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Yann
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PG&E Will File For Bankruptcy. PG&E announced yesterday, behind a wall of barricades, that it would file for chapter 11 protection by the end of the month. In terms of process, the advance notice was required per the legislation that passed last year during the bailout. You can expect PG&E to seek DIP (debtor in possession) financing over the next few weeks and the stock price and corporate bonds to crater. Just yesterday the stock price was down 50%, leaving the company’s valuation under $5billion. PG&E needs a new leader that is more of a restructuring officer than a traditional CEO, but more importantly the customers need a representative at the table on a daily basis as well. While PG&E is a private utility, and this fact is true for most IOUs around the Country, they serve the public as a monopoly under regulator oversight. In bankruptcy and matters that impact the health of the public, like this one, Governor Newsom should appoint a consumer advocate to oversee the restructuring and make recommendations to the Governor, legislature and the CPUC. I don’t know if there is a legal precedent for this but the consumers need to know that the next steps are not simply for the benefit of the DIP lenders or shareholders but the greater good as well.
Does Anything Change, Yet? The short answer is no, not yet. I do expect to see the impact stop some financings in the short term while investment committees try to understand the credit scenarios going forward. My hope is that the CCAs come to Sacramento with a legislative support proposal to back the CCA counterparty risk while also fixing the community solar rules in California. Community solar allows the off taker to be changed in a default scenario, which by definition will always be a partial default of the solar asset since many off takers are sitting side by side. Now is the time for industry to put forth strong proposals and show that clean energy including solar is ready to lead California forward.
My Proposal. I mentioned yesterday that I was asked by a legislator what I would do if I were in a situation to write one rule for solar. My answer was to lock in uncapped net metering away at retail rates without time of use restrictions. If the future of includes one or more EVs in every driveway and monopolies serving as wire companies, then distributed energy needs a simple and efficient way to do its part, which will be a necessary component of 100% renewable energy. Other States have this rule written and should be preserved. Those that do not need to take the leverage provided by monopolies looking for a handout to get back to where we came from.
Crossing the EV Chasm. EVs need mass market SUVs and pickup trucks to really make a dent in american transportation numbers. Like I said last week, An electric Ford Explorer or Chevy pickup would change the game and that can’t happen fast enough.
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PG&E CEO Leaves, Notices Coming? Geisha Williams, CEO of PG&E, has stepped down after running the company for less than 2 years. This comes amid speculation that PG&E will be providing notice of potential bankruptcy filing to the employees as required by the legislative bailout that passed the State legislature last year. The company is looking for a new CEO but from my perspective this is all about dumping the problem on Sacramento. Yes, the company doesn’t have $30billion in capital to pay for potential liabilities but I don’t see why today or next week the problem needs to be solved. PG&E as a monopoly is looking for the CPUC, State Legislature and Governor Newsom to make their move and show their hands.
What Happens Next? Wall Street is selling the news, see the chart below that shows the 60% declines in a few months, erasing billions of market value. PG&E will get out of this but the question is what opportunity is presented to consumers, including myself, about the type of company that PG&E can become. PG&E is private but it’s a monopoly. Newsom has the ability to fast-track his climate vision including transportation, solar and more, right now. I know who the next CEO should be, a CEO that believes that the future of PG&E is entirely clean and provides a service, not a hindrance, to all clean energy assets both distributed and centralized. I’ll be watching, eagerly, to see what happens next.
Solar Impacts. In the short term, expect solar to push hard for bailouts on the solar PPAs that lock in the solar capex from 5-10 years ago. PPA rates in the double digits but those projects are already paid for and bondholders bought into that pro forma. There are gigawatts of solar projects with PG&E as the off taker and solar can’t afford to show this downside scenario which would result in a capital markets tax for all other solar projects.
King For A Day. A legislator asked me last week what is the one thing that I would change if I were the Governor of a State and could pass a rule unilaterally. It was an obvious but interesting question, a question that we should probably all have answers for. What is your answer? You’ll get mine tomorrow.
Social Equality In Solar Lacking. Tufts is out with a study on the access and adoption of solar by socio-economic standings including race and ethnicity. There is a lot of data there and I hope you will find a time to read it. This is in line with the speakers’ messages at the Vote Solar Equinox event in DC.
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Massachusetts.SolarWakeup is coming back to Boston, stay tuned for date and location to be announced. With SMART in full effect, we look forward to catching up on the most important updates to the solar market. Can’t wait to be back!
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