WEBVTT

00:00:03.780 --> 00:00:05.170
<v ->Record.</v>

00:00:05.170 --> 00:00:06.040
Good afternoon.

00:00:08.030 --> 00:00:10.350
Mr. Johnson is back on the stand.

00:00:10.350 --> 00:00:12.100
Remind you you're still under oath.

00:00:13.600 --> 00:00:17.547
One housekeeping matter.

00:00:23.960 --> 00:00:26.850
I got circulated, as per my request,

00:00:26.850 --> 00:00:29.110
a written version to the service list

00:00:29.110 --> 00:00:33.270
of the proposed schedule for going forward

00:00:33.270 --> 00:00:35.250
for incorporating the ACR issues.

00:00:36.200 --> 00:00:37.570
That looks fine to me.

00:00:37.570 --> 00:00:40.360
Is there anyone has anything additional to say on that?

00:00:41.690 --> 00:00:45.270
I am adopting this proposal as the schedule

00:00:45.270 --> 00:00:46.170
for going forward.

00:00:48.820 --> 00:00:51.280
I'll do either a procedural email

00:00:51.280 --> 00:00:53.630
or procedural ruling memorializing that,

00:00:53.630 --> 00:00:57.030
so those will be actually on the record of the proceeding

00:00:57.030 --> 00:00:59.830
but this will be the schedule going forward.

00:01:00.780 --> 00:01:01.613
Thank you.

00:01:01.613 --> 00:01:04.000
Appreciation to the parties for working on that.

00:01:06.910 --> 00:01:09.110
Mr. Johnson, I have a few questions for you.

00:01:15.190 --> 00:01:18.090
One of the things I think you had answered some questions

00:01:18.090 --> 00:01:21.810
from Miss Sheriff the other day about the moratorium

00:01:21.810 --> 00:01:23.340
on structural alternatives

00:01:23.340 --> 00:01:25.040
that's proposed in your testimony.

00:01:26.490 --> 00:01:29.020
I wasn't clear from your answer before

00:01:29.020 --> 00:01:32.140
how long you expect that moratorium to extend

00:01:32.140 --> 00:01:34.290
or how long you would request it to extend.

00:01:35.150 --> 00:01:38.550
<v ->On the piece that we're requesting</v>

00:01:38.550 --> 00:01:42.750
to have the moratorium on, which is corporate structure,

00:01:42.750 --> 00:01:44.060
I would say five years.

00:01:44.060 --> 00:01:46.870
There was some bidding up yesterday to eight,

00:01:47.750 --> 00:01:50.060
but I would say a minimum of five years

00:01:50.060 --> 00:01:53.630
unless it's obvious going forward that it's not working.

00:01:53.630 --> 00:01:54.480
Some period of time,

00:01:54.480 --> 00:01:56.480
I think five years would be a good beta.

00:01:58.190 --> 00:01:59.110
<v Judge>Thank you.</v>

00:02:00.050 --> 00:02:01.580
As a general matter,

00:02:03.130 --> 00:02:07.030
why would a corporation use a holding company structure?

00:02:09.030 --> 00:02:09.940
<v ->Several reasons.</v>

00:02:09.940 --> 00:02:14.940
One is for flexibility in pursuing myriad businesses.

00:02:16.960 --> 00:02:19.730
It gives you some flexibility in your financing options.

00:02:19.730 --> 00:02:21.190
Those would be the main two.

00:02:22.690 --> 00:02:26.690
<v ->Given PG&E's current structure and reality</v>

00:02:26.690 --> 00:02:31.000
where pretty much the only thing in the holding company

00:02:31.000 --> 00:02:35.350
is the utility, why is a holding company a good idea

00:02:35.350 --> 00:02:36.550
or appropriate for PG&E?

00:02:37.400 --> 00:02:39.680
<v ->So I think, I've studied a little history,</v>

00:02:39.680 --> 00:02:41.050
I think it was created at a time

00:02:41.050 --> 00:02:46.050
where the desire was to diversify, go broadly,

00:02:46.910 --> 00:02:47.743
those kind of things.

00:02:47.743 --> 00:02:49.620
I don't think that's gonna happen anytime soon,

00:02:49.620 --> 00:02:52.300
so that reason for the holding company

00:02:52.300 --> 00:02:55.900
I think is not particularly strong at the moment.

00:02:55.900 --> 00:03:00.010
It does give us some financing flexibility going forward

00:03:00.010 --> 00:03:01.750
here as we come out of bankruptcy,

00:03:02.777 --> 00:03:04.850
and so I think it is valuable in that regard.

00:03:05.990 --> 00:03:10.860
<v ->I noticed that some of the debt that's being issued</v>

00:03:10.860 --> 00:03:13.210
pursuant to the plan is by the holding company.

00:03:14.250 --> 00:03:16.260
Why is that?

00:03:16.260 --> 00:03:21.040
<v ->So that you can achieve an appropriate capital structure</v>

00:03:21.040 --> 00:03:23.420
at the utility, and to do that

00:03:23.420 --> 00:03:27.680
and to have investment grade rating on the utility debt,

00:03:27.680 --> 00:03:30.080
you have to ace your sum at the holding company.

00:03:35.630 --> 00:03:36.940
<v ->You had noted in your testimony</v>

00:03:36.940 --> 00:03:39.490
that approximately 70% of the officers

00:03:39.490 --> 00:03:42.410
of PG&E had been replaced.

00:03:42.410 --> 00:03:43.790
Is that roughly correct?

00:03:44.710 --> 00:03:48.060
<v Johnson>That's roughly correct since 2017, yes.</v>

00:03:48.060 --> 00:03:53.060
<v ->And I've noticed in my time here at the commission</v>

00:03:53.700 --> 00:03:58.700
that the response to the PUC when PG&E has a problem

00:03:59.300 --> 00:04:02.430
often includes the language of something to the effect

00:04:02.430 --> 00:04:05.580
of, oh, yes, there was a problem but we fired him.

00:04:08.320 --> 00:04:09.890
And so it seems to me though,

00:04:09.890 --> 00:04:13.910
I have a concern because in the locate and mark proceeding,

00:04:13.910 --> 00:04:15.130
PG&E indicated that it's trying

00:04:15.130 --> 00:04:17.460
to foster a safe environment

00:04:17.460 --> 00:04:19.710
where employees feel comfortable speaking up.

00:04:21.210 --> 00:04:24.510
Is there a tension between essentially a willingness

00:04:24.510 --> 00:04:26.390
to fire employees for problems

00:04:26.390 --> 00:04:28.920
and making sure that they feel willing to speak up?

00:04:30.909 --> 00:04:32.450
<v ->(clears throat) Pardon me.</v>

00:04:32.450 --> 00:04:34.330
Yes, there is a tension there.

00:04:36.458 --> 00:04:37.530
I can only speak to my time here.

00:04:37.530 --> 00:04:39.570
I didn't have a lot to do with that 70%,

00:04:39.570 --> 00:04:41.570
most of that happened before I got here.

00:04:42.490 --> 00:04:45.650
I do think you have to have, and particularly executives

00:04:45.650 --> 00:04:47.370
that take accountability for their work.

00:04:47.370 --> 00:04:50.060
So deviation from the code of conduct,

00:04:50.060 --> 00:04:55.030
the code of ethics can produce results if you're miscast.

00:04:55.030 --> 00:04:57.440
So I do think sometimes people have

00:04:57.440 --> 00:04:59.600
to leave the organization.

00:04:59.600 --> 00:05:04.600
To prevent that from becoming a chilling effect more broadly

00:05:05.540 --> 00:05:08.030
requires work by the enterprise

00:05:08.030 --> 00:05:10.220
and we have a large compliance and ethics group

00:05:10.220 --> 00:05:12.380
that works on speak up culture.

00:05:12.380 --> 00:05:15.970
We train on this, we work on this for that very reason,

00:05:15.970 --> 00:05:18.020
to make sure that people are speaking up.

00:05:19.270 --> 00:05:22.270
<v ->Yeah, I would just want to make sure that that continues</v>

00:05:22.270 --> 00:05:24.010
because certainly one of the things I observed

00:05:24.010 --> 00:05:26.230
in the locate and mark from the record was

00:05:26.230 --> 00:05:28.610
that there were plenty of employees

00:05:28.610 --> 00:05:31.580
who knew what was going on and top management didn't.

00:05:34.053 --> 00:05:36.570
And that concerns me,

00:05:36.570 --> 00:05:41.570
want to make sure that people are not afraid to speak up.

00:05:41.720 --> 00:05:45.090
<v ->Yeah, so my experience in 10 months is</v>

00:05:46.710 --> 00:05:48.070
I have no trouble getting people

00:05:48.070 --> 00:05:49.470
to speak up everywhere I go,

00:05:50.500 --> 00:05:53.030
which I think is another way of saying,

00:05:53.030 --> 00:05:54.810
I don't think we've had a speak up problem,

00:05:54.810 --> 00:05:56.610
I think we've had a hearing problem.

00:05:58.260 --> 00:06:00.140
And we haven't been able to hear and respond

00:06:00.140 --> 00:06:01.740
to what people are saying to us.

00:06:02.850 --> 00:06:04.730
<v ->Good, whatever works.</v>

00:06:04.730 --> 00:06:05.563
Thank you.

00:06:06.911 --> 00:06:08.130
I believe, President Batjer?

00:06:16.290 --> 00:06:17.240
<v ->Thank you, Judge.</v>

00:06:18.320 --> 00:06:21.170
Mr. Johnson, thank you for your testimony.

00:06:21.170 --> 00:06:25.050
I've appreciated being here, Judge, yesterday and today

00:06:25.050 --> 00:06:26.750
for the time that I could be here.

00:06:27.850 --> 00:06:29.910
Mr. Johnson, we have some very,

00:06:30.890 --> 00:06:33.150
I think most people would consider tight time frames

00:06:33.150 --> 00:06:36.340
that have been mostly established under 1054

00:06:36.340 --> 00:06:40.680
regarding the exit of bankruptcy by PG&E.

00:06:41.970 --> 00:06:45.930
You know well, I know well the June 30th, 2020 date.

00:06:48.010 --> 00:06:51.600
I am very curious and would like to hear from you,

00:06:53.100 --> 00:06:55.370
what are the consequences for PG&E

00:06:55.370 --> 00:06:58.430
of not meeting that June 30, 2020 date?

00:07:00.760 --> 00:07:02.540
<v ->Those are pretty dire consequences.</v>

00:07:02.540 --> 00:07:07.280
First of all, we can't get into the wildfire fund,

00:07:07.280 --> 00:07:10.200
whatever the formal name is, but the fund.

00:07:11.130 --> 00:07:15.350
At this point, PG&E procuring insurance

00:07:15.350 --> 00:07:16.910
is almost an impossibility,

00:07:16.910 --> 00:07:20.990
so that fund is really important to us and to the industry.

00:07:24.050 --> 00:07:27.390
You know, I hate to even think about what happens

00:07:27.390 --> 00:07:28.500
if we don't meet that date.

00:07:28.500 --> 00:07:29.580
Nothing good happens.

00:07:32.440 --> 00:07:36.460
<v ->Is it harder, for example, to attract capital</v>

00:07:36.460 --> 00:07:39.060
as you would remain in chapter 11?

00:07:40.440 --> 00:07:43.740
<v ->Yes, and the fact if we weren't in the fund</v>

00:07:43.740 --> 00:07:46.510
and weren't able to procure insurance,

00:07:46.510 --> 00:07:49.320
it would make raising capital very difficult.

