RESTRICTIONS ON CERTAIN TRANSFERS OF STOCK OF, AND 

CLAIMS AGAINST, THE DEBTORS (THE “NOL MOTION”) 

Pursuant to the NOL Motion, the Debtors seek entry of interim and final orders authorizing the 

Debtors to establish procedures (the “Procedures”) to protect the potential value of the Debtors’ 

consolidated net operating loss carryforwards (“NOLs”) and other tax benefits (collectively, the “Tax 

Attributes”) for use in connection with the reorganization of the Debtors. The Procedures apply to (a) 

common stock of PG&E Corp. (the “Common Stock”) and preferred stock of the Utility (“Preferred 

Stock”) (together with the Common Stock, the “PG&E Stock”) and any options or similar rights 

(within the meaning of applicable Treasury Regulations) to acquire such stock (the “Options”), and (b) 

claims (each, as defined in section 101(5) of the Bankruptcy Code) against one or more of the Debtors 

(a “Claim”). The Debtors request relief effective nunc pro tunc to the Petition Date. 

A. The Debtors’ Tax Attributes 

The Debtors possess certain Tax Attributes, including, as of the Petition Date, estimated federal 

NOLs of approximately $4 billion and certain tax credits (including investment tax credits and research 

and development tax credits) of approximately $115 million. The Tax Attributes are valuable assets. 

It is my understanding based upon discussions with counsel that Title 26 of the United States 

Code (the “Tax Code”) generally permits a corporation to carry forward its NOLs to reduce future 

taxable income, thereby reducing, along with available tax credits, such corporation’s tax liability in 

future periods. See, e.g., 26 U.S.C. §§ 38 and 172. Accordingly, absent any intervening limitations 

and depending on future operating results and the consummation of taxable asset dispositions by the 

Debtors, the Tax Attributes could substantially reduce the Debtors’ U.S. federal income tax liability for 

current and future periods, including during the pendency of these Chapter 11 Cases. The Tax 

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Attributes are available to reduce the Debtors’ federal income tax liability through the taxable year that 

includes the effective date of a chapter 11 plan and potentially thereafter, depending on the 

consequences of the restructuring. The Tax Attributes, therefore, could translate into future tax 

savings over time, and any such savings could enhance the Debtors’ cash position for the benefit of all 

parties in interest and contribute to the Debtors’ efforts toward a successful reorganization. 

It is my understanding based upon discussions with counsel that the Debtors’ ability to utilize 

the Tax Attributes to reduce future tax liability is subject to certain statutory limitations. Sections 382 

and 383 of the Tax Code limit a corporation’s ability to utilize its NOLs, tax credits, and certain other 

tax benefits to offset future income once that corporation has undergone an “ownership change” within 

the meaning of section 382 of the Tax Code (an “Ownership Change”). Pursuant to section 382 of 

the Tax Code, an Ownership Change generally occurs when the percentage of a corporation’s equity 

held by one or more of its “5-percent shareholders” (each, as that term is used in section 382 of the 

Tax Code, a “5-Percent Shareholder”) increases by more than fifty (50) percentage points above the 

lowest percentage of the corporation’s equity owned by such shareholder(s) at any time during the 

relevant testing period (usually three years). 

The Debtors do not believe that PG&E Corp. has undergone an Ownership Change prior to the 

Petition Date. Accordingly, the Debtors believe that they have significant Tax Attributes that would be 

severely impaired by the occurrence of an Ownership Change during the pendency of these Chapter 11 

Cases. Therefore, it is in the best interests of the Debtors and their stakeholders (including a customer 

base of over 16 million residential and non-residential customers) to restrict acquisitions of PG&E 

Stock that could result in an Ownership Change occurring before the effective date of a chapter 11 plan 

or any applicable bankruptcy court order. Such a restriction would protect the Debtors’ ability to use 

the Tax Attributes during the pendency of these chapter 11 cases or, potentially, in the event of a future 

transaction, to offset gain or other income recognized in connection with the Debtors’ sale or 

ownership of their assets, which may be significant in amount. In the event a pre-effective date 

Ownership Change occurred, the resulting limitation on the Debtors’ Tax Attributes primarily depends 

on the value of the PG&E Stock at such time, and thus becomes increasingly severe as the value of the 

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PG&E Stock declines. Although (as described below) the limitations imposed by section 382 of the 

Tax Code may be significantly less restrictive when an Ownership Change occurs pursuant to a 

confirmed chapter 11 plan (or any applicable bankruptcy court order), the benefits available under 

section 382 of the Tax Code in connection with a confirmed chapter 11 plan (or any applicable 

bankruptcy court order) are not applied retroactively to reduce the limitations imposed on a 

corporation’s ability to utilize its tax benefits resulting from a previous Ownership Change (such as an 

Ownership Change occurring during the pendency of a chapter 11 case). 

A chapter 11 plan that contemplates a reorganization of the Debtors may involve the issuance 

of new common stock in the Debtors (or any successor to the Debtors) and the distribution of such 

stock to certain creditors in satisfaction, in whole or in part, of their respective Claims. This issuance 

and distribution could potentially result in an Ownership Change. In such event, it is possible that the 

special relief afforded by section 382(l)(5) of the Tax Code could be both available and beneficial to 

the Debtors; the Debtors, in that circumstance, may seek to qualify the restructuring for such relief. 

Such relief, however, may become unavailable to the Debtors if the trading and accumulation of 

certain Claims prior to the effective date of a chapter 11 plan is left unrestricted. 

B. The Proposed Procedures Relating to PG&E Stock 

By establishing procedures for monitoring acquisitions of PG&E Stock (the “Stock 

Procedures”), the Debtors can preserve their ability to seek the necessary relief if it appears that any 

such acquisition(s) may impair the Debtors’ ability to utilize their Tax Attributes. Therefore, the 

Debtors propose the following Stock Procedures:45

(a) Definitions. For purposes of these Stock Procedures, the following terms have 

the following meanings: 

(i) “Acquiring Group” shall mean any group of persons (including any 

Entity) that has a plan or arrangement to acquire beneficial ownership of the stock of more than one 

Debtor within the meaning of Treasury Regulations section 1.1502-92(c)(3)(i). 

(ii) “Beneficial ownership” of PG&E Stock and Options to acquire PG&E 

Stock shall be determined in accordance with section 382 of the Tax Code, the regulations 

promulgated by the U.S. Department of the Treasury under the Tax Code (the “Treasury 

Regulations”), and rulings issued by the Internal Revenue Service (the “IRS”), and as described in the 

 

45 The Security Procedures delineated herein summarize the relevant portion of Exhibit 1 to the 

proposed orders annexed to the NOL Motion, which sets forth the Procedures. 

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NOL Motion, and, thus, to the extent provided in those sources, from time to time shall include, 

without limitation, (A) direct and indirect ownership (but determined without regard to any rule that 

treats stock of an entity as to which the constructive ownership rules apply as no longer owned by that 

entity) e.g., a holding company would be considered to beneficially own all stock owned or acquired 

by its subsidiaries, (B) ownership by a holder’s family members, (C) ownership by any Entity, and (D) 

to the extent set forth in Treasury Regulations section 1.382-4, the ownership of an Option to acquire 

PG&E Stock. 

(iii) “Entity” shall mean any “entity” as such term is defined in Treasury 

Regulations section 1.382-3(a), including any group of persons acting pursuant to a formal or informal 

understanding among themselves to make a coordinated acquisition of PG&E Stock. 

(iv) “Substantial Stockholder” shall mean any person (including any Entity) 

or Acquiring Group that beneficially owns at least 24.6 million shares of Common Stock (representing 

approximately 4.75% of all issued and outstanding shares of Common Stock). 

(b) Notice of Substantial Ownership. Any person (including any Entity) or 

Acquiring Group that beneficially owns, at any time on or after the Petition Date, PG&E Stock in an 

amount sufficient to qualify such person or Acquiring Group as a Substantial Stockholder shall file 

with this Court and serve upon (i) PG&E Corporation, 77 Beale Street, P.O. Box 770000 San 

Francisco, California 94177 (Attn: Mark Caron); (ii) Weil, Gotshal & Manges LLP, 767 Fifth Avenue, 

New York, New York 10153 (Attn: Stephen Karotkin, Esq.; Jessica Liou, Esq.; and Matthew Goren, 

Esq., as proposed counsel to the Debtors; (iii) counsel to any statutory committees appointed in the 

Chapter 11 Cases (each, an “Official Committee”); and (iv) counsel to the lenders under the Debtors’ 

proposed debtor in possession financing facilities (the “DIP Lenders”) (collectively, the “Disclosure 

Parties”) a notice of such person’s or Acquiring Group’s substantial ownership (a “Substantial Stock 

Ownership Notice”), in substantially the form annexed to the proposed orders to the NOL Motion as 

Exhibit 2, which describes specifically and in detail such person’s or Acquiring Group’s ownership of 

PG&E Stock, on or before the date that is the later of (x) twenty (20) calendar days after the entry of 

the order granting the requested relief or (y) ten (10) business days after such person or Acquiring 

Group qualifies as a Substantial Stockholder. At the election of the filing person or Acquiring Group, 

the Substantial Stockholder Ownership Notice to be filed with this Court (but not the Substantial Stock 

Ownership Notice that is served upon the Debtors, the attorneys for the Debtors, and the attorneys for 

any Official Committee) may be redacted to exclude the taxpayer identification number and the 

amount of PG&E Stock beneficially owned. 

