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Utilities in California

Pacific Gas & Electric Company Land in its Bankruptcy Settlement

by Cameron Scott (2012)

Who will oversee the land in PG&E’s bankruptcy settlement?

Something good has finally come from the dark days of 2000 and 2001, when Californians suffered a series of rolling electrical blackouts as free-market high jinks wreaked havoc on the state’s electrical supply.

In April 2001, caught between manipulated prices and state regulations controlling its rates, utility giant Pacific Gas & Electric Company filed for bankruptcy. As part of the settlement it eventually reached with the California Public Utilities Commission – after a contentious back-and-forth – Pacific Gas & Electric Company agreed to conservation easements that will protect 140,000 acres of watershed land it holds for hydroelectric operations. The utility will retain at least half of those acres, and the rest will likely go to public, tribal, and environmental groups.

In November, the nonprofit organization established to manage the process began announcing plans for some of the higher-profile parcels – including lands near Lake Spaulding that would go to the University of California Center for Forestry. Insiders expect the coming months to bring a flurry of recommendations about who should become the stewards of 43,000 acres along the western edge of the Sierra Nevada and in northern parts of the state, given that funding for the Pacific Forest & Watershed Lands Stewardship Council is set to end in 2013. It has already made recommendations for 27,000 acres, but none has been finalized.

“Almost all the properties are in watershed areas,” explains Allene Zanger, the Stewardship Council’s executive director, “so they’re important not just in terms of habitat but also in terms of being the source of water for the entire state.” Zanger added that protecting or improving public access to the lands would bring “tremendous” recreational value to state residents.

Pacific Gas & Electric Company is scoring PR points in news reports about the easement project, but the company had to be pushed to conserve the properties in question. It had been looking to cash out on the land holdings. Terrie Prosper, chief spokesman for the Public Utilities Commission, noted with satisfaction that the settlement agreement removes “forever that possibility,” replacing “the specter of loss of public control with the promise of perpetual public access.”

Longtime Sierra Club volunteer Donald Rivenes of Nevada City said that the properties “are very good for hiking and recreation.” Many of the lands for which recommendations have yet to be announced open onto beloved preserves, including the Emigrant Wilderness Area and Grouse Lakes forestland.

Rivenes says one unanswered question is whether the remaining land will go to federal, rather than state, foresters. The Sierra Club favors the U.S. Forest Service’s tougher logging restrictions and argues that the federal government is in a better position to hold PG&E liable for any changes to the land.

Public Utilities Commission (PUC) in the Pacific Gas & Electric Company bankruptcy case

By Dennis Pfaff, who is an environmental reporter for the San Francisco Daily Journal (2002)

Through political appointment, personal misfortune, and blind luck the PUC is unusually well prepared to represent the state’s consumers.

Appointed as Public Utilities Commission president by Gov. Gray Davis during the state’s energy crisis, Loretta Lynch quickly realized she needed help. With some foresight she hired New York’s Paul, Weiss, Rifkind, Wharton & Garrison to provide bankruptcy law advice. Then in December 2000 she attended the Keker & Van Nest Christmas party and encountered Cohen, Keker’s hiring partner, at a turning point in his career.

The year before, Cohen, at age 44, had been diagnosed with prostate cancer. “Everybody said to me, ‘This is going to change your life,’ ” Cohen says. “My thought at the time was, ‘I don’t want any life-transforming experience. My life is just fine.’ ” But after undergoing surgery and radiation therapy, Cohen says, he began to consider public service workb.

Loretta Lynch had been looking for a tough litigator as Public Utilities Commission general counsel. Although she could offer Cohen just $118,000-a small fraction of his compensation at Keker-he accepted the next day.

Pacific Gas & Electric Company filed for bankruptcy protection in April 2001, just three weeks after Cohen started work. Then in September 2001 the company submitted an audacious reorganization plan that asserted federal bankruptcy law preempted dozens of state laws and regulations. “I really did know what I was getting into,” Cohen says. But he was badly outnumbered. Pacific Gas & Electric Company’s chief bankruptcy firm, San Francisco’s Howard, Rice, Nemerovski, Canady & Falk, had more than 50 lawyers working on the case by late 2001. Cohen had 65 lawyers in his entire department, and assigned about 12 to the Pacific Gas & Electric Company matter.

Cohen’s first move was to reorganize the law department. He created practice groups based on the litigation-firm model he’d learned at Keker. One group concentrated on issues that generally came before the commission, while another focused primarily on practicing before federal regulatory agencies. The effect was to mix the veterans with the newcomers, giving younger lawyers increased responsibility and the chance to work with some of the top experts in the field.

Lynch and Cohen also used the tools of modern technology-email and airplanes-to even the sides. “We are in touch by email all day and all night,” says Paul Weiss attorney Alan Kornberg in New York.

The new structure paid off. In late February 2012, Bankruptcy Judge Dennis Montali granted the Public Utilities Commission permission to file a competing reorganization plan, which would retain full state regulatory authority over the company. Though such early signs were encouraging, Cohen says that both sides are girded for a long battle.

I don’t think that throwing money and people at problems is necessarily the best way to deal with everything,” he says. “It’s a lot more important to be focused, to think creatively, and to make the right arguments.”

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