00:07:50.610 --> 00:07:53.530
And you know, being in chapter 11, continuing in chapter 11

00:07:53.530 --> 00:07:56.550
just makes that process eventually harder, raising capital.

00:07:57.810 --> 00:07:59.710
<v ->And I'm assuming also therefore,</v>

00:07:59.710 --> 00:08:03.000
there would be some real operational functional problems

00:08:03.000 --> 00:08:04.950
or concerns as well,

00:08:04.950 --> 00:08:09.390
remaining in chapter 11 post-June 30, 2020?

00:08:09.390 --> 00:08:11.280
<v ->So I wouldn't say problems</v>

00:08:11.280 --> 00:08:14.600
but I would say concerns that could turn into problems.

00:08:14.600 --> 00:08:17.990
You have a continuing distraction of the bankruptcy.

00:08:17.990 --> 00:08:19.190
And I have to say, I've been amazed

00:08:19.190 --> 00:08:22.660
at how much mind share this process has taken.

00:08:23.920 --> 00:08:25.090
Can you get the financing?

00:08:25.090 --> 00:08:27.100
I mean, we would do everything we needed to do

00:08:27.100 --> 00:08:30.480
and could do to prevent problems, but it's a distraction.

00:08:34.080 --> 00:08:37.270
<v ->And access to equity a difficulty?</v>

00:08:38.930 --> 00:08:41.780
<v ->Very difficult, maybe impossible in most circumstances.</v>

00:08:42.980 --> 00:08:45.960
<v ->So under this scenario,</v>

00:08:47.330 --> 00:08:51.820
what is, if I may use the colloquial, what is your plan B?

00:08:54.390 --> 00:08:56.270
<v ->We are focused on plan A,</v>

00:08:56.270 --> 00:08:58.010
which is to do everything we can

00:08:58.010 --> 00:09:00.530
to get a result in this proceeding

00:09:00.530 --> 00:09:04.610
that moves us ahead toward exit by June 30th.

00:09:05.620 --> 00:09:08.090
You know, if you get pushed past that date,

00:09:08.090 --> 00:09:11.920
you can somehow magically get back in the fund

00:09:11.920 --> 00:09:14.210
if you form the new electrical corporation.

00:09:16.070 --> 00:09:19.290
I would prefer not to go through those gymnastics.

00:09:19.290 --> 00:09:21.690
I do think we're poised, in many regards,

00:09:21.690 --> 00:09:25.590
to emerge as we get these last few processes

00:09:25.590 --> 00:09:26.630
and decisions done.

00:09:27.620 --> 00:09:29.720
But at the moment, we're all in on plan A.

00:09:32.100 --> 00:09:32.933
<v ->Okay.</v>

00:09:34.020 --> 00:09:35.090
Judge, I think,

00:09:37.810 --> 00:09:39.310
let me ask one other question.

00:09:41.790 --> 00:09:45.830
We have talked, you have been cross-examined yesterday,

00:09:45.830 --> 00:09:48.530
today, regarding securitization.

00:09:49.670 --> 00:09:53.510
If for whatever reason you were not able

00:09:53.510 --> 00:09:57.600
to grant securitization, what is your plan?

00:09:59.730 --> 00:10:01.060
<v ->The next step would be to ask</v>

00:10:01.060 --> 00:10:03.590
for a permanent waiver in the capital structure.

00:10:04.650 --> 00:10:05.940
<v Marybel>I'm sorry, say that again?</v>

00:10:05.940 --> 00:10:08.120
<v ->A permanent waiver in the capital structure.</v>

00:10:08.120 --> 00:10:10.003
<v ->A permanent waiver?</v>
<v ->Yeah.</v>

00:10:10.003 --> 00:10:12.771
<v ->Okay.</v>

00:10:12.771 --> 00:10:13.604
Okay.

00:10:13.604 --> 00:10:15.900
Judge, I think, thank you, Mr. Johnson,

00:10:15.900 --> 00:10:17.700
that concludes my questions.

00:10:19.310 --> 00:10:21.110
<v Judge>Thank you, President Batjer.</v>

00:10:21.110 --> 00:10:23.410
Mr. Manheim, do you have any redirect?

00:10:23.410 --> 00:10:24.620
<v William>Just a few clarifications,</v>

00:10:24.620 --> 00:10:27.460
Your Honor, thank you.

00:10:27.460 --> 00:10:32.220
Mr. Johnson, who does the CRO, the Chief Risk Officer,

00:10:32.220 --> 00:10:34.020
currently report to?

00:10:34.020 --> 00:10:36.570
<v ->I think yesterday I said that person reported</v>

00:10:36.570 --> 00:10:38.000
to the President of the Utility,

00:10:38.000 --> 00:10:41.040
but they actually report to the CFO currently.

00:10:41.040 --> 00:10:43.860
And then the next iteration will report to me.

00:10:43.860 --> 00:10:44.693
<v William>Thank you.</v>

00:10:47.100 --> 00:10:49.050
Earlier today when you were talking

00:10:49.050 --> 00:10:52.310
about the securitization proposal,

00:10:52.310 --> 00:10:54.990
I believe you described it as part of our plan.

00:10:54.990 --> 00:10:58.250
Is there anything that you'd like to clarify about that?

00:10:59.495 --> 00:11:01.280
<v ->(laughs) Yeah, so the securitization proposal</v>

00:11:01.280 --> 00:11:02.430
is not part of the plan.

00:11:02.430 --> 00:11:07.430
The plan is to pay the victims with the shareholders.

00:11:07.740 --> 00:11:09.620
Securitization is outside the plan,

00:11:09.620 --> 00:11:11.690
will require a separate filing,

00:11:11.690 --> 00:11:13.570
a separate proceeding before this commission,

00:11:13.570 --> 00:11:15.920
so it's an adjunct to the plan

00:11:15.920 --> 00:11:17.980
but it's not part of the plan.

00:11:17.980 --> 00:11:21.450
<v ->And PG&E can successfully confirm a plan</v>

00:11:21.450 --> 00:11:24.290
and exit bankruptcy based on a proposal

00:11:24.290 --> 00:11:26.570
that does not include securitization, is that correct?

00:11:26.570 --> 00:11:27.830
<v Johnson>That is correct.</v>

00:11:27.830 --> 00:11:30.260
<v ->And the proposal for securitization is something</v>

00:11:30.260 --> 00:11:33.140
that would be addressed following PG&E's exit?

00:11:33.140 --> 00:11:34.362
<v Johnson>Correct.</v>

00:11:34.362 --> 00:11:35.362
<v ->Thank you.</v>

00:11:37.840 --> 00:11:40.520
With respect to the June 30th date,

00:11:40.520 --> 00:11:45.520
does that date set a deadline for confirmation of the plan

00:11:45.640 --> 00:11:46.850
or exit from bankruptcy?

00:11:49.500 --> 00:11:51.580
<v ->It's not particularly clear to me in the statute,</v>

00:11:51.580 --> 00:11:53.910
but I think it is confirmation of the plan

00:11:53.910 --> 00:11:55.780
with an effective date being later.

00:11:57.000 --> 00:11:58.830
Effective meaning you've recapitalized

00:11:58.830 --> 00:12:00.330
and you're out of the process.

00:12:01.560 --> 00:12:06.520
<v ->Thank you, just one moment.</v>

00:12:06.520 --> 00:12:08.340
That's all, Your Honor, thank you.

00:12:08.340 --> 00:12:09.460
<v Judge>Thank you, Mr. Manheim.</v>

00:12:09.460 --> 00:12:10.840
Any recross?

00:12:10.840 --> 00:12:11.673
Mr. Finkelstein.

00:12:17.680 --> 00:12:18.867
<v William>Excuse me.</v>

00:12:18.867 --> 00:12:23.010
Mr. Johnson, I think you described securitization

00:12:23.010 --> 00:12:25.570
as an adjunct to the plan but not part of the plan.

00:12:26.578 --> 00:12:27.780
Is that a fair statement?

00:12:27.780 --> 00:12:28.860
<v Johnson>That is what I said, yes.</v>

00:12:28.860 --> 00:12:33.860
<v ->Okay, and it is still part,</v>

00:12:36.476 --> 00:12:37.350
I mean adjunct to the plan,

00:12:37.350 --> 00:12:40.620
is it fair to describe it as an essential element

00:12:40.620 --> 00:12:45.140
of how PG&E plans to implement its reorganization plan?

00:12:45.140 --> 00:12:49.360
<v ->It's an essential element in one version</v>

00:12:49.360 --> 00:12:51.850
of our plan to refinance,

00:12:51.850 --> 00:12:53.810
because it's really a financing tool.

00:12:54.730 --> 00:12:56.060
<v ->And that would be the refinancing</v>

00:12:56.060 --> 00:12:57.850
that you would have to take on

00:12:57.850 --> 00:13:00.730
after your plan of reorganization is confirmed.

00:13:00.730 --> 00:13:02.100
<v ->Correct.</v>

00:13:02.100 --> 00:13:06.030
<v ->And if that adjunct plan doesn't work out,</v>

00:13:06.030 --> 00:13:07.100
I think as you said in response

00:13:07.100 --> 00:13:10.520
to the commissioner's question, you'd need to go to a plan B

00:13:10.520 --> 00:13:13.130
which might be a permanent waiver of the capital structure?

00:13:13.130 --> 00:13:14.223
<v ->Right.</v>

00:13:14.223 --> 00:13:15.056
<v William>Okay, thank you.</v>

00:13:16.510 --> 00:13:17.360
<v Judge>Any other recross?</v>

00:13:17.360 --> 00:13:18.193
Miss Kelly?

00:13:20.510 --> 00:13:21.343
<v ->Thank you, Your Honor.</v>

00:13:21.343 --> 00:13:23.860
I had one question for you, Mr. Johnson,

00:13:23.860 --> 00:13:27.140
following up on President Batjer's question.

00:13:27.140 --> 00:13:31.100
She had asked about what is your plan B

00:13:31.100 --> 00:13:33.020
and you had discussed your plan A.

00:13:33.020 --> 00:13:36.320
So if you would please return to that question.

00:13:36.320 --> 00:13:37.660
<v Man>Your Honor, I'm gonna object.</v>

00:13:37.660 --> 00:13:41.400
That redirect is to respond to questions that I raised

00:13:41.400 --> 00:13:44.710
in my direct, but the recross should be limited

00:13:44.710 --> 00:13:47.110
to that scope, not to questions asked of others.

00:13:48.840 --> 00:13:51.700
<v Judge>Sustained, let's not go there.</v>

00:13:51.700 --> 00:13:53.190
Any other recross?

00:13:55.050 --> 00:13:56.600
Okay.

00:13:56.600 --> 00:13:58.540
Seeing none, thank you, Mr. Johnson.

00:13:58.540 --> 00:13:59.373
You are excused.

00:14:03.740 --> 00:14:04.573
Off the record.

00:14:10.070 --> 00:14:11.600
<v ->Let's switch places.</v>

00:14:11.600 --> 00:14:15.270
My colleague, Mr. Allred, will ask Mr. Plaster.

00:14:17.035 --> 00:14:19.952
(people murmuring)

00:15:08.130 --> 00:15:11.620
May I just introduce Mr. Allred, for the record, Kevin?

00:15:11.620 --> 00:15:12.710
<v Kevin>Good afternoon.</v>

00:15:15.513 --> 00:15:17.596
(laughs)

00:15:21.950 --> 00:15:25.070
<v ->And PG&E call their next witness, please?</v>

00:15:25.070 --> 00:15:27.930
And I understand Mr. Weissmarr has an introduction to make.