(c) Acquisition of PG&E Stock. At least twenty (20) business days prior to the 

proposed date of any transfer of PG&E Stock or exercise of any Option to acquire PG&E Stock that 

would result in an increase in the amount of PG&E Stock beneficially owned by any person (including 

any Entity) or Acquiring Group that currently is or, as a result of the proposed transaction, would be a 

Substantial Stockholder (a “Proposed Acquisition Transaction”), such person, Acquiring Group or 

Substantial Stockholder (a “Proposed Transferee”) shall file with this Court and serve upon the 

Disclosure Parties a notice of such Proposed Transferee’s intent to purchase, acquire, or otherwise 

accumulate PG&E Stock (an “Acquisition Notice”), in substantially the form annexed to the proposed 

orders to the NOL Motion as Exhibit 3, which describes specifically and in detail the Proposed 

Acquisition Transaction. At the election of the filing person or Acquiring Group, the Acquisition 

Notice to be filed with this Court (but not the Acquisition Notice that is served upon the Debtors, the 

attorneys for the Debtors, and the attorneys for any Official Committee) may be redacted to exclude 

the taxpayer identification number and the amount of PG&E Stock beneficially owned. 

(d) Objection Procedures. The Debtors and any Official Committee shall have 

fifteen (15) business days after the filing of an Acquisition Notice (the “Objection Period”) to file 

with this Court and serve on a Proposed Transferee, an objection (each, an “Objection”) to any 

Proposed Acquisition Transaction described in such Acquisition Notice. If the Debtors or any Official 

Committee files an Objection by the expiration of the Objection Period (the “Objection Deadline”), 

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then the applicable Proposed Acquisition Transaction shall not be effective unless approved by a final 

and nonappealable order of this Court. If neither the Debtors nor any Official Committee file an 

Objection by the Objection Deadline or if the Debtors and any and all Official Committees provide 

written authorization to the Proposed Transferee, approving the Proposed Acquisition Transaction then 

such Proposed Acquisition Transaction may proceed solely as specifically described in the applicable 

Acquisition Notice. Any further Proposed Acquisition Transaction must be the subject of an additional 

Acquisition Notice and Objection Period. 

C. The Proposed Procedures Relating to Claims 

The procedures relating to the trading of Claims (the “Claims Procedures”), which only will 

become effective upon entry of the order granting the requested relief on a final basis, permit the full 

trading of Claims until the Debtors or another Plan Proponent (as defined below) decides to pursue a 

plan of reorganization contemplating the potential utilization of section 382(l)(5) of the Tax Code, at 

which point, if necessary for the Debtors to utilize that provision, a purchaser of certain Claims on or 

after the Petition Date may be required to resell some or all of such Claims. The following are certain 

principal provisions of the proposed Claims Procedures:46

(a) Disclosure of 382(l)(5) Plan. If the proponent of a Plan (a “Plan Proponent”) 

determines that the reorganized Debtors likely will benefit from the application of section 382(l)(5) of 

the Tax Code and reasonably anticipates that the reorganized Debtors (or any successors thereto) (the 

“Post-Emergence PG&E”) will invoke such section (a “382(l)(5) Plan”), then the Plan Proponent 

shall disclose the following in its proposed disclosure statement or, in the case of items (iii) through (v) 

described below, a later, separate notice (collectively, the “Proposed 382(l)(5) Disclosure 

Statement”): 

(i) Adequate information about the incremental tax benefits anticipated to 

be realized through the use of section 382(l)(5) of the Tax Code that, taking into account the Debtors’ 

anticipated net unrealized built-in gains or net unrealized built-in losses, would not otherwise be 

available; 

(ii) A summary of any restrictions expected to be imposed on the 

transferability of securities issued under the Plan in order to preserve such incremental tax benefits; 

(iii) The (A) dollar amount of Claims (by class or other applicable 

classification) expected to result in a one-percent (1%) interest in the equity of Post-Emergence PG&E 

(the “New PG&E Stock”) and (B) number of any of the specified interests (the “Owned Interests”) in 

the Debtors expected to result in a one-percent (1%) interest in the New PG&E Stock, in each case 

based upon then-available information; 

(iv) A specified date (the “Determination Date”) that is not less than ten 

(10) calendar days after the service of the notice of the hearing with respect to the Proposed 382(l)(5) 

Disclosure Statement; and 

(v) A specified date (the “Reporting Deadline”) that is not less than five (5) 

calendar days after the Determination Date, by which persons (including Entities, which for purposes 

 

46 The complete proposed Claims Procedures are set forth in Exhibit 1 to the Proposed Final Order to 

the NOL Motion (the “Proposed Final NOL Order”), which sets forth the Procedures. 

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of the Claims Procedures also includes an “entity” within the meaning of Treasury Regulations section 

1.382-3(a)) must serve on various parties the Notice of Substantial Claim Ownership (as defined in 

paragraph B(3) of Exhibit 1 to the Proposed Final NOL Order) required by these Claims Procedures. 

(b) Claims Trading Before and After the Determination Date. 

(i) Any person generally may trade freely and make a market in Claims 

until the Determination Date. 

(ii) After the Determination Date, any acquisition of Claims by a person 

(including any Entity) who filed or was required to file a Notice of Substantial Claim Ownership or by 

a person who would be required to file a Notice of Substantial Claim Ownership as a result of the 

consummation of the contemplated transaction if the proposed acquisition date had been the 

Determination Date (each such person, a “Proposed Claims Transferee”), shall not be effective 

unless consummated in compliance with the Claims Procedures. 

(iii) At least ten (10) business days prior to the proposed date of any 

acquisition of Claims by a Proposed Claims Transferee (each acquisition, a “Proposed Claims 

Acquisition Transaction”), such Proposed Claims Transferee shall serve upon the Plan Proponent and 

its counsel (and the Debtors and their counsel if not the Plan Proponent), counsel to the DIP Lenders, 

and counsel to any Official Committee a notice of such Proposed Claims Transferee’s request to 

purchase, acquire, or otherwise accumulate a Claim (a “Claims Acquisition Request”), in 

substantially the form annexed to the Proposed Final NOL Order as Exhibit 6, which describes 

specifically and in detail the Proposed Claims Acquisition Transaction, regardless of whether such 

transfer would be subject to the filing, notice, and hearing requirements set forth in Bankruptcy Rule 

3001. 

(iv) The Plan Proponent may determine, in consultation with the Debtors (if 

not the Plan Proponent), counsel to any Official Committee and counsel to the DIP Lenders, whether to 

approve a Claims Acquisition Request. If the Plan Proponent does not approve a Claims Acquisition 

Request in writing within eight (8) business days after the Claims Acquisition Request is filed with the 

Court, the Claims Acquisition Request shall be deemed rejected.

(c) Creditor Conduct and Sell-Downs 

(i) Following the Determination Date, if the Plan Proponent determines that 

certain persons holding Claims must sell or transfer all or a portion of their beneficial ownership of 

Claims so that the requirements of section 382(l)(5) of the Tax Code will be satisfied, the Plan 

Proponent may request—after notice to counsel to any Official Committee, counsel to the DIP 

Lenders, and the relevant claimholder(s), and a hearing—that this Court enter an order approving the 

issuance of a notice (a “Sell-Down Notice”) that such claimholder(s) must sell, cause to sell, or 

otherwise transfer a specified amount of its beneficial ownership of Claims. Notwithstanding anything 

to the contrary in the NOL Motion, no claimholder shall be required to sell, cause to sell, or otherwise 

transfer any beneficial ownership of Claims if such sale or transfer would result in the claimholder’s 

beneficial ownership of an aggregate amount of Claims (by class or other applicable classification) that 

is less than such claimholder’s “Protected Amount” (as defined in paragraph B(1)(p) of Exhibit 1 to the 

Proposed Final NOL Order). 

