Moody’s says bankruptcy court PG&E order credit positive for CCAs

A recent bankruptcy court order that maintains existing arrangements between community choice aggregators (CCAs) and investor-owned Pacific Gas & Electric is credit positive for CCAs in California, Moody’s Investors Service said.

The U.S. Bankruptcy Court for the Northern District of California on Jan. 31 provided interim approvals, known as “first-day” orders, related to PG&E’s Jan. 29 bankruptcy filing.

The approved motions include an order to maintain existing arrangements between CCAs and PG&E, which is credit positive for Marin Clean Energy (MCE) and other CCAs in California.

“The order provides more stability to CCAs’ cash flow collections, which enables their power suppliers and other vendors to have greater certainty that CCA revenues and cash flow will remain unaffected by the utility’s bankruptcy filing,” Moody’s said in a Feb. 7 report.

Issuance of the order will facilitate the continued receipt of revenues and cash flows and should also be supportive of continued development of CCAs in PG&E’s service area, the rating agency said.

CCAs were established to provide electricity customers choice of generation supplier in the service areas of California’s investor-owned utilities.

Under the CCA business model, PG&E includes the charges for generation services provided by MCE on the monthly electricity bill that PG&E sends to customers. The customer pays the bill, and on a daily basis, PG&E transfers collected CCA generation revenues to MCE, Moody’s noted in the report.

The California Public Utilities Commission’s “Rule 23” established this process and governs the relationship between PG&E and all of the CCAs in California implementing the requirements of Assembly Bill 117, the state’s electricity aggregation choice statute.

“For the past eight years, MCE has benefited from the PG&E billing and collection process, leading to a very strong receivable collection record. In return, MCE and the other CCAs have paid PG&E a fee to handle the collection process, which they will continue to do during the bankruptcy process,” Moody’s said.

The bankruptcy court’s first-day order also included an acknowledgment that the revenues are not a part of PG&E’s estate, that PG&E must return to regular banking and billing operations, including remitting bill collections to CCAs and that CCA revenues cannot have a lien placed against them by the debtor-in-possession lender.

MCE is one of the 12 CCAs operating in PG&E’s service territory where PG&E provides transmission and distribution services. Together, the CCAs provide generation services to approximately 40% of the electric demand in PG&E’s service territory, “a level that we expect will grow,” the rating agency said.