00:15:27.930 --> 00:15:29.240
<v ->Yes, thank you, Your Honor.</v>

00:15:29.240 --> 00:15:31.610
I'd like to introduce my colleague Kevin Allred,

00:15:31.610 --> 00:15:34.500
who will present our next witness, John Plaster.

00:15:34.500 --> 00:15:35.970
<v ->Good afternoon.</v>

00:15:35.970 --> 00:15:37.135
<v Judge>Thank you.</v>

00:15:37.135 --> 00:15:38.250
Let me swear Mr. Plaster in.

00:15:42.825 --> 00:15:44.460
Do you swear to tell the truth, the whole truth,

00:15:44.460 --> 00:15:45.890
and nothing but the truth?

00:15:45.890 --> 00:15:47.080
<v John>I do.</v>

00:15:47.080 --> 00:15:47.913
<v Judge>Thank you.</v>

00:15:47.913 --> 00:15:49.110
Please be seated, state your full name,

00:15:49.110 --> 00:15:50.700
spell your last name for the record.

00:15:51.887 --> 00:15:53.410
<v ->John C. Plaster, P-L-A-S-T-E-R.</v>

00:15:56.060 --> 00:15:58.180
<v Judge>And try and speak directly</v>

00:15:58.180 --> 00:16:00.590
into the front end of the microphone, that helps.

00:16:00.590 --> 00:16:02.530
And there's a little green light that's on

00:16:02.530 --> 00:16:03.720
if the mic is on.

00:16:05.290 --> 00:16:06.500
Mr. Allred?

00:16:06.500 --> 00:16:07.600
<v Kevin>Thank you, Your Honor.</v>

00:16:07.600 --> 00:16:09.800
Mr. Plaster, could you please state

00:16:09.800 --> 00:16:11.310
your employer and position?

00:16:12.520 --> 00:16:14.870
<v ->Yes, I'm employed at Barclays</v>

00:16:16.156 --> 00:16:18.860
and I'm the Head of the Power and Utilities

00:16:18.860 --> 00:16:19.920
for the Americas.

00:16:19.920 --> 00:16:21.530
<v ->And do you have in front of you</v>

00:16:21.530 --> 00:16:24.120
PG&E prepared testimony volume one,

00:16:24.120 --> 00:16:26.060
which has been marked as PG&E One?

00:16:27.375 --> 00:16:28.208
<v ->Yes, I do.</v>

00:16:28.208 --> 00:16:31.080
<v Kevin>And are you sponsoring chapter three</v>

00:16:31.080 --> 00:16:32.657
of that testimony?

00:16:32.657 --> 00:16:33.620
<v ->Yes.</v>

00:16:33.620 --> 00:16:35.310
<v Kevin>And was that chapter prepared by you</v>

00:16:35.310 --> 00:16:37.101
or under your direction?

00:16:37.101 --> 00:16:37.934
<v ->It was.</v>

00:16:37.934 --> 00:16:39.010
<v ->Have there been any updates</v>

00:16:39.010 --> 00:16:41.869
or corrections to that chapter?

00:16:41.869 --> 00:16:42.830
<v ->There have been.</v>

00:16:42.830 --> 00:16:45.930
<v Kevin>Do you have in front of you what's entitled</v>

00:16:46.800 --> 00:16:48.960
supplemental testimony including errata

00:16:48.960 --> 00:16:50.930
that's been marked as PG&E Seven?

00:16:52.110 --> 00:16:52.943
<v ->Yes, I do.</v>

00:16:52.943 --> 00:16:57.010
<v ->And is the chapter three excerpt from that the update</v>

00:16:57.010 --> 00:16:58.929
that you were just mentioning?

00:16:58.929 --> 00:16:59.762
<v ->Yes.</v>

00:16:59.762 --> 00:17:01.590
<v ->And do you have any further corrections</v>

00:17:01.590 --> 00:17:03.550
to your testimony beyond that?

00:17:03.550 --> 00:17:04.400
<v ->No.</v>

00:17:04.400 --> 00:17:06.270
<v ->And is your testimony true and correct</v>

00:17:06.270 --> 00:17:07.740
to the best of your knowledge?

00:17:07.740 --> 00:17:08.573
<v John>It is.</v>

00:17:08.573 --> 00:17:11.040
<v ->Mr. Plaster's available for cross-examination.</v>

00:17:11.040 --> 00:17:12.390
<v Judge>Thank you, Mr. Allred.</v>

00:17:12.390 --> 00:17:13.223
Off the record.

00:17:14.398 --> 00:17:17.315
(people murmuring)

00:17:28.922 --> 00:17:29.755
<v Man>We will not have cross</v>

00:17:29.755 --> 00:17:30.842
for this witness, Your Honor.

00:17:30.842 --> 00:17:32.259
<v ->No cross, okay.</v>

00:17:33.373 --> 00:17:37.206
Thank you for your (mumbles).

00:17:44.510 --> 00:17:46.360
<v ->Your Honor, one correction on here.</v>

00:17:47.290 --> 00:17:49.830
MCE did not request 10 minutes with Mr. Plaster,

00:17:49.830 --> 00:17:52.020
it's actually Miss Ronell.

00:17:53.200 --> 00:17:54.810
<v ->I'm sorry, what'd you say?</v>
<v ->I'm sorry, Your Honor.</v>

00:17:54.810 --> 00:17:56.820
Just one quick correction here.

00:17:56.820 --> 00:18:01.210
MCE did not request 10 minutes with Mr. Plaster,

00:18:01.210 --> 00:18:04.170
we had requested 10 minutes with Miss Ronell?

00:18:04.170 --> 00:18:05.490
<v ->Okay, thank you.</v>

00:18:07.730 --> 00:18:08.865
This is great.

00:18:08.865 --> 00:18:10.440
We've got two gone, all right.

00:18:11.371 --> 00:18:13.454
(laughs)

00:18:18.847 --> 00:18:20.765
Any preference for starting?

00:18:20.765 --> 00:18:21.598
Miss Han?

00:18:22.449 --> 00:18:23.931
<v ->We're three for three,</v>

00:18:23.931 --> 00:18:27.757
San Francisco has no cross-examination for this witness.

00:18:27.757 --> 00:18:30.308
Thank you, Your Honor.

00:18:30.308 --> 00:18:32.720
<v ->Okay, let's go on my chart here.</v>

00:18:32.720 --> 00:18:34.930
Mr. Geesman, are you prepared to go ahead?

00:18:34.930 --> 00:18:37.326
<v John>I am, Your Honor, sorry to break your momentum.</v>

00:18:37.326 --> 00:18:39.409
(laughs)

00:18:40.958 --> 00:18:41.791
<v ->Quite all right.</v>

00:18:41.791 --> 00:18:43.180
<v ->Good afternoon, Mr. Plaster.</v>

00:18:43.180 --> 00:18:45.560
<v Judge>Oh, excuse me, on the record.</v>

00:18:45.560 --> 00:18:47.180
Mr. Geesman.

00:18:47.180 --> 00:18:49.130
<v ->Good afternoon, Mr. Plaster.</v>

00:18:49.130 --> 00:18:50.760
My name is John Geesman,

00:18:50.760 --> 00:18:54.130
I represent the Alliance for Nuclear Responsibility.

00:18:54.130 --> 00:18:59.130
Our interest in this proceeding is the impact on rate fares

00:18:59.600 --> 00:19:01.700
in PG&E's proposed plan of reorganization.

00:19:03.770 --> 00:19:07.930
First question is at page 31 of your testimony,

00:19:07.930 --> 00:19:08.940
footnote one.

00:19:11.082 --> 00:19:13.200
You say, and I'm quoting,

00:19:13.200 --> 00:19:15.810
that your opinion regarding "the company's ability

00:19:15.810 --> 00:19:19.950
"to raise capital for its emergence from chapter 11

00:19:19.950 --> 00:19:22.980
"for its post-exit needs assumes the absence

00:19:22.980 --> 00:19:25.720
"of material adverse events," close quote.

00:19:25.720 --> 00:19:27.410
Did I get that right?

00:19:27.410 --> 00:19:28.560
<v John>That's correct.</v>

00:19:28.560 --> 00:19:31.200
<v ->Have you performed any stress tests</v>

00:19:31.200 --> 00:19:33.500
that would quantify the level of adverse event

00:19:34.619 --> 00:19:36.969
that the PG&E plan could financially withstand?

00:19:37.889 --> 00:19:39.280
<v ->I have not.</v>

00:19:39.280 --> 00:19:40.910
<v ->Based on your professional experience,</v>

00:19:40.910 --> 00:19:43.390
would you expect that the rating agencies

00:19:43.390 --> 00:19:45.090
would perform such stress testing?

00:19:46.990 --> 00:19:50.730
<v ->I think my conclusions are supported</v>

00:19:50.730 --> 00:19:55.470
by my understanding of the rating agency methodology

00:19:55.470 --> 00:19:59.460
and their analysis of the two closest comps,

00:20:00.380 --> 00:20:03.750
SCE and San Diego Gas and Electric.

00:20:03.750 --> 00:20:06.510
As part of rating agency analysis,

00:20:06.510 --> 00:20:08.670
they may look at some sensitivity cases.

00:20:10.260 --> 00:20:13.590
And generally in rating any company,

00:20:14.810 --> 00:20:17.330
you think about sensitivities

00:20:17.330 --> 00:20:22.100
but catastrophic events or very large material events

00:20:22.100 --> 00:20:27.100
are something that are generally not evaluated

00:20:27.490 --> 00:20:29.440
in a debt rating.

00:20:30.360 --> 00:20:33.937
<v ->But less than large but still material events.</v>

00:20:37.220 --> 00:20:39.940
<v ->I think a rating's risk analysis tries</v>

00:20:39.940 --> 00:20:41.190
to be very comprehensive.

00:20:42.520 --> 00:20:45.170
And again, I factored in my understanding

00:20:45.170 --> 00:20:49.790
of how the rating agency's work and their methodology

00:20:49.790 --> 00:20:51.880
in reaching my conclusions.

00:20:51.880 --> 00:20:55.050
<v ->So some of the sensitivity analyses</v>

00:20:55.050 --> 00:20:57.430
would include adverse events?

00:20:58.650 --> 00:20:59.920
Material adverse events?

00:21:01.160 --> 00:21:03.710
<v ->Well, I think rating agencies will generally look</v>

00:21:03.710 --> 00:21:07.000
at the company's projections, their five year plan,

00:21:07.000 --> 00:21:11.120
and they will look at various sensitivities

00:21:11.120 --> 00:21:13.420
in reaching their views.

00:21:14.920 --> 00:21:17.770
I think in this case in particular,

00:21:18.810 --> 00:21:21.960
the agencies have commented on the constructive nature

00:21:21.960 --> 00:21:26.960
of AB1054 and that legislation, I think, has been viewed

00:21:28.950 --> 00:21:30.280
and they've published their views

00:21:30.280 --> 00:21:34.700
as being very constructive for the utilities in California.

00:21:34.700 --> 00:21:37.490
I think that addresses, in large part,

00:21:38.930 --> 00:21:40.730
the issue around wildfires

00:21:40.730 --> 00:21:44.460
and what the methodology would be going forward

00:21:44.460 --> 00:21:45.460
with the commission.