(ii) Each Sell-Down Notice shall direct such claimholder to sell, cause to 

sell, or otherwise transfer its beneficial ownership of the amount of Claims specified in the Sell-Down 

Notice to certain permitted transferees. 

(iii) Any person (including any Entity) that violates its obligations under the 

Claims Procedures shall be precluded from receiving, directly or indirectly, any consideration 

consisting of a beneficial ownership of New PG&E Stock that is attributable to the “Excess Amount of 

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Claims” (as defined in paragraph B(5)(b) of Exhibit 1 to the Proposed Final NOL Order) for such 

person, including any consideration in lieu thereof, provided that such person may be entitled to 

receive any other consideration to which such person may be entitled by virtue of holding Claims. 

The Procedures are necessary to avoid severely impairing the Debtors’ ability to utilize their 

Tax Attributes. The Debtors’ ability to preserve their Tax Attributes may be seriously impaired unless 

the Stock Procedures are established immediately and nunc pro tunc to the Petition Date to ensure that 

the acquisition of PG&E Stock is either precluded or closely monitored and made subject to Court 

approval. 

The Stock Procedures must be implemented as soon as possible. Even if a transfer were to be 

null and void under section 362 of the Bankruptcy Code or as a result of a final order of the Court that 

prohibited such a transfer retroactively to the Petition Date, under federal income tax law, such transfer 

nevertheless may be regarded as having occurred for tax purposes, in which event the Debtors’ estates 

could suffer an irrevocable loss of value. Accordingly, if a transfer occurs that limits the Debtors’ 

ability to utilize their Tax Attributes under section 382 of the Tax Code, the Debtors’ ability to realize 

the value of their Tax Attributes may be permanently lost. The relief requested, therefore, is crucial to 

prevent an irrevocable diminution of the value of the Debtors’ estates. 

The Claims Procedures permit the full trading of Claims until the Debtors or another Plan 

Proponent decides to pursue a Plan that contemplates the potential utilization of section 382(l)(5) of 

the Tax Code, at which point, if necessary for the Debtors’ ability to utilize that provision, a purchaser 

of certain Claims on or after the Petition Date may be required to resell some or all of such Claims. 

 It is my understanding based upon discussions with counsel that, under the De Minimis Rule, 

a debtor may, for purposes of the Section 382(l)(5) Safe Harbor, “treat indebtedness as always having 

been owned by the beneficial owner of the indebtedness immediately before the [O]wnership [C]hange 

if the beneficial owner is not, immediately after the [O]wnership [C]hange, either a 5-[P]ercent 

[S]hareholder or an [E]ntity through which a 5-[P]ercent [S]hareholder owns an indirect ownership 

interest” in the debtor. 26 C.F.R. § 1.382-9(d)(3). If a creditor is treated as having continuously 

owned its Claim(s) under the De Minimis Rule, such creditor will be regarded as a Qualified Creditor 

so long as the particular Claim(s) that it holds either (a) arose in the ordinary course of the debtor’s 

business or (b) came into existence at least eighteen (18) months prior to the Petition Date. 

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It is my understanding based upon discussions with counsel that the requested relief will ensure 

that the Debtors will have flexibility, if the Debtors determine it to be desirable, to structure a chapter 

11 plan or other distributions to comply with the requirements of the Section 382(l)(5) Safe Harbor and 

thus to preserve the Tax Attributes to the fullest extent possible. 

Accordingly, for the reasons set forth herein, I respectfully submit that the relief requested in 

the NOL Motion is necessary and appropriate, is in the best interests of their estates and all parties in 

interest, is necessary to avoid immediate and irreparable harm to the Debtors, and should be granted. 

XII. MOTION OF DEBTORS PURSUANT TO 11 U.S.C. §§ 521(A) AND 105(A) AND FED. 

R. BANKR. P. 1007(C) FOR ENTRY OF ORDER (I) EXTENDING TIME TO FILE 

SCHEDULES OF ASSETS AND LIABILITIES AND STATEMENTS OF FINANCIAL

AFFAIRS, AND (II) EXTENDING TIME TO FILE 2015.3 REPORTS (THE 

“EXTENSION OF TIME TO FILE SCHEDULES AND STATEMENTS MOTION”) 

Pursuant to the Extension of Time to File Schedules and Statements Motion, the Debtors 

request entry of an order extending the initial fourteen (14) day period to file their schedules of assets 

and liabilities and statements of financial affairs (collectively, the “Schedules and Statements”) by 

sixty (60) days, to allow the Debtors a total of seventy-four (74) days after the Petition Date to file 

their Schedules and Statements (the “Schedules and Statements Deadline”), without prejudice to the 

Debtors’ right to request additional time if necessary. Additionally, the Debtors request that the Court 

grant an extension until thirty (30) days after the meeting of creditors to be held pursuant to section 

341 of the Bankruptcy Code for the Debtors to either file their initial reports of financial information 

with respect to entities in which their chapter 11 estates hold a controlling or substantial interest, as set 

forth in Bankruptcy Rule 2015.3 (the “2015.3 Reports”), or file a motion with the Court seeking a 

modification of such reporting requirements for cause. 

The Debtors own and operate approximately 136 generating facilities, nine (9) natural gas 

compressor stations, over 120,000 circuit miles of electric transmission and distribution lines, and 

nearly 50,000 miles of natural gas transmission and distribution pipelines throughout California. The 

scope and complexity of the Debtors’ businesses, coupled with the limited time available to the 

Debtors to assemble the required information, necessitate an extension of the Schedules and 

Statements Deadline and the deadline to file the 2015.3 Reports. It is my understanding that collecting 

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the necessary information to prepare the Schedules and Statements and the 2015.3 Reports requires an 

enormous expenditure of time and effort on the part of the Debtors, their employees, and their 

professionals. 

In light of the foregoing, I respectfully submit that given the volume of work entailed in 

completing the Schedules and Statements and the 2015.3 Reports, as well as the competing demands 

on the Debtors’ employees and professionals to stabilize the Debtors’ business operations and address 

the other many issues that arise during the critical postpetition period, the Debtors, as a practical 

matter, are unable to properly and accurately complete the Schedules and Statements and 2015.3 

Reports within the initial statutory period and that the requested extensions are necessary. 

XIII. MOTION OF DEBTORS PURSUANT TO 11 U.S.C. §§ 105(a), 342(a) AND 521(a)(1) 

AND FED. R. BANKR. P. 1007 AND 2002 FOR ENTRY OF ORDER (I) WAIVING THE 

REQUIREMENTS TO FILE LISTS OF CREDITORS AND EQUITY HOLDERS AND 

GRANTING RELATED RELIEF; AND (II) AUTHORIZING AND APPROVING 

PROCEDURES FOR PROVIDING NOTICE OF THE COMMENCEMENT OF 

CHAPTER 11 CASES (THE “CREDITOR MATRIX AND NOTICE OF 

COMMENCEMENT MOTION”) 

Pursuant to the Creditor Matrix and Notice of Commencement Motion, the Debtors request 

entry of an order (i) waiving the requirements that the Debtors file lists of creditors and equity holders 

on the Petition Date, as set forth in section 521(a)(1) of the Bankruptcy Code, Bankruptcy Rules 

1007(a)(1) and (a)(3), and Amended General Order 13 (the “General Order”) of the United States 

Bankruptcy Court for the Northern District of California (collectively, the “Notice Rules”); and (ii) 

authorizing the Debtors to implement certain procedures for the mailing and publication of the notice 

announcing the commencement of these Chapter 11 Cases and the meeting of creditors to be held 

pursuant to section 341 of the Bankruptcy Code (the “Notice of Commencement”). 

It is my understanding based upon discussions with counsel that, pursuant to the Notice Rules, 

unless a debtor’s schedules of assets and liabilities are filed simultaneously with a chapter 11 petition, 

a debtor must file a list of creditors as of the Petition Date (the “List of Creditors”) with the petition. 

Similarly, it is my understanding based upon discussions with counsel that the Notice Rules require 

that unless the Court orders otherwise, the debtor must file within fourteen (14) days after entry of the 

order for relief a list of the debtor’s equity security holders of each class (the “List of Equity 

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Holders”) showing the number and kinds of interests registered in the name of each holder, and the 

last known address or place of business for each holder. I respectfully submit that waiving the 

requirements to file a List of Creditors and, for PG&E Corp., a List of Equity Holders is appropriate. 

Contemporaneously with the Creditor Matrix and Notice of Commencement Motion, the 

Debtors have filed the Extension of Time to File Schedules and Statements Motion, requesting an 

extension of the time to file their Schedules and Statements, and, therefore, have not yet filed their 

Schedules and Statements with the Bankruptcy Court. Accordingly, without the relief requested in the 

Creditor Matrix and Notice of Commencement Motion, the Notice Rules would require the Debtors to 

each file a separate List of Creditors on the Petition Date. 

