What Happens to Energy Efficiency When PG&E Files for Bankruptcy?

Graph credit: www.marketwatch.com

One of my mantras this year at kW has been to try to minimize uncertainty. Uncertainty is bad for business – it stalls decisions, makes your colleagues nervous, anxious and stressed, and generally sows the seeds for trouble. Well best laid plans… between the government shutdown and a PG&E Chapter 11 “re-organization”, we are getting up to our ears in uncertainty right now.

But we’ve been here before. Those of you who’ve been in the business for a while will remember that PG&E filed bankruptcy back in 2001 in the aftermath of California’s bungled attempt at utility deregulation. At the time, their bleak liquidity position was much worse than it is now, largely due to manipulation of the electricity markets and regulations that forced PG&E to buy power at a higher cost than it could collectively sell it.

Remember those “smartest guys in the room” the now non-existent Enron? Not that they caused it on their own, but the CA markets that they were profiting from were a big part of PG&E’s problems. I can remember some nervous days when PG&E and Enron both owed us a lot of money.

It’s not PG&E’s money that pays our bills

The good news for the energy efficiency industry is that, for most of the work we do for PG&E, they are administering ratepayer money, not paying us from shareholder money. Back in 2001 it took about six months for the CPUC to carve out that money saying essentially “hands off – that’s not your money.” It’s nerve wracking, but not the end of the world.  This time we’re ahead of the game on that front – PG&E has already filed a motion, that allows them to continue paying for public purpose funds from their existing budget. It’s been approved on an interim basis and will be finalized February 27th.

Big ticket industry changes are in the works

In the meantime, we’re in the beginning stages of the biggest open procurement for energy efficiency in California history. We’re trying to meet two ambitious goals already in the state, neither of which we’ve done before. The first is to meet SB 350’s directive to double the contribution of energy efficiency to the state’s grid by 2030. That bill became law in 2015, so we’re already more than a 25% down the road, and we are far from doubling our contributions. The second is PG&E and all the IOU’s in CA are also meeting the CPUC’s order to contract at least 60% of that EE through third parties by 2023 – an unprecedented level of programs to be run “outside” the IOUs.

It looks like we’re going to need to proceed quickly, regardless of the uncertainties, and I’ll need a new, uncertainty-embracing mantra. I’m reminded of the 12-step Serenity Payer; “Grant me the serenity to accept the things I cannot change, Courage to change the things I can, And the Wisdom to know the difference.” Those are comforting words that we could all learn from, 12-steppers or not.

What can we do about PG&E’s bankruptcy?

One thing that we can do is to ask our regulators at the CPUC for help ensuring PG&E maintains its current schedule for next year’s program solicitations. I feel for folks that are just starting out and pursuing third party program administration. On one hand you have this great opportunity with PG&E’s solicitation, but now you’re facing the uncertainty of the Chapter 11 process. And, if you are a successful bidder for the 2020 program year, you’ll have to hit the ground running, tough for anyone let alone new firms. The last thing our industry needs is more uncertainty and delays.

Prioritizing work diversity is another course of action for firm’s relying heavily on PG&E income. In 2001 we had about a six-month lapse in payments from PG&E, which is a big burden for a small business to bear. At the time, we had half a dozen employees total and PG&E was about half of our business. We learned our lesson and now have a diverse client base.

Faced with PG&E’s Chapter 11, we’re dependent on the CPUC to protect our businesses from the liabilities of others and that’s exactly what we’ll be asking them to do. I hope that, like us, they learn from our experience 17 years ago, and there aren’t any delays in a final ruling to isolate ratepayer money from shareholder dollars. To have our, typically small and growing businesses, carry huge PG&E’s debt for any time is a ridiculous outcome and I hope our friends at the CPUC can help us minimize it.

In the meantime, grant us the serenity…


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