00:21:46.872 --> 00:21:48.200
<v ->Your Honor, I don't believe his response</v>

00:21:48.200 --> 00:21:50.450
was responsive to my question.

00:21:50.450 --> 00:21:51.850
It was a yes or no question.

00:21:53.790 --> 00:21:55.440
<v Judge>You can try again.</v>

00:21:55.440 --> 00:21:58.860
I would note to the witness

00:21:58.860 --> 00:22:00.960
that I do want to make sure

00:22:00.960 --> 00:22:03.470
the answers are responsive to questions.

00:22:03.470 --> 00:22:05.430
If you wish to give more of an explanation,

00:22:05.430 --> 00:22:08.690
more detailed explanation, you can do that on redirect,

00:22:08.690 --> 00:22:10.520
so please just make sure you answer the question

00:22:10.520 --> 00:22:11.810
clearly and concisely.

00:22:11.810 --> 00:22:12.643
<v ->Sure.</v>

00:22:13.510 --> 00:22:15.690
<v ->So my question, Mr. Plaster,</v>

00:22:15.690 --> 00:22:20.690
is would you anticipate the sensitivity cases

00:22:21.830 --> 00:22:25.120
looked at by the rating agencies would include

00:22:25.120 --> 00:22:27.017
material adverse events?

00:22:30.860 --> 00:22:34.710
<v ->I really don't have a great answer for you on that.</v>

00:22:34.710 --> 00:22:37.380
In general, my experience has been that they have not

00:22:38.290 --> 00:22:41.700
but I don't know that in any case they would not do that.

00:22:42.680 --> 00:22:43.990
<v ->Let me ask the same question</v>

00:22:43.990 --> 00:22:46.740
with regard to large institutional investments.

00:22:47.770 --> 00:22:48.930
Would you anticipate

00:22:48.930 --> 00:22:52.360
that large institutional events investors

00:22:52.360 --> 00:22:56.340
would do stress testing to evaluate the capability

00:22:56.340 --> 00:23:01.167
of the plan to absorb material adverse events?

00:23:04.530 --> 00:23:06.860
<v ->I think in terms of evaluating risk,</v>

00:23:06.860 --> 00:23:10.980
investors would look at different sensitivity cases.

00:23:12.510 --> 00:23:15.470
<v ->So your statement in footnote one is based</v>

00:23:15.470 --> 00:23:17.283
on a qualitative judgment?

00:23:23.390 --> 00:23:26.010
<v ->I'm not sure I understand the question.</v>

00:23:26.010 --> 00:23:30.610
<v ->Well, you've indicated that your opinion is based</v>

00:23:30.610 --> 00:23:34.120
on an absence of material events.

00:23:34.120 --> 00:23:37.990
You're not certain if the rating agencies would evaluate

00:23:37.990 --> 00:23:39.700
for adverse events.

00:23:39.700 --> 00:23:42.610
You think that institutional investors would.

00:23:43.560 --> 00:23:46.720
What's your opinion in footnote one based on?

00:23:46.720 --> 00:23:51.720
<v ->So the conclusions I reached and the analysis I did,</v>

00:23:54.290 --> 00:23:58.490
I stand by my view on the ratings outcome.

00:23:58.490 --> 00:24:03.490
And I think that when you look at the qualitative risk

00:24:03.930 --> 00:24:07.560
that the agencies are putting on PG&E,

00:24:07.560 --> 00:24:12.560
that that is factoring in these material adverse events

00:24:12.950 --> 00:24:14.470
that you're referring to.

00:24:16.440 --> 00:24:18.990
We didn't, in terms of this analysis,

00:24:18.990 --> 00:24:22.410
we didn't look at any particular adverse event

00:24:22.410 --> 00:24:25.040
but if you look at the rating agency commentary

00:24:25.040 --> 00:24:29.300
and what I presented in my testimony,

00:24:29.300 --> 00:24:32.460
we feel that the rating agencies will have

00:24:32.460 --> 00:24:36.310
a very conservative view on PG&E's business profile

00:24:37.210 --> 00:24:39.020
versus where their financial metrics are.

00:24:39.020 --> 00:24:40.980
So their financial metrics,

00:24:41.840 --> 00:24:43.850
our expectation under this plan is

00:24:43.850 --> 00:24:46.070
that they would be much stronger

00:24:46.980 --> 00:24:48.870
than the ultimate rating they would receive

00:24:48.870 --> 00:24:50.900
and that was reflected in my testimony.

00:24:51.870 --> 00:24:56.250
<v ->On page 2-24, lines 11 through 15.</v>

00:24:57.180 --> 00:24:59.030
<v John>Two dash, different chapter?</v>

00:24:59.970 --> 00:25:00.803
<v ->Excuse me.</v>

00:25:05.267 --> 00:25:07.410
Ignore me (mumbles), I'm sorry.

00:25:07.410 --> 00:25:11.020
Is there a quantitative threshold in your opinion

00:25:11.020 --> 00:25:13.730
for when an adverse event would become material

00:25:13.730 --> 00:25:14.670
to the PG&E plan?

00:25:18.090 --> 00:25:19.840
<v ->I haven't done that analysis, no.</v>

00:25:22.157 --> 00:25:25.570
<v ->On page 3-2, lines 11 through 13,</v>

00:25:26.907 --> 00:25:28.930
you say that you have reviewed preliminary

00:25:28.930 --> 00:25:32.860
and confidential estimated credit metrics for PG&E,

00:25:32.860 --> 00:25:35.400
post-emergence from bankruptcy.

00:25:35.400 --> 00:25:39.417
Have you had any interaction or are you aware of any

00:25:39.417 --> 00:25:40.250
with the rating agencies

00:25:40.250 --> 00:25:42.710
concerning PG&E's post-emergence plan?

00:25:45.686 --> 00:25:47.990
<v ->I have spoken to the rating agencies</v>

00:25:47.990 --> 00:25:51.090
about the California utilities generally.

00:25:52.370 --> 00:25:57.000
I have not spoken to them about PG&E's plan.

00:25:58.840 --> 00:26:01.170
<v ->Based upon your professional experience,</v>

00:26:01.170 --> 00:26:04.740
what rating level would you expect PG&E to receive

00:26:04.740 --> 00:26:09.740
for its unsecured debt upon emergence from bankruptcy?

00:26:11.143 --> 00:26:14.180
<v ->So my testimony notes on a secured basis,</v>

00:26:15.290 --> 00:26:17.870
investment grade, which I would say would be triple B

00:26:17.870 --> 00:26:19.420
to triple B minus secured.

00:26:21.140 --> 00:26:24.600
Generally, the rating agencies will give two notches

00:26:24.600 --> 00:26:28.490
of credit for first mortgage collateral,

00:26:28.490 --> 00:26:33.350
so that would be a mid to high double B rating unsecured.

00:26:35.436 --> 00:26:38.740
<v ->On page 3-2, line 26,</v>

00:26:38.740 --> 00:26:41.400
you mention the monopoly franchise utilities have

00:26:42.538 --> 00:26:44.188
on the generation of electricity.

00:26:45.220 --> 00:26:47.540
Is that how you would characterize PG&E's position

00:26:47.540 --> 00:26:51.420
within its service territory?

00:26:51.420 --> 00:26:53.310
<v ->No, the statement really relates</v>

00:26:53.310 --> 00:26:58.310
to why the rating agencies generally provide utilities

00:26:59.400 --> 00:27:02.760
with a very favorable business risk profile.

00:27:02.760 --> 00:27:07.560
And so again, that's why you'll see many of the utilities,

00:27:08.500 --> 00:27:12.330
which would have equivalent financial metrics to PG&E,

00:27:12.330 --> 00:27:14.760
with higher debt ratings.

00:27:16.710 --> 00:27:20.800
So in general, the rating agencies have

00:27:20.800 --> 00:27:25.490
a very favorable view of utility business risk

00:27:26.770 --> 00:27:31.770
because of the franchise which often is a monopoly franchise

00:27:31.770 --> 00:27:34.500
but also because of the regulatory profile

00:27:34.500 --> 00:27:36.930
and the fact that it's critical infrastructure

00:27:36.930 --> 00:27:39.790
and supplying an essential service to its customers.

00:27:40.870 --> 00:27:44.400
<v ->Are you aware that when taking into account</v>

00:27:44.400 --> 00:27:47.670
community choice aggregation and direct access,

00:27:47.670 --> 00:27:50.380
PG&E only has a 43% market share

00:27:50.380 --> 00:27:53.220
in its service territory for generation?

00:27:53.220 --> 00:27:54.580
<v ->Yes, I'm aware of that.</v>

00:27:54.580 --> 00:27:58.560
<v ->You think that has any impact on credit ratings?</v>

00:27:59.520 --> 00:28:00.353
<v ->I do not.</v>

00:28:02.560 --> 00:28:05.290
<v ->Have you made any assessment of the proportion</v>

00:28:05.290 --> 00:28:07.450
of PG&E's electric generation revenues

00:28:07.450 --> 00:28:12.010
that it recovers from exit fees?

00:28:12.010 --> 00:28:13.460
<v ->Can you repeat the question?</v>

00:28:13.460 --> 00:28:16.460
<v ->Have you made any assessment of the proportion</v>

00:28:16.460 --> 00:28:19.620
of PG&E's electric generation revenues

00:28:19.620 --> 00:28:21.880
that it recovers from exit fees?

00:28:21.880 --> 00:28:22.713
<v ->I have not.</v>

00:28:23.978 --> 00:28:25.180
<v ->In your opinion, is there any difference</v>

00:28:25.180 --> 00:28:26.770
in the contribution

00:28:26.770 --> 00:28:29.630
to utility investment grade credit metrics

00:28:29.630 --> 00:28:32.790
between an income stream coming from sales revenues

00:28:32.790 --> 00:28:34.290
and one coming from exit fees?

00:28:38.270 --> 00:28:41.510
<v ->I would have to look at the magnitude of the exit fees</v>

00:28:41.510 --> 00:28:44.650
to make a determination on that.

00:28:44.650 --> 00:28:47.840
My analysis was based on the financial plan

00:28:47.840 --> 00:28:51.070
that PG&E published with the commission

00:28:51.070 --> 00:28:52.520
or filed with the commission.

00:28:54.360 --> 00:28:59.360
<v ->In footnote 20, page 3-8 of your testimony,</v>

00:28:59.500 --> 00:29:00.990
you quote from a Moody's report

00:29:00.990 --> 00:29:04.050
on regulated electric and gas utilities.

00:29:04.050 --> 00:29:06.220
"Lighter notching differentials may be appropriate

00:29:06.220 --> 00:29:09.080
"for speculative rates of credit."

00:29:09.080 --> 00:29:11.190
Would you say you don't believe such a methodology

00:29:11.190 --> 00:29:13.880
would be applied to regulated utility?

00:29:16.100 --> 00:29:18.050
Is there a quantitative threshold?

00:29:19.570 --> 00:29:21.320
Excuse me.

00:29:21.320 --> 00:29:23.600
Do you have an opinion on why Moody's would include

00:29:23.600 --> 00:29:26.960
such a statement in a report on regulated utilities

00:29:26.960 --> 00:29:29.330
if they don't intend to apply such methodology?

00:29:31.980 --> 00:29:34.400
<v ->Could you give me the page again?</v>

00:29:35.750 --> 00:29:37.850
<v ->Footnote 20, page 3-8.</v>

00:29:52.970 --> 00:29:57.970
<v ->Yeah, I think that Moody's has a different methodology</v>

00:29:59.090 --> 00:30:02.780
that it can use from time to time on notching.