The Debtors have filed the Claims and Noticing Agent Retention Application (as defined 

below) in these Chapter 11 Cases. It is my understanding based upon discussions with counsel that the 

Court is empowered to use outside facilities or services to provide notices and other administrative 

information to parties in interest, if the costs are paid from the assets of the estates. Under the 

proposed Notice of Commencement Procedures (as defined and as set forth below), as soon as 

practicable after the Petition Date, the Debtors will furnish their consolidated List of Creditors to Prime 

Clerk, LLC (“Prime Clerk”) so that Prime Clerk can mail the Notice of Commencement to creditors 

identified on the Debtors’ List of Creditors. I respectfully submit that the requirement that the List of 

Creditors be filed on the Petition Date should be waived. 

All of the outstanding common stock of the Utility is owned by PG&E Corp. This information 

is set forth in the List of Equity Holders filed as a part of the Utility’s chapter 11 petition. With respect 

to PG&E Corp., however, I respectfully submit that the requirement that it file a List of Equity Holders 

should be waived. PG&E Corp. is a public company and, as of October 25, 2018, had 518,674,276 

shares of common stock outstanding. The ownership of these shares changes daily, if not more 

frequently. I respectfully submit that preparing the List of Equity Holders with last-known addresses 

will be expensive for the Debtors, time consuming, and difficult to accomplish quickly and accurately. 

I further submit that PG&E Corp.’s equity security holders will not be prejudiced if the List of Equity 

Holders is not filed. As set forth in the Notice of Commencement Procedures, such parties will receive 

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appropriate notice of the commencement of these Chapter 11 Cases. Accordingly, the requirement that 

the Debtors file a List of Equity Holders for PG&E Corp. should be waived. 

A. Proposed Procedures for Service of the Notice of Commencement 

The Debtors propose the following procedures (the “Notice of Commencement Procedures”) 

with respect to service and publication of the Notice of Commencement: 

1. Mailing of the Notice of Commencement 

Pursuant to the Creditor Matrix and Notice of Commencement Motion, in light of the 

requirement to notify creditors and shareholders of the commencement of these Chapter 11 Cases and 

to notify creditors of the meeting of creditors under section 341 of the Bankruptcy Code (the “Section 

341 Meeting”), the Debtors seek authority to have Prime Clerk undertake the mailing of the Notice of 

Commencement, substantially in the form annexed as Exhibit 1 to the proposed order filed with the 

Creditor Matrix and Notice of Commencement Motion, to the creditors listed on the Debtors’ 

consolidated List of Creditors. 

For purposes of the Creditor Matrix and Notice of Commencement Motion, the Debtors have 

not included their 16 million customers or their nearly 24,000 employees as creditors on the List of 

Creditors (other than any customers or employees that may otherwise be creditors (e.g., litigation 

claimants)) and, it is my understanding based upon discussions with counsel, that the Notice Rules do 

not require the Debtors to provide the Notice of Commencement to such parties. Moreover, Prime 

Clerk estimates that the cost of mailing the Notice of Commencement to such parties via traditional 

first class mail would increase the cost of preparing and mailing the Notice of Commencement by 

approximately $9.4 million. Nevertheless, employees will be made aware of the commencement of 

these Chapter 11 Cases through customary employee communication channels that the Debtors have 

historically utilized. Additionally, given the extensive media coverage of these Chapter 11 Cases and 

the proposed publication procedures described below, I believe that the Debtors’ customers will also 

be adequately informed regarding the commencement of these Chapter 11 Cases. 

As set forth above, as PG&E Corp. is a public company, the ownership of its shares changes on 

a daily, if not more frequent, basis. Accordingly, serving the Notice of Commencement on holders of 

PG&E Corp.’s equity interests by mail also would be a very costly undertaking and not necessarily 

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very effective. Further, it is highly likely that PG&E Corp.’s equity security holders will learn of these 

Chapter 11 Cases through the financial press, the extensive publication proposed by the Debtors below, 

as well as the Debtors’ reporting with the United States Securities and Exchange Commission. 

Accordingly, I respectfully submit that the requirement that the Debtors provide the Notice of 

Commencement to holders of equity interests in PG&E Corp. should be waived. 

2. Publication of the Notice of Commencement 

In addition to providing the Notice of Commencement to the Debtors’ creditors as set forth 

above, the Debtors propose to publish, as soon as practicable, the Notice of Commencement, 

substantially in the form attached to the Proposed Order (i) once in the national editions of the Wall 

Street Journal and USA Today, and (ii) once in each of the Los Angeles Times, San Francisco 

Chronicle, The Bakersfield Californian, The Fresno Bee, The Modesto Bee, The Sacramento Bee, The 

Santa Rosa Press Democrat, The San Jose Mercury News, The East Bay Times, The Stockton Record, 

the Paradise Post, and the Chico Enterprise-Record. The Debtors also propose to post the Notice of 

Commencement on the website to be established by Prime Clerk (as defined below) and on the 

Debtors’ website. Publication of the Notice of Commencement as proposed above is the most practical 

method by which to notify customers, employees and equity holders who do not receive the Notice of 

Commencement by mail and other parties in interest of the commencement of these Chapter 11 Cases. 

Notice by publication also will ensure an efficient use of estate resources. 

Based on the foregoing, I respectfully submit that the proposed Notice of Commencement 

Procedures will ease administrative burdens that would otherwise fall upon the Court and the U.S. 

Trustee, while at the same time ensuring that actual notice is provided to all of the Debtors’ creditors, 

equity holders, and customers in an efficient and cost-effective manner. Accordingly, I respectfully 

submit that the relief requested is appropriate in these Chapter 11 Cases to provide adequate notice to 

all parties in interest. 

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XIV. MOTION OF DEBTORS PURSUANT TO 11 U.S.C. §§ 503(b)(9) AND 105(a) FOR 

ENTRY OF ORDER ESTABLISHING PROCEDURES FOR THE ASSERTION, 

RESOLUTION, AND SATISFACTION OF CLAIMS ASSERTED PURSUANT TO 11 

U.S.C. § 503(b)(9) (THE “503(b)(9) PROCEDURES MOTION”) 

Pursuant to the 503(b)(9) Procedures Motion, the Debtors request entry of an order establishing 

procedures for the assertion, resolution, and satisfaction of unpaid 503(b)(9) Claims. 

Prior to the Petition Date and in the ordinary course of their business, the Debtors purchased on 

credit a variety of raw materials, equipment, specially fabricated repair and replacement parts, supplies, 

and other goods (collectively, the “Goods”) for use in their electric and natural gas transmission, 

distribution, generation and other operations. As of the Petition Date, the Debtors were in possession 

of certain Goods that had been delivered to them by various Vendors, but for which the Debtors had 

not yet made payment. 

There will be some uncertainty among Vendors over the procedures and methods they must 

undertake to properly assert administrative expense claims pursuant to section 503(b)(9) of the 

Bankruptcy Code. This may result in numerous inquiries and demands on the Debtors’ employees and 

professionals, as well as in the initiation of piecemeal litigation, which would divert the attention of the 

Debtors and their professionals from the more pressing task of administering these Chapter 11 Cases 

and overseeing the Debtors’ operations in a safe and reliable manner. To avoid the resulting 

distraction, delay, and expense that may ensue, I respectfully submit that the following Procedures 

should be the sole and exclusive method for the assertion, resolution, allowance, and satisfaction of 

503(b)(9) Claims: 

(a) Any Vendor asserting a 503(b)(9) Claim must prepare a proof of claim (a 

“Proof of 503(b)(9) Claim”), substantially in the form annexed as Schedule 1 to the 

proposed order for the 503(b)(9) Procedures Motion (the “Proof of 503(b)(9) Claim 

Form”) that sets forth: (i) the value of the Goods the Vendor contends the Debtors 

received within twenty (20) days prior to the Petition Date; (ii) documentation, 

including invoices, receipts, bills of lading, and the like, identifying the particular 

Goods for which the claim is being asserted; (iii) documentation regarding which 

Debtor the Goods were shipped to, the date the Goods were received by such Debtor, 

and the alleged value of such Goods; and (iv) a statement indicating (I) whether the 

value of such Goods listed in the Proof of 503(b)(9) Claim represents a combination of 

services and Goods, (II) the percentage of value related to services and related to 

Goods, and (III) whether the Vendor has filed any other claim against any Debtor 

regarding the Goods underlying its Proof of 503(b)(9) Claim; 

