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This excerpt taken from the PCG 8-K filed Oct 28, 2005. Risks Related to PG&E Corporation
PG&E Corporation could be required to contribute capital to the Utility or be denied distributions from the Utility to the extent required by the CPUC’s determination of the Utility’s financial condition.
In approving the formation as the holding company of the Utility, the CPUC imposed certain conditions, including an obligation by PG&E Corporation’s Board of Directors to give “first priority” to the capital requirements of the Utility, as determined to be necessary and prudent to meet the Utility’s obligation to serve and to operate in a prudent and efficient manner. The CPUC later issued decisions in which it adopted an expansive interpretation of PG&E Corporation’s obligations under this condition, including the requirement that PG&E Corporation, as well as each of the holding companies of the other major California investor-owned electric utilities, “infuse the utility with all types of capital necessary for the utility to fulfill its obligation to serve.” PG&E Corporation and the other holding companies of the other major California investor-owned electric utilities appealed these decisions. On May 21, 2004, the California Court of Appeal issued an opinion finding that the CPUC has
limited jurisdiction over the holding companies to enforce the conditions imposed by the CPUC on their formations, but that the CPUC’s decision interpreting the capital requirements condition was not ripe for review. On September 1, 2004, the California Supreme Court denied PG&E Corporation’s petition seeking review of the California Court of Appeal’s finding that the CPUC had limited jurisdiction.
Pursuant to the terms of the Settlement Agreement, the CPUC agreed that, once the CPUC approval of the Settlement Agreement is no longer subject to appeal, it will release all claims against PG&E Corporation and the Utility related to past holding company actions during the California energy crisis. Nevertheless, as now interpreted by the CPUC, whenever the Utility’s financial health is impaired in the future, PG&E Corporation could be required to infuse the Utility with all types of capital necessary to fulfill its obligation to serve or to operate in a prudent and efficient manner. These obligations, if ultimately upheld by the courts, could materially restrict PG&E Corporation’s ability to meet other obligations.
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