00:30:03.970 --> 00:30:07.680
But in the past, we've not seen them use that methodology

00:30:07.680 --> 00:30:12.400
in the utility sector, which informed my view.

00:30:13.810 --> 00:30:17.110
<v ->Didn't you respond to one of my earlier questions</v>

00:30:17.110 --> 00:30:22.110
in assessing what rating the unsecured credit

00:30:22.430 --> 00:30:25.690
would receive from Moody based on a notching assessment?

00:30:27.190 --> 00:30:30.810
<v ->Yes, it's my view that the likely outcome is</v>

00:30:30.810 --> 00:30:32.060
a two notch differential.

00:30:33.830 --> 00:30:36.710
<v ->And the rating that you attributed to the unsecured credit</v>

00:30:36.710 --> 00:30:39.550
would be considered a speculative rating, would it not?

00:30:40.750 --> 00:30:42.730
<v ->That's right, it would be non-investment grade.</v>

00:30:48.670 --> 00:30:53.670
<v ->Would wider notching than simply two clicks</v>

00:30:56.640 --> 00:30:59.680
likely mean that PG&E's only access

00:30:59.680 --> 00:31:02.230
to the investment grade credit market

00:31:02.230 --> 00:31:03.520
for a longer period of time

00:31:03.520 --> 00:31:05.120
would require secured financing?

00:31:09.160 --> 00:31:10.090
<v ->Not necessarily.</v>

00:31:10.090 --> 00:31:12.130
I mean, I think under the plan,

00:31:13.100 --> 00:31:17.300
the company's intent would be to issue first mortgage bonds

00:31:17.300 --> 00:31:21.010
and that's a very common practice in the utility sector.

00:31:21.010 --> 00:31:23.240
In fact, many utilities

00:31:24.190 --> 00:31:27.770
that have high investment grade ratings

00:31:27.770 --> 00:31:30.530
make the determination to issue first mortgage bonds

00:31:31.450 --> 00:31:35.470
to access the market on a more cost-efficient basis.

00:31:35.470 --> 00:31:38.610
<v ->Is there any capacity limit to PG&E's ability</v>

00:31:38.610 --> 00:31:42.020
to market secured debt?

00:31:42.020 --> 00:31:44.280
<v ->There's not a capacity limit</v>

00:31:44.280 --> 00:31:47.210
other than how you would look at overall leverage

00:31:47.210 --> 00:31:48.460
for a corporation.

00:31:49.740 --> 00:31:51.970
You know, so if you,

00:31:55.180 --> 00:31:57.410
I don't look at there being a limit

00:31:57.410 --> 00:32:00.200
to how much secured debt you can sell,

00:32:00.200 --> 00:32:01.800
particularly if you're within

00:32:01.800 --> 00:32:03.600
the investment grade credit rating.

00:32:05.100 --> 00:32:08.540
<v ->And is there a proportion of assets</v>

00:32:10.000 --> 00:32:13.870
that you're limited to encumbering

00:32:13.870 --> 00:32:16.070
and still retain an investment grade rating?

00:32:17.850 --> 00:32:19.890
<v ->I don't believe so, no.</v>

00:32:19.890 --> 00:32:23.250
<v ->So potentially you could encumber 100% of your assets?</v>

00:32:24.660 --> 00:32:25.811
<v ->You could.</v>

00:32:25.811 --> 00:32:27.900
The mortgage bond structure generally encumbers all

00:32:27.900 --> 00:32:30.750
the property, plant, and equipment of a utility,

00:32:31.680 --> 00:32:33.910
which is the lion's share of the assets.

00:32:33.910 --> 00:32:37.110
And that's the common structureused in the industry.

00:32:37.970 --> 00:32:41.120
<v ->Let me reframe that question as a ratio</v>

00:32:41.120 --> 00:32:43.850
between the amount of debt to asset.

00:32:44.710 --> 00:32:49.710
Could you go up to 100% debt on your pledged assets

00:32:51.300 --> 00:32:53.500
and still retain an investment grade rating?

00:32:54.690 --> 00:32:57.060
<v ->So I don't think that's how the rating agencies</v>

00:32:57.060 --> 00:32:59.730
would determine credit quality or ratings.

00:32:59.730 --> 00:33:03.970
For a leverage basis, they're going to rely more heavily

00:33:03.970 --> 00:33:08.333
on cash flow metrics, which would be an FFO to debt ratio.

00:33:10.600 --> 00:33:12.680
Also debt to EBITDA ratio.

00:33:13.680 --> 00:33:16.710
Secondarily, they will look at a debt to capitalization,

00:33:18.410 --> 00:33:20.850
but the test that you're mentioning

00:33:20.850 --> 00:33:25.740
in terms of just security versus assets is not something

00:33:25.740 --> 00:33:29.800
that I think is generally used to determine ratings.

00:33:33.520 --> 00:33:36.320
<v ->What about among large institutional investors?</v>

00:33:36.320 --> 00:33:37.810
<v ->I'd have the same answer.</v>

00:33:37.810 --> 00:33:41.340
I think how much secured versus unsecured you have

00:33:41.340 --> 00:33:44.100
would make a difference between the cost

00:33:44.100 --> 00:33:45.850
between secured and unsecured debt.

00:33:47.640 --> 00:33:50.500
But if for utilities, which again is normal,

00:33:50.500 --> 00:33:53.820
if they're doing all their financing on a secured basis,

00:33:53.820 --> 00:33:56.830
I think the market would not have an issue with that.

00:33:58.780 --> 00:34:00.620
<v ->Regarding PG&E's proposed issuance</v>

00:34:00.620 --> 00:34:03.800
of $7 billion in securitization funds,

00:34:03.800 --> 00:34:06.180
how would you expect such a financing price?

00:34:07.510 --> 00:34:08.910
Spread to treasury?

00:34:08.910 --> 00:34:10.180
<v ->A spread to treasuries, yes.</v>

00:34:10.180 --> 00:34:12.723
<v ->And what would you estimate that spread to be?</v>

00:34:16.400 --> 00:34:20.870
<v ->Well, the spread would depend on market conditions.</v>

00:34:20.870 --> 00:34:22.550
What I would say is the securitization,

00:34:22.550 --> 00:34:25.410
we would expect it to have a triple A rating

00:34:25.410 --> 00:34:29.470
and that in general, that market would price tighter

00:34:29.470 --> 00:34:34.050
than the first mortgage bonds for PG&E.

00:34:35.630 --> 00:34:37.620
You would basically look at comps in the market

00:34:37.620 --> 00:34:39.820
at the time you were launching the deal to see that

00:34:39.820 --> 00:34:41.820
and you could look at those data points.

00:34:42.740 --> 00:34:44.670
I would think today,

00:34:47.020 --> 00:34:50.230
you would probably be at treasuries plus 100,

00:34:50.230 --> 00:34:52.280
give or take, depending on what maturity.

00:34:53.320 --> 00:34:56.920
<v ->And ordinarily, you'd price off the 10 year treasury?</v>

00:34:56.920 --> 00:34:59.470
<v ->In securitization, you do multiple tranches</v>

00:34:59.470 --> 00:35:00.540
based on average life

00:35:00.540 --> 00:35:02.470
and so it's not always off the,

00:35:02.470 --> 00:35:06.230
it would be off either the curve or the on the run treasury

00:35:06.230 --> 00:35:08.810
depending on the maturity.

00:35:08.810 --> 00:35:12.710
<v ->And in today's market, what tranches would you envision</v>

00:35:12.710 --> 00:35:16.510
being the most marketable for credit by PG&E's customers?

00:35:16.510 --> 00:35:17.530
<v ->For securitization?</v>

00:35:17.530 --> 00:35:18.940
<v ->Yes.</v>

00:35:18.940 --> 00:35:22.670
<v ->I think a securitization could be done across the curve</v>

00:35:22.670 --> 00:35:24.820
and I think it would be about optimization.

00:35:27.700 --> 00:35:30.540
<v ->And how far out, when you say across the curve,</v>

00:35:30.540 --> 00:35:33.950
how far out is the final maturity?

00:35:33.950 --> 00:35:37.710
<v ->I believe final maturities can go out 30 years.</v>

00:35:37.710 --> 00:35:38.760
<v ->On a taxable basis?</v>

00:35:39.840 --> 00:35:41.270
<v ->On a securitization.</v>

00:35:41.270 --> 00:35:44.200
<v ->A taxable securitization, not a tax-exempt.</v>

00:35:44.200 --> 00:35:45.033
<v ->Yes.</v>

00:35:46.390 --> 00:35:49.730
<v ->Do the NOLs or other shareholder tax benefits</v>

00:35:49.730 --> 00:35:51.590
that are intended to cover debt service

00:35:51.590 --> 00:35:53.800
back your pricing assessment?

00:35:55.450 --> 00:35:56.283
<v ->No.</v>

00:35:57.260 --> 00:35:59.980
<v ->Regarding the tax exempt pollution control bonds</v>

00:35:59.980 --> 00:36:03.460
that the PG&E plan elects to retire,

00:36:03.460 --> 00:36:05.460
can you describe their credit structure?

00:36:06.430 --> 00:36:08.130
<v ->I have not reviewed those bonds.</v>

00:36:11.820 --> 00:36:13.320
<v ->Are you aware of them at all?</v>

00:36:14.950 --> 00:36:15.800
<v ->I'm aware that they have</v>

00:36:15.800 --> 00:36:18.830
tax-exempt pollution control bonds

00:36:18.830 --> 00:36:21.580
but no, I haven't, other than the general awareness.

00:36:21.580 --> 00:36:22.480
That's all I know.

00:36:23.480 --> 00:36:24.770
<v ->Thank you very much, Mr. Plaster.</v>

00:36:24.770 --> 00:36:29.770
Those are all my questions, Your Honor.

00:36:29.980 --> 00:36:31.370
<v Judge>Thank you, Mr. Geesman.</v>

00:36:34.770 --> 00:36:35.770
CLECA, Miss Sheriff?

00:36:39.490 --> 00:36:41.150
<v ->Thank you, Your Honor.</v>

00:36:41.150 --> 00:36:43.810
Good afternoon, Mr. Plaster, my name is Nora Sheriff.

00:36:43.810 --> 00:36:44.643
I represent

00:36:44.643 --> 00:36:47.570
the California Large Energy Consumers Association, or CLECA.

00:36:48.530 --> 00:36:50.500
I just have a few questions for you.

00:36:54.960 --> 00:36:58.440
In your testimony at page 3-4,

00:36:58.440 --> 00:37:00.570
you discuss the requirement

00:37:00.570 --> 00:37:03.070
of enabling legislation from the state

00:37:03.070 --> 00:37:05.210
for securitized debt.

00:37:05.210 --> 00:37:08.230
What enabling legislation would be necessary to allow

00:37:08.230 --> 00:37:12.540
for the proposed post-emergence securitization transaction?

00:37:12.540 --> 00:37:14.300
<v Kevin>Calls for a legal conclusion.</v>

00:37:15.150 --> 00:37:16.650
<v ->He references the requirement--</v>

00:37:16.650 --> 00:37:18.650
<v ->Overruled.</v>
<v ->Thank you.</v>

00:37:18.650 --> 00:37:23.090
<v ->So in my testimony, this is just a generic statement.</v>

00:37:23.090 --> 00:37:24.490
It doesn't relate to PG&E

00:37:24.490 --> 00:37:26.560
or it doesn't relate to California.