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(b) All Proofs of 503(b)(9) Claims must be submitted to the Debtors’ 

proposed claims and noticing agent, Prime Clerk, so as to be received no later than the 

fiftieth (50th) day after the Petition Date (the “503(b)(9) Claim Filing Deadline”), 

either (i) by mail or hand delivery at PG&E Corporation Claims Processing Center c/o 

Prime Clerk, 850 3rd Avenue, Suite 412, Brooklyn, New York 11232, or (ii) 

electronically via the interface provided on Prime Clerk’s website at 

http://restructuring.primeclerk.com/PGE/EPOC-index. Proofs of 503(b)(9) Claims sent 

by facsimile or electronic mail will not be accepted; 

(c) The Debtors shall have seventy-five (75) days (or such later date as may 

be approved by the Court) after the 503(b)(9) Claim Filing Deadline to file with the 

Court and serve any objections (the “Objections”) to timely filed 503(b)(9) Claims (the 

“Objection Deadline”), without prejudice to the Debtors’ right to set an extension to 

such Objection Deadline; 

(d) Vendors shall have until twenty (20) days after the filing of the 

applicable Objection to file with the Court and serve on the Notice Parties any replies to 

such Objections; 

(e) All timely filed 503(b)(9) Claims will be deemed allowed unless

objected to by the Debtors on or before the Objection Deadline;

(f) Notwithstanding and without limiting the foregoing, the Debtors are 

authorized, but not required, to negotiate, in their sole discretion, with any Vendor and 

to seek an agreement resolving any Objection to such Vendor’s 503(b)(9) Claim 

without the need for any further order by the Court; 

(g) If the Debtors cannot reach agreement with a Vendor regarding a

particular Objection to such Vendor’s 503(b)(9) Claim, the Debtors will schedule the 

matter for a hearing by the Court; 

(h) To the extent a 503(b)(9) Claim is allowed, such 503(b)(9) Claim will be 

satisfied pursuant to and as set forth in, a chapter 11 plan for the Debtors as confirmed 

by the Court, or as otherwise ordered by the Court after notice and an opportunity for a 

hearing; provided, that the Debtors reserve the right to exercise any lawful right of 

setoff against any 503(b)(9) Claim; and 

(i) Vendors shall be forever barred, without further order of the Court, from 

asserting 503(b)(9) Claims after the expiration of the 503(b)(9) Claim Filing Deadline, 

but shall not be barred from asserting related or unrelated general unsecured claims in 

accordance with any unsecured claims bar date established in these Chapter 11 Cases. 

Pursuant to the 503(b)(9) Procedures Motion, the Debtors propose that the Procedures be the 

sole and exclusive method for the assertion, resolution, allowance, and satisfaction of 503(b)(9) Claims 

and request that all Vendors be prohibited from invoking any other means therefor, including, without 

limitation, the filing of a motion for allowance, or to compel payment, of any 503(b)(9) Claims. 

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 It is my understanding based upon discussions with counsel that deferring litigation of claims 

asserted under section 503(b)(9) of the Bankruptcy Code and establishing uniform procedures for 

resolving such claims is a common practice in chapter 11 cases, as is the establishment of a bar date. 

Moreover, the Debtors believe that the Procedures will facilitate their ability to resolve claims with 

Vendors asserting a 503(b)(9) Claim, expediting the resolution of 503(b)(9) Claims, and assisting with 

the administration of these Chapter 11 Cases. 

Accordingly, I respectfully submit that the relief requested in the 503(b)(9) Claims Motion 

should be granted. 

XV. MOTION OF DEBTORS FOR ENTRY OF ORDER PURSUANT TO 11 U.S.C. §§ 546(c) 

AND 105(a) AND FED. R. BANKR. P. 9019 ESTABLISHING AND IMPLEMENTING 

EXCLUSIVE AND GLOBAL PROCEDURES FOR THE TREATMENT OF 

RECLAMATION CLAIMS (THE “RECLAMATION PROCEDURES MOTION”). 

Pursuant to the Reclamation Procedures Motion, the Debtors are seeking entry of an order 

establishing procedures for the treatment of all claims that may be asserted against the Debtors seeking 

the reclamation of Goods pursuant to section 546(c) of the Bankruptcy Code (the “Reclamation 

Claims”) and prohibiting any Seller from (as defined below) from taking any other remedial action 

with respect to its Goods, including any other effort to reclaim the same. 

As a result of the commencement of these Chapter 11 Cases, the Debtors have received, and 

expect to continue to receive, Reclamation Claims from various parties (collectively, the “Sellers”) 

that, in the ordinary course of business, sold and delivered a variety of Goods to the Debtors prior to 

the Petition Date, but for which the Debtors have not yet been invoiced or made payment to the Seller 

in full.47

To avoid potentially extensive piecemeal litigation that would interfere with the orderly 

administration of these Chapter 11 Cases, the Debtors seek to establish the Reclamation Procedures for 

the reconciliation and allowance of Reclamation Claims. The Reclamation Procedures will effectively 

 

47 Certain Sellers may receive payment on account of their prepetition claims pursuant to certain other 

motions filed by the Debtors on the Petition Date. To the extent a Seller receives payment on account 

of its prepetition claim pursuant to an order approving any such motion, the Reclamation Procedures 

shall not apply to such Seller. 

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and efficiently streamline the process of resolving any potential Reclamation Claims for the benefit of 

the Debtors and all other parties in interest. 

The Debtors propose the following procedures (the “Reclamation Procedures”) for processing 

and reconciling Reclamation Claims: 

(a) any Seller asserting a Reclamation Claim must satisfy all procedural and 

timing requirements entitling it to have a right to reclamation under section 546(c) of 

the Bankruptcy Code; 

(b) any Seller asserting a Reclamation Claim must submit a written demand 

asserting such Reclamation Claim (a “Reclamation Demand”), which must include, to 

the extent such information is already available or known to such Seller, (i) a 

description of the Goods subject to the Reclamation Demand; (ii) copies of any 

purchasing orders, invoices, receipts, bills of lading and the like, identifying the 

particular Goods for which the Reclamation Demand is being asserted; (iii) any 

evidence regarding the date(s) such Goods were shipped to and received by the Debtors 

and the alleged value of such Goods; and (iv) a statement indicating whether the Seller 

has filed or intends to file any other claim against the Debtors regarding the Goods 

underlying its Reclamation Demand (collectively, the “Reclamation Demand 

Requirements”); 

(c) all Reclamation Demands must be submitted to Prime Clerk, by the 

applicable deadline set forth below, either by mail or hand delivery at PG&E 

Corporation Reclamations Demands, c/o Prime Clerk LLC, 850 3rd Avenue, Suite 412, 

Brooklyn, New York 11232, and not filed on the Court docket; 

(d) to the extent that any Seller asserted a Reclamation Demand prior to 

entry of the proposed order (the “Reclamation Procedures Order”) granting the relief 

requested in the Reclamation Procedures Motion that complied with the procedures and 

timing requirements of section 546(c) of the Bankruptcy Code, but otherwise did not 

meet the Reclamation Demand Requirements, such Seller shall have twenty (20) days 

from the date of entry of the Reclamation Procedures Order to submit to the Debtors 

(via Prime Clerk as set forth in (c) above) the supplemental information or evidence 

required to meet the Reclamation Demand Requirements; 

(e) unless a Seller has already submitted a Reclamation Demand to the 

Debtors within the forty-five (45) days prior to the Petition Date, any Seller asserting a 

Reclamation Claim must have submitted a Reclamation Demand (subject to the Seller’s 

right to supplement the Reclamation Demand as set forth in (d) above to meet the 

Reclamation Demand Requirements) so that it was received by the Debtors (via Prime 

Clerk as set forth in (c) above) on or before twenty (20) days after the Petition Date (the 

“Reclamation Deadline”); 

(f) upon entry of the Reclamation Procedures Order, the Debtors will serve 

upon all Sellers who have submitted a Reclamation Demand by the Reclamation 

Deadline a copy of such order at the address indicated in its Reclamation Demand; 

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(g) no later than 120 days after entry of the Reclamation Procedures Order 

(the “Reclamation Notice Deadline”), the Debtors will file with the Court a notice (the 

“Reclamation Notice”) listing the timely submitted Reclamation Claims and the 

amounts (if any) and proposed status and treatment of each such Reclamation Claim 

that the Debtors determine to be valid. The Debtors will serve the Reclamation Notice 

on (i) the United States Trustee for Region 17; (ii) the attorneys for any statutory 

committees appointed in these Chapter 11 Cases; (iii) counsel to the agent(s) under the 

Debtors’ proposed debtor-in-possession financing facilities, and (iv) each Seller listed 

in the Reclamation Notice, at the address indicated in the respective Seller’s 

Reclamation Demand (collectively, the “Notice Parties”); 

(h) if the Debtors fail to file the Reclamation Notice by the Reclamation 

Notice Deadline, any holder of a Reclamation Claim that submitted a timely 

Reclamation Demand in accordance with the Reclamation Procedures may bring a 

motion on its own behalf to seek relief with respect to its Reclamation Claim; 

(i) any party that wishes to object to the Reclamation Notice must file and 

serve an objection (a “Reclamation Notice Objection”) on the Notice Parties, so as to 

be received no later than 4:00 p.m. (prevailing Eastern Time) on the twentieth (20th) 

day after the date on which the Reclamation Notice is filed (the “Reclamation 

Objection Deadline”). Any Reclamation Notice Objection must include (i) a copy of 

the Reclamation Demand, with evidence of the date mailed to the Debtors; and (ii) a 

statement describing with specificity the objections to the Reclamation Notice and any 

legal and factual bases for such objections; 

(j) any Reclamation Claim listed in the Reclamation Notice for which no 

Reclamation Notice Objection is filed and served by the Reclamation Objection 

Deadline shall be deemed allowed by the Court in the amount identified by the Debtors 

in the Reclamation Notice, provided that all issues relating to the treatment of any such 

allowed Reclamation Claim under a chapter 11 plan for the Debtors shall be reserved; 

(k) notwithstanding and without limiting the foregoing, the Debtors will be 

authorized, but not required, to negotiate, with any Seller to seek an agreement 

resolving the Seller’s Reclamation Claim. If no agreement is reached resolving the 

Reclamation Notice Objection, the Debtors or the Sellers may file a motion with the 

Court requesting a hearing with respect to the Reclamation Notice Objection. If the 

Debtors and a Seller agree on the validity, amount, or treatment of the Seller’s 

Reclamation Claim, the Debtors will file with the Court a notice of settlement (a 

“Settlement Notice”) and serve such Settlement Notice on the Notice Parties. Each 

Notice Party will have ten (10) days from the date of service of such Settlement Notice 

to file with the Court and serve on the other Notice Parties and attorneys for the Debtors 

an objection thereto (a “Settlement Objection”); 

(l) if no Settlement Objection is timely filed and served, such Reclamation 

Claim will be treated in accordance with the Settlement Notice without further order of 

the Court; 

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(m) if a Settlement Objection is timely filed and served, the parties may 

negotiate a consensual resolution of such objection to be incorporated in a stipulation 

filed with the Court (a “Settlement Stipulation”). Upon the filing of a Settlement 

Stipulation, the applicable Reclamation Claim shall be allowed and treated in 

accordance with the terms of the Settlement Stipulation without further order of the 

Court; 

(n) if no consensual resolution of a Settlement Objection is reached, the 

Debtors may file a motion with the Court requesting a hearing with respect to the 

Settlement Notice; 

(o) if a Seller receives payment on account of the Seller’s prepetition claims 

pursuant to any other motion that has been or may be filed by the Debtors, including, 

without limitation, (i) the 503(b)(9) Procedures Motion; and (ii) the Operational 

Integrity Suppliers Motion, to the extent a Seller receives payment on account of its 

prepetition claim pursuant to an order approving any of such motions, the Reclamation 

Procedures shall not apply to such Seller to the extent of any such payment; and 

(p) all Sellers shall be forever barred, without further order of the Court, 

from asserting a Reclamation Demand after the expiration of the Reclamation Deadline, 

but shall not be barred from asserting, subject to applicable deadlines, related or 

unrelated general unsecured claims or administrative expense status pursuant to section 

503(b)(9) of the Bankruptcy Code. 

The Debtors propose that the Reclamation Procedures shall be the sole and exclusive method 

for addressing and resolving Reclamation Claims. As a result, pursuant to the Reclamation Procedures 

Motion, the Debtors request that all Sellers be prohibited from seeking any other means for the 

resolution or treatment of their Reclamation Claims, including, without limitation, the following: (a) 

commencing adversary proceedings or contested matters in connection with any Reclamation Claim, 

(b) seeking to obtain possession of any Goods except as may be permitted by the Reclamation 

Procedures, or (c) interfering with the delivery of any Goods to the Debtors or the retention of any 

Goods by the Debtors. The Reclamation Procedures will effectively and efficiently streamline the 

process of resolving the Reclamation Claims for the Debtors and the Sellers alike, without impacting 

the parties’ substantive rights to pursue or contest the Reclamation Claims. 

I respectfully submit that the Reclamation Procedures will effectively and efficiently streamline 

the process of resolving the Reclamation Claims for the Debtors and the Sellers alike, without 

impacting the parties’ substantive rights to pursue or contest the Reclamation Claims. Accordingly, I 

respectfully submit that the relief requested in the Reclamation Procedures Motion should be granted. 

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XVI. DEBTORS’ APPLICATION PURSUANT TO 28 U.S.C. § 156(C) FOR APPOINTMENT 

OF PRIME CLERK LLC AS CLAIMS AND NOTICING AGENT (THE “SECTION 

156(C) APPLICATION”) 

Pursuant to the 156(c) Application, the Debtors are seeking entry of an order appointing Prime 

Clerk as their claims and noticing agent (the “Claims and Noticing Agent”) for the Debtors and their 

Chapter 11 Cases, including assuming full responsibility for the distribution of notices and the 

maintenance, processing and docketing of proofs of claim filed in the Chapter 11 Cases, including 

assuming full responsibility for the distribution of notices and the maintenance, processing, and 

docketing of proofs of claim filed in the Chapter 11 Cases, as set forth in the Engagement Agreement 

attached as Exhibit B to the Section 156(c) Application; provided, however, the Debtors are seeking 

approval solely of those terms and provisions set forth in the Section 156(c) Application. By separate 

application, the debtors will seek authorization to retain and employ Prime Clerk as administrative 

advisor in the Chapter 11 Cases pursuant to section 327(a) of the Bankruptcy Code because the 

administration of the Chapter 11 Cases will require Prime Clerk to perform duties outside the scope of 

28 U.S.C. § 156(c). 

By appointing Prime Clerk as the Claims and Noticing Agent in the Chapter 11 Cases, the 

distribution of notices and the processing of claims will be expedited, and the Office of the Clerk of the 

Bankruptcy Court will be relieved of the administrative burden of processing what may be an 

overwhelming number of claims. Accordingly, I respectfully submit that the Section 156(c) 

Application should be approved. 

XVII. MOTION OF DEBTORS PURSUANT TO 11 U.S.C. §§ 105, 362, 363, AND 364 AND 

FED. R. BANKR. P. 6003 AND 6004 TO (A) HONOR PREPETITION OBLIGATIONS 

TO NATURAL GAS AND ELECTRICITY EXCHANGE OPERATORS, (B) GRANT 

ADMINISTRATIVE EXPENSE CLAIMS AND AUTHORIZE POSTING OF 

COLLATERAL TO EXCHANGE OPERATORS TRADING COUNTERPARTIES, 

AND FUTURE COMMISSION MERCHANTS, (C) MODIFY THE AUTOMATIC 

STAY, AND (D) GRANT RELATED RELIEF (THE “EXCHANGE OPERATORS 

MOTION”) 

Pursuant to the Exchange Operators Motion, the Debtors are seeking interim and final authority 

to (i) pay all outstanding Prepetition Exchange Obligations (as defined below) owed to ICE NGX 

Canada Inc. (together with certain of its affiliates and subsidiaries, “ICE NGX”) and California 

Independent System Operator Corporation (“CAISO” and, together with ICE NGX, the “Exchange 

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Operators”), under those certain Prepetition Exchange Agreements (as defined below), in the ordinary 

course as they come due, (ii) provide the Exchange Operators with administrative expense claims on 

account of all Exchange Obligations (as defined below), (iii) confirm the existing liens and security 

interests of the Exchange Operators in their collateral and authorize the Utility to pledge additional 

collateral to the Exchange Operators in the form of cash, letters of credit, and/or other forms of 

collateral acceptable to the parties on account of all Postpetition Exchange Obligations (as defined 

below), (iv) permit the Trading Counterparties (as defined below) to apply existing cash collateral to 

their prepetition obligations and authorize the Utility to provide cash collateral for postpetition 

obligations to Trading Counterparties, (v) provide cash or other collateral to the Future Commission 

Merchants (as defined below), and (vi) modify the automatic stay under section 362 of the Bankruptcy 

Code to the extent necessary to allow the (A) Exchange Operators to exercise any valid rights of setoff 

or recoupment (the “Trade Setoff”), and to apply collateral and the proceeds thereof and settle 

transactions, whether undertaken with respect to collateral or obligations that arose, and whether such 

collateral and proceeds were posted or arose, prior to or after the Petition Date, and, upon default, 

exercise their rights, in each case under and in accordance with the terms of the agreements and tariffs 

that govern the relationship between the Exchange Operators and the Utility, and (B) Trading 

Counterparties to exercise any valid right to setoff, settle or recoup any mutual obligations owing by 

the Utility to such Trading Counterparties, and to apply cash collateral to prepetition obligations, 

notwithstanding any limits otherwise imposed by section 553 of the Bankruptcy Code, and (vii) grant 

related relief. 