00:37:27.640 --> 00:37:31.610
It relates to in general securitization

00:37:31.610 --> 00:37:34.350
when it's been used for storm cost recovery

00:37:34.350 --> 00:37:38.840
or other expense recovery may require enabling legislation,

00:37:38.840 --> 00:37:40.930
but I don't have any expertise

00:37:40.930 --> 00:37:43.020
regarding California regulatory issues.

00:37:44.350 --> 00:37:47.060
<v ->You do have expertise regarding PG&E</v>

00:37:47.060 --> 00:37:49.070
and its financial structure

00:37:49.070 --> 00:37:51.220
and its plan of reorganization though, correct?

00:37:51.220 --> 00:37:52.090
<v Kevin>Object to the form.</v>

00:37:52.090 --> 00:37:52.940
<v John>Correct.</v>

00:37:56.670 --> 00:37:58.720
<v Judge>If there was an objection, it's overruled.</v>

00:37:59.724 --> 00:38:01.690
<v ->(laughs) Thank you, Your Honor.</v>

00:38:01.690 --> 00:38:03.340
<v Judge>Given he answered anyway.</v>

00:38:05.165 --> 00:38:07.420
<v ->Are you familiar with assembly bill 235,</v>

00:38:07.420 --> 00:38:11.680
which was introduced last year in 2019

00:38:11.680 --> 00:38:14.560
about securitization for PG&E,

00:38:14.560 --> 00:38:17.110
enabling a securitization transaction for PG&E?

00:38:18.190 --> 00:38:19.800
<v John>No, I'm not familiar with that.</v>

00:38:23.570 --> 00:38:27.400
<v ->At page 3-7 of your testimony,</v>

00:38:27.400 --> 00:38:32.400
you state that PG&E has greater exposure to wildfire risk

00:38:33.010 --> 00:38:35.910
compared with SCE and SDG&E

00:38:35.910 --> 00:38:38.930
because of the size and character of its service territory.

00:38:38.930 --> 00:38:40.170
This is line 13.

00:38:41.340 --> 00:38:43.790
Please explain what specific characteristics

00:38:43.790 --> 00:38:47.520
about PG&E's service territory increase its exposure.

00:38:49.310 --> 00:38:50.580
<v ->Sure.</v>

00:38:50.580 --> 00:38:55.580
My testimony was based on the size of the service territory

00:38:56.700 --> 00:39:01.700
and also the topography in some of the less populated areas,

00:39:04.500 --> 00:39:07.980
which I believe is a much larger service territory,

00:39:07.980 --> 00:39:12.980
particularly than SDG&E, and also in a more rural area.

00:39:19.276 --> 00:39:20.109
<v ->Are you familiar</v>

00:39:20.109 --> 00:39:22.670
with PG&E's advanced vegetation management strategy?

00:39:24.930 --> 00:39:26.750
<v ->I am familiar with it generally.</v>

00:39:26.750 --> 00:39:28.740
I'm not an expert on it.

00:39:28.740 --> 00:39:31.480
<v ->Do you know for how many years PG&E's been pursuing</v>

00:39:31.480 --> 00:39:33.760
its enhanced vegetation management strategy?

00:39:37.070 --> 00:39:37.960
<v ->I'm not sure.</v>

00:39:37.960 --> 00:39:39.960
No, I don't recall how many years.

00:39:39.960 --> 00:39:43.770
I know that they've recently increased their focus

00:39:43.770 --> 00:39:48.060
and efforts substantially around vegetation management.

00:40:00.990 --> 00:40:05.990
<v ->If PG&E the utility, sorry, it's difficult to see you.</v>

00:40:07.130 --> 00:40:12.130
If PG&E the utility and the PG&E corporation,

00:40:12.990 --> 00:40:17.840
the parent entity, were evaluated together,

00:40:17.840 --> 00:40:21.160
can you tell us what your opinion is

00:40:21.160 --> 00:40:23.690
about what its investment rating would be

00:40:23.690 --> 00:40:25.090
or what grade it would have?

00:40:28.650 --> 00:40:31.810
<v ->Separate companies are not evaluated together</v>

00:40:33.310 --> 00:40:36.540
but what I would tell you is that it is my expectation

00:40:36.540 --> 00:40:39.540
the holding company would have a non-investment grade rating

00:40:40.540 --> 00:40:45.070
based on my prior commentary

00:40:45.070 --> 00:40:46.920
about the utility's unsecured rating.

00:40:48.400 --> 00:40:50.200
<v ->But I asked you to assume</v>

00:40:50.200 --> 00:40:52.450
that they would be evaluated together,

00:40:52.450 --> 00:40:54.940
so you're making an assumption here

00:40:54.940 --> 00:40:56.420
that they're not separate.

00:41:01.210 --> 00:41:05.400
<v ->I don't exactly know how to answer that question</v>

00:41:05.400 --> 00:41:09.690
because I would think the corporate family rating

00:41:09.690 --> 00:41:11.940
would also be in the double B category.

00:41:16.010 --> 00:41:16.843
<v ->Okay.</v>

00:41:18.170 --> 00:41:19.510
Thank you, Mr. Plaster.

00:41:19.510 --> 00:41:22.160
Thank you, Your Honor, I have no further questions.

00:41:22.160 --> 00:41:23.490
<v Judge>Thank you, Miss Sheriff.</v>

00:41:26.300 --> 00:41:30.630
EPUC, would that be Mr. Alcantar?

00:41:31.905 --> 00:41:34.155
(mumbling)

00:41:35.820 --> 00:41:37.730
Okay, Mr. Finkelstein.

00:41:37.730 --> 00:41:40.120
Who's doing cross on Mr. Plaster?

00:41:41.040 --> 00:41:42.690
Is it just one of you or both of you?

00:41:42.690 --> 00:41:44.530
<v Man>I'm doing cross for TURN.</v>

00:41:44.530 --> 00:41:46.830
<v Judge>Okay, this is for TURN.</v>

00:41:46.830 --> 00:41:48.830
And okay, is there any cross for EPUC?

00:41:50.670 --> 00:41:53.710
Okay, but you want TURN to go first, okay.

00:41:54.790 --> 00:41:57.500
Siblings, always the worst.

00:41:57.500 --> 00:41:59.250
Mr. Finkelstein for TURN, go ahead.

00:42:02.181 --> 00:42:03.014
<v ->Good afternoon, Mr. Plaster.</v>

00:42:03.014 --> 00:42:04.300
I'm Bob Finkelstein for TURN.

00:42:06.447 --> 00:42:09.570
Just a couple of questions.

00:42:09.570 --> 00:42:11.910
Is it correct that your chapter in the testimony

00:42:11.910 --> 00:42:16.910
makes no reference to PG&E corp, the holding company?

00:42:21.853 --> 00:42:25.540
<v ->Well, we discuss access to the equity capital markets</v>

00:42:25.540 --> 00:42:29.050
and so I think that refers to PG&E corporate.

00:42:30.080 --> 00:42:33.570
<v ->So by implication, because somebody buying equity</v>

00:42:33.570 --> 00:42:36.790
in PG&E utility would be buying the stock of PG&E corp?

00:42:38.490 --> 00:42:40.100
Is that what you have in mind

00:42:40.100 --> 00:42:42.830
as how it came up in the equity context?

00:42:44.980 --> 00:42:46.480
<v ->What I have in mind is</v>

00:42:46.480 --> 00:42:49.900
that PG&E corp is the public company,

00:42:49.900 --> 00:42:53.900
and so if we're issuing stock in the public markets

00:42:53.900 --> 00:42:55.570
to institutional investors,

00:42:55.570 --> 00:42:57.380
it's gonna be PG&E corporate stock.

00:42:58.800 --> 00:43:01.780
<v ->You're aware that PG&E's plan includes</v>

00:43:03.020 --> 00:43:06.080
approximately $4.75 billion of debt

00:43:06.080 --> 00:43:08.290
at the holding company level?

00:43:08.290 --> 00:43:09.123
<v ->Yes.</v>

00:43:09.123 --> 00:43:11.110
<v ->Do you assess or analyze that debt</v>

00:43:11.110 --> 00:43:14.980
or the likely federating of that debt?

00:43:14.980 --> 00:43:16.550
<v ->I did not.</v>

00:43:16.550 --> 00:43:20.820
<v ->Then did I understand at the end your responses</v>

00:43:20.820 --> 00:43:23.410
to Miss Sheriff the observation

00:43:23.410 --> 00:43:27.410
that you would expect the unsecured debt

00:43:27.410 --> 00:43:32.410
of PG&E the holding company to also be double B?

00:43:34.785 --> 00:43:35.618
Is that correct?

00:43:35.618 --> 00:43:37.650
<v ->I think I said in the double B category.</v>

00:43:42.420 --> 00:43:43.850
<v ->I'm forgetting the term that you used</v>

00:43:43.850 --> 00:43:45.010
in response to Mr. Geesman,

00:43:45.010 --> 00:43:47.120
but is that category that goes

00:43:47.120 --> 00:43:50.040
by the colloquial name junk investment?

00:43:52.840 --> 00:43:54.640
<v ->Yes, you don't hear that very often,</v>

00:43:54.640 --> 00:43:56.670
but it's more commonly called non-investment grade

00:43:56.670 --> 00:43:57.940
or speculative grade.

00:43:57.940 --> 00:43:58.773
<v ->Okay, thank you.</v>

00:43:58.773 --> 00:44:01.000
The speculative grade I think is what we were.

00:44:03.290 --> 00:44:08.290
Would the amount of holding company debt

00:44:09.910 --> 00:44:12.100
potentially have an impact on the business risk

00:44:12.100 --> 00:44:12.933
of the utility?

00:44:15.456 --> 00:44:17.260
<v ->I don't believe so.</v>

00:44:17.260 --> 00:44:19.490
<v ->But would the rating of the holding company debt</v>

00:44:19.490 --> 00:44:23.200
potentially have an impact on the rating of utility debt?

00:44:25.350 --> 00:44:27.840
<v ->I think the agencies will evaluate</v>

00:44:28.840 --> 00:44:32.710
the corporate enterprise together,

00:44:32.710 --> 00:44:36.017
but I believe that in this case,

00:44:39.890 --> 00:44:42.040
I don't believe that it's having an impact

00:44:42.040 --> 00:44:43.840
on the utility rating.

00:44:49.220 --> 00:44:51.430
<v ->But if I understood your earlier response correctly,</v>

00:44:51.430 --> 00:44:54.170
you didn't analyze the holding company debt at all?

00:44:55.040 --> 00:44:55.873
Is that correct?

00:44:58.060 --> 00:45:01.260
<v ->For my testimony, I'm commenting only</v>

00:45:01.260 --> 00:45:05.540
on the utility's access to the debt markets, yes.

00:45:06.929 --> 00:45:07.762
<v ->Okay, and my question was,</v>

00:45:07.762 --> 00:45:10.010
did you analyze, in the course of preparing your testimony,

00:45:10.010 --> 00:45:12.410
did you analyze the holding company debt at all?

00:45:14.950 --> 00:45:16.007
<v ->I did not.</v>

00:45:20.590 --> 00:45:23.220
<v ->And in your testimony at page 3-3</v>

00:45:28.720 --> 00:45:32.400
on lines, starting on line 15,

00:45:35.040 --> 00:45:37.020
you are making a point, as I understand it,

00:45:37.020 --> 00:45:40.140
about the interplay of business risk and financial leverage.

00:45:41.170 --> 00:45:44.930
You state that a weaker business risk profile would allow

00:45:44.930 --> 00:45:47.470
for lower leverage as compared to a company

00:45:47.470 --> 00:45:49.980
with a stronger business risk profile

00:45:49.980 --> 00:45:54.090
that's gonna get higher leverage at the same credit rating?

00:45:55.380 --> 00:45:56.213
<v ->That's correct.</v>

00:45:56.213 --> 00:45:57.046
<v ->I may be paraphrasing it badly.</v>

00:45:57.046 --> 00:45:58.250
Do you see that testimony in here?

00:45:58.250 --> 00:45:59.083
<v ->I do, I do.</v>

00:45:59.083 --> 00:45:59.916
<v ->Thank you.</v>

00:46:02.600 --> 00:46:04.120
Assuming you've got two companies

00:46:04.120 --> 00:46:05.970
with the same level of business risk,

00:46:06.960 --> 00:46:08.920
is it correct to understand

00:46:08.920 --> 00:46:13.920
that if one of the companies has higher financial leverage,

00:46:14.050 --> 00:46:17.200
it would result in a higher credit rating, all else equal?

00:46:18.900 --> 00:46:20.180
<v ->If they have higher leverage?</v>

00:46:20.180 --> 00:46:21.242
<v ->Yes.</v>

00:46:21.242 --> 00:46:22.940
<v ->It would result in a lower credit rating.</v>

00:46:22.940 --> 00:46:25.400
<v ->Knew I was gonna mess up the direction on that.</v>

00:46:25.400 --> 00:46:27.640
But all else equal, that's what you would expect?

00:46:28.920 --> 00:46:31.730
<v ->It was a pretty simplistic statement,</v>

00:46:31.730 --> 00:46:34.520
so it would depend on the industry

00:46:36.040 --> 00:46:40.040
and the characteristics of the company within that industry,

00:46:40.040 --> 00:46:44.080
which I assume would be captured in business risk.

00:46:48.710 --> 00:46:49.543
<v ->All right, thank you, Mr. Plaster.</v>

00:46:49.543 --> 00:46:50.700
That's all I have, Your Honor.

00:46:51.670 --> 00:46:52.730
<v Judge>Thank you, Mr. Finkelstein.</v>

00:46:52.730 --> 00:46:53.563
Mr. Alcantar?

00:46:53.563 --> 00:46:55.970
<v ->Thank you, Your Honor.</v>

00:46:55.970 --> 00:46:57.823
Good morning, Mr. Plaster, my name is Michael Alcantar,

00:46:57.823 --> 00:47:02.823
representing (mumbles).

00:47:03.567 --> 00:47:04.799
<v Judge>Mr. Alcantar,</v>

00:47:04.799 --> 00:47:07.180
please speak up and use a microphone.

00:47:12.870 --> 00:47:14.470
<v Michael>Sorry, I hope you heard most of that anyway.</v>

00:47:14.470 --> 00:47:15.303
<v ->I did.</v>

00:47:17.318 --> 00:47:22.247
<v ->I just have questions for you about your role here today,</v>

00:47:25.960 --> 00:47:30.010
relationship to others in your industry.

00:47:30.010 --> 00:47:32.690
Share the same role, share the same experience

00:47:32.690 --> 00:47:34.080
of 20 years of experience

00:47:34.080 --> 00:47:39.080
and share the same focus of attention on utility financing.

00:47:42.710 --> 00:47:45.470
You're here, if I'm correct to assume

00:47:45.470 --> 00:47:49.550
that you're here to tell us that there's great optimism

00:47:49.550 --> 00:47:53.460
about the emergence of PG&E from this plan

00:47:54.570 --> 00:47:57.080
to have access to the financial markets

00:47:57.080 --> 00:47:59.520
that you've described in your testimony, correct?

00:48:00.700 --> 00:48:03.760
<v ->My testimony says that I believe the company will have</v>

00:48:03.760 --> 00:48:06.230
investment grade secured ratings

00:48:06.230 --> 00:48:10.000
and will have access to capital markets based on that, yes.

00:48:10.000 --> 00:48:11.430
<v Michael>What happens if you're wrong?</v>

00:48:13.260 --> 00:48:18.260
<v ->Well, the company will be able to determine its ratings</v>

00:48:18.940 --> 00:48:21.490
before it exits bankruptcy.

00:48:21.490 --> 00:48:23.470
<v Michael>You allude in your testimony</v>

00:48:23.470 --> 00:48:27.400
to the benefits rated for the company

00:48:28.380 --> 00:48:32.500
arising from AB1054, correct?

00:48:32.500 --> 00:48:33.620
<v ->Correct.</v>

00:48:33.620 --> 00:48:37.990
<v ->Did you look at any detriments to the company</v>

00:48:37.990 --> 00:48:40.070
with respect to AB1054,

00:48:40.070 --> 00:48:42.800
for example with respect to the protections included

00:48:42.800 --> 00:48:45.910
in that bill for rate payer protection,

00:48:45.910 --> 00:48:47.510
financial rate payer protection?

00:48:49.290 --> 00:48:51.990
<v ->So I read the legislation.</v>

00:48:51.990 --> 00:48:55.070
I've read commentary on it.

00:48:55.070 --> 00:48:57.920
I've read the rating agency views on it.

00:48:59.180 --> 00:49:03.250
I don't know if I can comment on that level of detail

00:49:03.250 --> 00:49:05.010
that you're asking.

00:49:05.010 --> 00:49:06.810
<v ->Okay, so I think the answer</v>

00:49:06.810 --> 00:49:09.490
to the question then is no, correct?

00:49:09.490 --> 00:49:11.190
<v ->Could you rephrase the question?</v>

00:49:12.090 --> 00:49:12.990
<v ->Try another one.</v>

00:49:16.150 --> 00:49:21.150
Your 20 years of experience in investment banking arena,

00:49:24.220 --> 00:49:26.730
making predictions of financial futures,

00:49:26.730 --> 00:49:27.980
have you ever been wrong?

00:49:29.867 --> 00:49:31.120
<v ->(laughs) Yes.</v>

00:49:32.040 --> 00:49:33.750
<v ->Would it be fair to say</v>

00:49:33.750 --> 00:49:36.110
because forecasts are forecasts, they're always wrong,

00:49:36.110 --> 00:49:40.260
but wrong in the sense of this case

00:49:40.260 --> 00:49:44.890
where the risk of being wrong would have adverse effects

00:49:44.890 --> 00:49:46.900
on this commission's ability

00:49:48.130 --> 00:49:51.180
to protect rate payers under 1054?

00:49:53.690 --> 00:49:58.330
<v ->Well, I certainly took these proceedings</v>

00:49:58.330 --> 00:50:01.530
and my preparation for them incredibly seriously

00:50:01.530 --> 00:50:03.960
and I did a tremendous amount of work

00:50:03.960 --> 00:50:06.020
to inform my testimony.

00:50:07.220 --> 00:50:11.870
So while anyone can be wrong,

00:50:11.870 --> 00:50:14.990
I feel that these are well thought out

00:50:14.990 --> 00:50:17.040
and reasonable conclusions.

00:50:17.040 --> 00:50:19.580
<v ->So in the context of the former question,</v>

00:50:19.580 --> 00:50:22.010
which is what happens if you're wrong,

00:50:24.010 --> 00:50:26.750
is there a plan B as we've talked about this morning

00:50:26.750 --> 00:50:27.670
if you are wrong?

00:50:27.670 --> 00:50:29.170
What would this commission do?

00:50:32.880 --> 00:50:35.750
<v ->I think that is probably a better question</v>

00:50:35.750 --> 00:50:37.330
for the company than for me.

00:50:57.946 --> 00:50:58.779
<v ->Thank you, Your Honor.</v>

00:50:58.779 --> 00:51:00.460
Thank you, Mr. Plaster, I have nothing further.

00:51:00.460 --> 00:51:01.620
<v Judge>Thank you, Mr. Alcantar.</v>

00:51:01.620 --> 00:51:04.780
Mr. Abrams, do you have cross for this witness?

00:51:04.780 --> 00:51:05.730
<v Will>I do, Your Honor.</v>

00:51:05.730 --> 00:51:07.200
<v Judge>Okay, go ahead, please.</v>

00:51:10.700 --> 00:51:11.800
<v ->Thank you very much.</v>

00:51:15.723 --> 00:51:16.556
I am not a CFA

00:51:17.700 --> 00:51:21.080
and I don't have an extensive financial background.

00:51:23.300 --> 00:51:28.300
However, I am a victim of the PG&E fires,

00:51:29.460 --> 00:51:34.460
so going into and exiting with this plan of reorganization,

00:51:36.960 --> 00:51:41.160
myself and other wildfire survivors are going

00:51:41.160 --> 00:51:46.160
to be put into a trust and hold 21% of PG&E stock.

00:51:48.450 --> 00:51:51.840
So my questions are from that standpoint,

00:51:51.840 --> 00:51:54.390
so just wanted to say that up front.

00:51:56.750 --> 00:52:01.270
So that I can understand if victims who are in this trust

00:52:01.270 --> 00:52:05.700
and other investors who are perhaps less savvy

00:52:07.260 --> 00:52:12.260
would be able to rely upon your testimony

00:52:12.490 --> 00:52:14.180
and the advice that's within it,

00:52:16.830 --> 00:52:20.560
can you describe sort of the nature

00:52:20.560 --> 00:52:25.350
of your independence from PG&E?

00:52:29.050 --> 00:52:34.050
<v ->Well, PG&E is a client of Barclays and a client of mine,</v>

00:52:35.550 --> 00:52:37.470
so I have that relationship with them.

00:52:41.780 --> 00:52:45.660
From the testimony standpoint, I'm testifying under oath

00:52:45.660 --> 00:52:50.660
and I'm trying to give my best views

00:52:50.920 --> 00:52:54.680
and my best informed views of what I think.

00:52:55.730 --> 00:52:58.610
<v Will>So would you say that it would be fair</v>

00:52:58.610 --> 00:53:03.610
for these new shareholders--

00:53:04.553 --> 00:53:06.340
<v ->Can I add one thing?</v>
<v ->Yes, please.</v>

00:53:06.340 --> 00:53:08.300
<v ->So it is in the testimony,</v>

00:53:08.300 --> 00:53:13.300
but Barclays is one of the banks

00:53:13.920 --> 00:53:18.190
that provided the debtor and possession financing for PG&E.

00:53:19.470 --> 00:53:21.180
So that's a business relationship.

00:53:21.180 --> 00:53:22.530
We're also one of the banks

00:53:22.530 --> 00:53:25.930
that underwrote the exit financing.

00:53:27.180 --> 00:53:32.180
<v ->So given that, would it also be safe to assume then</v>

00:53:32.380 --> 00:53:36.600
that victims and other shareholders

00:53:36.600 --> 00:53:41.507
who would not necessarily take the advice

00:53:42.810 --> 00:53:45.610
and the testimony that you've been providing here

00:53:46.510 --> 00:53:49.120
because of that close relationship with PG&E?

00:53:54.104 --> 00:53:56.720
<v ->I'm giving my best views, I'm under oath.</v>

00:53:56.720 --> 00:54:01.720
And I would say that it's in the company's interest

00:54:04.480 --> 00:54:08.590
to exit bankruptcy, being able to access

00:54:08.590 --> 00:54:10.950
the investment grade debt markets.

00:54:10.950 --> 00:54:15.603
And I would believe that it's their intent to do so.