A. ICE NGX 

To clear transactions relating to the procurement of natural gas, the Utility is party to that 

certain contracting party agreement (the “CPA”) with ICE NGX. ICE NGX is a centralized exchange 

and clearinghouse (the “NGX Exchange” and the Utility’s obligations thereunder, the “NGX 

Exchange Obligations”) that provides electronic trading, central counterparty clearing, and data 

services to natural gas, crude oil, and electricity markets in North America. Pursuant to the CPA, the 

Utility purchases natural gas from ICE NGX for (i) its core gas supply, which is delivered to “core” 

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customers (e.g., residential and small commercial customers), (ii) its electric gas supply, which is used 

to fuel the Utility’s gas-fired electric generation facilities, including certain units operating under 

tolling agreements, and (iii) for temporary storage in both Utility-owned and third party-owned gas 

storage facilities. The Utility also sells excess natural gas through the NGX Exchange. 

The Utility participates on the NGX Exchange primarily through the purchase of futures 

contracts for natural gas. The Utility typically orders natural gas supply through ICE NGX for a 

particular month – the month’s “flow” – in the prior month, but the Utility may also enter into daily 

orders for the next day’s “flow.” For example, in January 2019, the Utility placed orders through ICE 

NGX on the NGX Exchange to cover its February 2019 “flow.” Payment to ICE NGX is generally not 

due until the 25th day of the month following the month in which the natural gas is delivered to the 

Utility. 

Given the delay between the placement of orders for natural gas, deliveries of natural gas, and 

the payment thereon, ICE NGX requires the Utility to post collateral and other credit support to secure 

payment for transactions effected through the NGX Exchange (such collateral, and all proceeds 

thereof, the “NGX Collateral”), and, in some instances, to prepay such obligations. ICE NGX is the 

only party with any lien or security interest on the NGX Collateral, and ICE NGX holds a first-priority 

lien on, and security interest in, all NGX Collateral. 

Pursuant to the CPA, NGX Exchange Obligations are required to be fully-collateralized on a 

daily basis and the value of collateral may change on a day-to-day basis due to fluctuations in natural 

gas prices. The Utility’s failure to post appropriate NGX Collateral can result in ICE NGX, among 

other things, having the right or ability under the CPA to (i) declare all NGX Exchange Obligations 

immediately due and payable, (ii) request additional NGX Collateral, (iii) terminate any open 

transactions, and/or (iv) suspend the Utility’s participation in the NGX Exchange. In addition, under 

the CPA, ICE NGX is authorized to setoff, settle, or otherwise recoup amounts owed by the Utility to 

ICE NGX against amounts owed by ICE NGX to the Utility. 

The Utility purchases a significant amount of its natural gas each month through the NGX 

Exchange, including approximately $40 million for January 2019 deliveries, representing 

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approximately 92% of the supply needed for its electric gas supply, and approximately 19% for its core 

gas supply customers. Given the Utility’s current credit rating, its ability to procure natural gas from 

alternative suppliers is extremely limited. Should the Utility be unable to procure gas through the 

NGX Exchange, it may be foreclosed from participating in natural gas markets altogether. As a result, 

the Utility would be required to deplete its limited reserves of natural gas in an effort to delay a natural 

gas shortfall. Depending on weather conditions and the appetite for other natural gas suppliers to 

honor existing contracts, gas in storage could be exhausted in a matter of weeks, forcing the Utility to 

stop delivering natural gas to some customers. 

Moreover, even if the Utility were able to secure alternative suppliers that may be willing to 

supply natural gas to the Utility, such alternative suppliers would likely charge higher prices, which 

may be passed on to the Utility’s customers through higher bills. These alternative suppliers may also 

impose extremely burdensome contract terms on the Utility. Accordingly, preserving the Utility’s 

ability to participate in the NGX Exchange is essential to accessing sufficient natural gas supplies 

needed to maintain uninterrupted utility services and the success of these Chapter 11 Cases. 

B. CAISO 

Due to the complexities involved in storing electricity after it is generated and transmitting it to 

end users, the Utility participates in energy markets operated by the CAISO (the “CAISO Market” 

and, together with the NGX Exchange, the “Exchanges”). CAISO settles transactions by the Utility 

and its other participants, including transactions in the CAISO Market, and issues charges for services 

related to maintaining the reliability of the grid, pursuant to the rates, terms and conditions of a tariff 

approved by the Federal Energy Regulatory Commission (the “Tariff” and, together with ICE NGX’s 

CPA, the “Prepetition Exchange Agreements”). CAISO controls a competitive wholesale electricity 

market in California and manages access to, and the reliability of, the bulk of the transmission system 

in California. CAISO provides the Utility with particular channels to buy and sell electricity, which is 

critical to the Utility’s operations, and to transmit the electricity it generates, buys and sells. The 

Utility also utilizes CAISO to obtain transmission congestion instruments to mitigate the Utility’s risks 

associated with electricity generation assets. The Utility procures all of the energy needed to meet its 

customers’ demand through the CAISO Market. The Utility sells and transmits all of the power it 

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generates and purchases under power purchase agreements to CAISO. CAISO determines which of 

the Utility’s resources (or those controlled by other parties) to operate at which times to meet the 

CAISO system wide load and ensure the reliability of the grid. 

Given CAISO’s central role in California’s electricity market, the Utility consummates 

transactions through CAISO that it would not otherwise be able to execute with any other party or 

entity. Specifically, through CAISO and the CAISO Market, the Utility: (i) sells all of the energy from 

its Utility owned generation units as well as those units it has under contract with third parties, (ii) 

purchases all of the energy in the day-ahead and real-time energy markets to meet customer demands, 

(iii) acts as a scheduling coordinator for the Utility’s generation facilities as well as certain third-party 

generation facilities, (iv) transmits the power it generates, buys, and sells, (v) sells and purchases 

congestion revenue rights, and (vi) settles for other services as required as a load serving entity. 

Because the Utility buys and sells all of the electricity through CAISO that it needs to meet customer 

demand and to generate revenue from its generation portfolio, any disruption or the loss of access to 

this market would severely impact the Utility’s ability to operate. In that scenario, the Utility would be 

unable to generate revenue from its owned and contracted resources and, likewise, would be unable to 

buy electricity to meet the demands of its customers. 

Although the Utility is often a “net” creditor of CAISO, because it has been a net seller of 

energy to the CAISO Market, it may also at any given time owe money to CAISO on a net basis. To 

minimize credit risk, the Utility’s liabilities to CAISO for the charges described in the Tariff 

(collectively, the “CAISO Obligations” and, together with the NGX Obligations, the “Exchange 

Obligations”) are secured by collateral, such as cash collateral and/or letters of credit, the amount and 

form of which are controlled by the terms of the Tariff (the “CAISO Collateral” and, together with 

the NGX Collateral, the “Exchange Collateral”). In addition, CAISO is authorized under the Tariff to 

setoff, settle, or otherwise recoup amounts owed by the Utility to CAISO against amounts owed by 

CAISO to the Utility. To the extent amounts owed by the Utility to CAISO exceed amounts owed by 

CAISO, the Utility must pay the difference in cash. The Utility’s failure to meet its obligations to 

CAISO can result in CAISO’s refusal to continue to do business with the Utility, and/or refusal to 

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allow the Utility to participate in the CAISO Market. The Utility may also be precluded from acting as 

a scheduling coordinator for generation facilities. 

The Utility’s participation on the Exchanges is currently governed by the Utility’s market risk 

and credit policies, which establish internal policies and controls with respect to Exchange activity. As 

of the Petition Date, the Utility estimates that it owes approximately $38 million to ICE NGX and 

approximately $13.7 million to CAISO on account of prepetition Exchange Obligations (collectively, 

the “Prepetition Exchange Obligations”). CAISO invoices its participants, including the Utility, 

each Wednesday (and at other times depending on the charge type) and payment is due on the fourth 

business day after the invoice is issued. ICE NGX’s Prepetition Exchange Obligations will become 

due and owing during the Interim Period. As of the Petition Date, ICE NGX and CAISO are holding 

cash collateral in the amounts of $36.4 million and $40 million, respectively. 

Participating in the Exchanges protects the Utility from harmful fluctuations in commodity 

prices and helps it to better manage the future energy demands of its customers. Specifically, 

participation in the Exchanges enables the Utility to procure natural gas for the long-term, thereby 

fixing the Utility’s exposure to pricing. The Utility can also make short-term purchases of gas and 

power through the Exchanges, which enables the Utility to cover customer shortfalls quickly and 

efficiently, or quickly sell excess supply, thereby mitigating the Utility’s losses associated therewith. 

To maintain continued access to the critical gas and power markets in which the Utility 

operates, and to maintain the Utility’s access to the power grid over which it must transmit nearly all of 

the power it buys, sells, and generates, the Utility requests authority for the Exchange Operators to 

setoff, settle, or recoup Prepetition Exchange Obligations and apply Exchange Collateral in satisfaction 

thereof to the extent permitted by the terms of the Prepetition Exchange Agreements, and for the 

Utility to pay the Prepetition Exchange Obligations in the ordinary course of business on a postpetition 

basis including “true-up” amounts which may be invoiced in the future for prepetition delivery dates or 

charges. (True-ups may result, for example, from revisions to estimated versus actual volumes and 

service charges and may lag behind the initial invoice by months or more). In addition, the Utility is 

seeking authority to ensure payment of ongoing Prepetition Exchange Obligations and postpetition 

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obligations to the Exchange Operators under the Prepetition Exchange Agreements (collectively, the 

“Postpetition Exchange Obligations,” which, together with the Prepetition Exchange Obligations, 

constitute Exchange Obligations) by: (i) providing the Exchange Operators with administrative 

expense claims on account of the Exchange Obligations under section 364(b) of the Bankruptcy Code 

(the “Administrative Expense Claims”), and (ii) confirming the first-priority liens and security 

interests of the Exchange Operators in the existing Exchange Collateral and seeking authority to pledge 

additional collateral to the Exchange Operators, as applicable, in the ordinary course of business and 

consistent with the Prepetition Exchange Agreements to secure postpetition obligations, including the 

Postpetition Exchange Obligations, on a first-priority basis in such collateral (the “Postpetition 

Exchange Collateral”). Because the Prepetition Exchange Obligations are fully secured, no other 

parties in interest will be prejudiced by the foregoing relief.

Additionally, the Utility participates in other gas and electricity markets and exchanges, and is 

concerned that certain counterparties in those markets and exchanges, such as natural gas suppliers, 

natural gas transportation providers, natural gas storage providers, gas fired electric generators, 

renewable electric generators, RPS shaping and firming providers, and buyers of the Utility’s resource 

adequacy and renewable energy products (collectively, the “Trading Counterparties”) may seek to 

terminate their agreements with the Utility or seek to liquidate the Utility’s natural gas or electricity 

positions as a result of the commencement of these Chapter 11 Cases. The Trading Counterparties 

currently hold cash collateral as security for outstanding obligations. In order to avoid a termination of 

their agreements, pursuant to the Exchange Operators Motion, the Utility also requests that the Trading 

Counterparties be authorized to exercise any valid setoff rights, apply cash collateral to outstanding 

obligations, and, to the extent of any excess cash collateral, continue to hold the same to secure 

postpetition obligations to the Trading Counterparties. The Utility also requests authority to provide 

the Trading Counterparties with cash or other collateral in connection with ongoing postpetition 

transactions. 

C. FCM 

In addition to the Exchange Operators, the Utility is party to certain agreements (the 

“Prepetition FCM Agreements”) with Macquarie Futures USA LLC and BNP Paribas Securities 

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Corp. (collectively, the “Future Commission Merchants”) to buy or sell futures contracts (or options 

on futures contracts) and other forward contracts related to certain commodities and commodity related 

products. The Future Commission Merchants solicit or accept orders to buy or sell futures contracts, 

options on futures, retail off-exchange forex contracts or swaps, and accept money or other assets from 

customers to support such orders. In connection with the Prepetition FCM Agreements, the Utility is 

required to provide collateral, including initial margin and variation margin, from time to time in such 

amounts, at such times, and in such form (usually cash) as requested by each Future Commission 

Merchant in its discretion. The collateral amounts requested by a Future Commission Merchant may be 

affected by the Utility’s open trading positions and the Future Commission Merchant’s perception of 

the Utility’s credit risk. Again, in order to avoid a termination of the Prepetition FCM Agreements, 

which provide the Utility with the ability to protect against price fluctuations, the Utility seeks 

authority to provide such additional cash or other collateral required by the Prepetition FCM 

Agreements in an amount not to exceed $15,000,000. 

I respectfully submit that allowing the Utility to continue its trading and exchange practices in 

the ordinary course, without interruption, including the payment of any Prepetition Exchange 

Obligations, and the furnishing of collateral in connection therewith, is a sound exercise of its business 

judgment. The Utility has utilized the same, or substantially similar, exchange practices for years. 

Indeed, it is impossible for the Utility to operate its business without such practices. In particular, 

absent the ability to participate in the Exchanges, the Utility would simply be unable to effectively 

procure and sell its natural gas and electricity—a result that may lead to the Utility’s inability to meet 

customer demand, risks to gas and electric system reliability in California and, with respect to the 

CAISO practices, to pricing volatility in the power markets or to a decrease in the reliability of the 

state-wide system. 

Payment of the Prepetition Exchange Obligations is essential to the Utility’s continued 

operations and the proper functioning of the California gas and power markets within which the Utility 

plays a crucial role. Any limitation on the Utility’s ability to continue their prepetition trading and 

exchange practices will: (i) cause disruption to the Utility’s operations and, potentially, to the 

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California gas and power markets; and (ii) compromise the Utility’s ability to procure natural gas and 

power in amounts needed to satisfy customer demand and maintain system reliability. The Exchange 

Operators are currently in possession of significant amounts of collateral and are fully secured with 

respect to the Prepetition Exchange Obligations. Consequently, as stated, the relief requested in the 

Exchange Operators Motion will not prejudice any party in interest, including the Utility’s unsecured 

creditors. 

Accordingly, I respectfully submit that the relief requested in the Exchange Operators Motion 

is necessary and appropriate, is in the best interests of their estates and all parties in interest, is 

necessary to avoid immediate and irreparable harm to the Debtors, and should be granted. 

XVIII. MOTION OF DEBTORS PURSUANT TO BANKR. L. R. 9006-1 REQUESTING 

ORDER SHORTENING TIME FOR HEARING ON FIRST DAY MOTIONS (THE 

“MOTION TO SHORTEN”) 

Pursuant to the Motion to Shorten, the Debtors are seeking entry of an order shortening time for 

a hearing on the following First Day Motions: (i) Joint Administration Motion; (ii) DIP Financing 

Motion; (iii) Cash Management Motion; (iv) Employee Wages and Benefits Motion; (v) Public 

Purpose Programs Motion; (vi) Operational Integrity Suppliers Motion; (vii) Lien Claimants Motion; 

(viii) Insurance Motion; (ix) Taxes Motion; (x) NOL Motion; (xi) Exchange Operator Motion; (xii) 

Extension of Time to File Schedules and Statements Motion; (xiii) Creditor Matrix and Notice of 

Commencement Motion; (xiv) Section 156(c) Application; and (xv) the Responsible Individual 

Application (collectively, the “Emergency First Day Motions”). 

Specifically, the relief requested in the Emergency First Day Motions is necessary, to among 

other things, protect the interests of the Debtors’ employees and customers, to avoid disruption to their 

operations, to maintain the cash management systems, and to maintain public programs (most of which 

are mandated by statute or regulation) during the pendency of the Chapter 11 Cases. The relief 

requested in the Emergency First Day Motions is designed to prevent unnecessary disruptions in the 

operations of the Debtors’ businesses generally, and all of such relief is necessary to preserve and 

maximize the value of the Debtors’ estates and operations for the benefit of all parties in interest. 

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Accordingly, for the reasons set forth herein, I respectfully submit that the relief requested in 

the Motion to Shorten is necessary and appropriate, is in the best interests of their estates and all 

parties in interest, and should be granted. 

For the reasons set forth in the Emergency First Day Motions and herein, the relief requested in 

the Emergency First Day Motions is essential to avoid the disruption of operations and to promote the 

Debtors’ smooth transition into chapter 11 for the benefit of all parties in interest. 

Pursuant to 28 U.S.C. § 1746, I declare under the penalty of perjury, that the foregoing is true 

and correct. 

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