00:54:17.964 --> 00:54:22.964
<v ->So other folks who have a background,</v>

00:54:24.490 --> 00:54:28.220
who've provided a different perspective

00:54:28.220 --> 00:54:33.220
on the investment structure of PG&E exiting bankruptcy,

00:54:34.830 --> 00:54:38.130
is it safe to assume that they perhaps have a different view

00:54:38.130 --> 00:54:40.520
because they're not a client of PG&E?

00:54:41.841 --> 00:54:43.120
<v ->I can't comment on that,</v>

00:54:43.120 --> 00:54:44.290
I don't know who those people are.

00:54:44.290 --> 00:54:45.490
<v ->Understood, thank you.</v>

00:54:49.100 --> 00:54:53.160
So one of the things that you pointed to is

00:54:53.160 --> 00:54:56.460
that looking at the stress tests

00:54:56.460 --> 00:54:59.110
would look at San Diego Gas and Electric

00:54:59.110 --> 00:55:01.920
and the sensitivities of catastrophic events

00:55:03.750 --> 00:55:05.510
and that those catastrophic events

00:55:05.510 --> 00:55:09.940
weren't necessarily in your analysis.

00:55:09.940 --> 00:55:13.580
Given that catastrophic events are in some ways

00:55:13.580 --> 00:55:17.610
sort of the new normal unfortunately

00:55:17.610 --> 00:55:20.570
as it relates to PG&E territory,

00:55:20.570 --> 00:55:22.320
would you say that credit agencies

00:55:22.320 --> 00:55:25.010
might change their practices

00:55:25.010 --> 00:55:30.010
to build in a certain number of catastrophic events

00:55:30.270 --> 00:55:33.120
when taking a look at PG&E as an investment?

00:55:36.430 --> 00:55:41.010
<v ->So I believe that wildfire risk is factored</v>

00:55:41.010 --> 00:55:44.390
into my analysis and my conclusions.

00:55:44.390 --> 00:55:48.150
And the two companies that you mentioned,

00:55:48.150 --> 00:55:50.460
Southern California and Edison and SDG&E

00:55:51.640 --> 00:55:56.220
that are both rated, also have wildfire risk

00:55:56.220 --> 00:55:57.420
and the rating agencies

00:55:57.420 --> 00:56:00.760
and their current credit ratings take that into account.

00:56:02.300 --> 00:56:04.710
<v ->But those are different risks depending on the company,</v>

00:56:04.710 --> 00:56:05.543
is that correct?

00:56:06.810 --> 00:56:08.920
<v ->Well, because they're all California utilities,</v>

00:56:08.920 --> 00:56:10.900
they share some similarities

00:56:10.900 --> 00:56:14.600
but there would be differences based on service territory.

00:56:17.420 --> 00:56:19.210
<v ->In the introduction to your testimony,</v>

00:56:19.210 --> 00:56:22.110
you state, "I expect the company

00:56:22.110 --> 00:56:25.950
"to achieve investment grade bond ratings

00:56:25.950 --> 00:56:27.480
"on a secure basis."

00:56:29.150 --> 00:56:32.290
Can you just again, for sort of a 101 on that,

00:56:32.290 --> 00:56:37.290
can you just sort of go over what goes into determining

00:56:38.620 --> 00:56:40.260
an investment grade bond rating?

00:56:41.590 --> 00:56:43.370
<v ->Sure, I'd be happy to.</v>

00:56:43.370 --> 00:56:48.370
So the first component the rating agencies will evaluate is

00:56:48.550 --> 00:56:51.990
the business risk associated with the company.

00:56:51.990 --> 00:56:53.870
And as we had talked about,

00:56:53.870 --> 00:56:57.480
if a company has very low business risk,

00:56:57.480 --> 00:57:01.530
meaning you view the cash flow profile of the company

00:57:01.530 --> 00:57:03.640
as being very stable,

00:57:03.640 --> 00:57:06.890
the agencies will allow that company

00:57:06.890 --> 00:57:10.730
to have higher leverage at a certain rating level

00:57:10.730 --> 00:57:15.530
than a company that had a more volatile cash flow stream

00:57:15.530 --> 00:57:18.920
or less certainty or a higher business risk position.

00:57:18.920 --> 00:57:23.920
So in making my assessment, the first thing I did is

00:57:24.870 --> 00:57:28.010
look at how the rating agencies assess

00:57:28.010 --> 00:57:29.550
utility's business risk.

00:57:30.850 --> 00:57:34.770
One large component of that is the regulatory construct,

00:57:36.040 --> 00:57:38.410
which historically has been, I think,

00:57:38.410 --> 00:57:39.760
constructive in California.

00:57:41.720 --> 00:57:44.260
And for utilities,

00:57:44.260 --> 00:57:46.870
regulation is probably the single biggest factor

00:57:46.870 --> 00:57:48.240
around business risk.

00:57:48.240 --> 00:57:50.610
Some of the other things we talked about,

00:57:50.610 --> 00:57:55.610
the fact that this is essential infrastructure, electric,

00:57:57.220 --> 00:58:01.570
that's all generally very stable business model.

00:58:01.570 --> 00:58:04.730
And so I first evaluated business risk.

00:58:04.730 --> 00:58:08.300
Again, reading and evaluating

00:58:08.300 --> 00:58:10.970
what the rating agencies say about that.

00:58:10.970 --> 00:58:14.760
I then reviewed the financial plan

00:58:14.760 --> 00:58:17.270
that the company filed with the commission

00:58:18.640 --> 00:58:21.620
and looked at the leverage metrics on that

00:58:21.620 --> 00:58:24.780
and I compared the business risk

00:58:25.820 --> 00:58:28.510
to the two closest comps,

00:58:28.510 --> 00:58:30.710
the two other California utilities.

00:58:30.710 --> 00:58:33.230
I compared the financial metrics

00:58:33.230 --> 00:58:37.100
to the other two California companies

00:58:37.100 --> 00:58:41.830
and my assessment was based on that.

00:58:41.830 --> 00:58:43.890
And I've said I believe

00:58:43.890 --> 00:58:48.890
that the agencies will initially be more conservative

00:58:49.440 --> 00:58:52.010
around business risk for PG&E

00:58:52.010 --> 00:58:54.220
than it is for the other two companies,

00:58:55.190 --> 00:59:00.190
but that their leverage metrics are aligned

00:59:00.490 --> 00:59:03.830
with investment grade credit metrics.

00:59:03.830 --> 00:59:06.280
<v ->Thank you.</v>

00:59:06.280 --> 00:59:10.030
So this $21 billion wildfire fund

00:59:10.030 --> 00:59:13.000
helps them achieve that investment grade, is that correct?

00:59:14.340 --> 00:59:15.200
<v ->It does.</v>

00:59:15.200 --> 00:59:19.630
Participating in the fund and the legislation

00:59:19.630 --> 00:59:21.440
is definitely a credit positive

00:59:21.440 --> 00:59:22.910
for the California utilities.

00:59:25.180 --> 00:59:30.180
<v ->Would you say that the wildfire victim trust</v>

00:59:32.020 --> 00:59:36.090
and the fact that stock is provided

00:59:36.090 --> 00:59:39.830
as opposed to a cash settlement

00:59:39.830 --> 00:59:42.360
also favors that investment grade?

00:59:45.793 --> 00:59:49.070
<v ->I can't comment on that.</v>

00:59:49.070 --> 00:59:54.070
So in terms of the broader negotiations around the plan

00:59:55.130 --> 00:59:58.220
and how cash and stock were allocated,

00:59:59.220 --> 01:00:01.390
that's not something that I've been involved in,

01:00:01.390 --> 01:00:03.610
that's something for the company.

01:00:03.610 --> 01:00:06.090
<v ->Let me ask the question a little bit differently.</v>

01:00:07.880 --> 01:00:12.620
A cash outlay from PG&E to victims

01:00:14.970 --> 01:00:19.350
or a cash outlay to anyone versus providing stock,

01:00:21.910 --> 01:00:23.780
what are the consequences to that

01:00:23.780 --> 01:00:27.600
in terms of how an investment grade is determined?

01:00:30.887 --> 01:00:35.887
<v ->I think any use of funds like that,</v>

01:00:36.620 --> 01:00:38.420
it would depend on how it's funded

01:00:39.790 --> 01:00:43.330
and if it's funded with debt or equity.

01:00:46.080 --> 01:00:48.170
<v ->So does this not speak to cash flow?</v>

01:00:48.170 --> 01:00:51.350
So cash flow does not come into your analysis at all?

01:00:54.050 --> 01:00:56.000
Does cash flow come into your analysis?

01:00:57.100 --> 01:00:58.900
<v ->For credit ratings?</v>

01:00:58.900 --> 01:00:59.760
<v ->Yes.</v>

01:00:59.760 --> 01:01:02.640
<v ->Yes, when I was speaking about leverage metrics,</v>

01:01:02.640 --> 01:01:07.640
one of the primary leverage metrics is FFO to debt.

01:01:07.990 --> 01:01:10.870
And FFO is funds from operation,

01:01:10.870 --> 01:01:14.180
which is a cash flow metric.

01:01:15.820 --> 01:01:17.460
<v ->So I'm trying to connect the dots here.</v>

01:01:17.460 --> 01:01:20.850
So if there's a large cash outlay.

01:01:21.850 --> 01:01:22.683
<v ->I see.</v>

01:01:22.683 --> 01:01:27.683
So when I'm talking about cash flow,

01:01:27.870 --> 01:01:30.020
I'm talking about operating cash flow.

01:01:30.020 --> 01:01:31.470
<v ->Okay.</v>

01:01:31.470 --> 01:01:34.420
So if there's a large cash outlay,

01:01:36.470 --> 01:01:38.420
does that not affect the credit rating?

01:01:41.420 --> 01:01:44.660
<v ->It would depend how it's funded.</v>

01:01:44.660 --> 01:01:47.710
<v ->I'm not talking about funded, I'm talking about--</v>

01:01:47.710 --> 01:01:48.543
<v ->But if you have--</v>

01:01:48.543 --> 01:01:49.930
<v Judge>Okay, stop.</v>

01:01:49.930 --> 01:01:51.020
Let's have one at a time.

01:01:51.020 --> 01:01:51.853
<v ->Sorry.</v>

01:01:54.000 --> 01:01:57.030
<v Judge>Please let Mr. Plaster attempt</v>

01:01:57.030 --> 01:01:59.960
to answer the question before following up.

01:01:59.960 --> 01:02:01.320
<v ->I apologize.</v>

01:02:01.320 --> 01:02:03.193
<v Judge>Mr. Abrams, go ahead.</v>

01:02:03.193 --> 01:02:04.698
<v ->Thank you, sorry.</v>

01:02:04.698 --> 01:02:09.698
So I'm sure it's me not stating the question correctly,

01:02:11.160 --> 01:02:16.130
but I'm trying to ask about not funding or money coming in,

01:02:16.130 --> 01:02:18.130
right, I'm talking about cash going out.

01:02:19.010 --> 01:02:21.800
<v ->So here's the connection.</v>

01:02:21.800 --> 01:02:24.790
So if you're talking about a large cash outlay,

01:02:25.690 --> 01:02:30.180
that would not be funded from funds from operations.

01:02:30.180 --> 01:02:35.180
So a company would raise capital to make that fund outlay

01:02:36.260 --> 01:02:38.640
and there are various ways they can do that.

01:02:38.640 --> 01:02:40.960
They can issue debt, they can sell stock.

01:02:42.460 --> 01:02:44.090
So that was the point I was making

01:02:44.090 --> 01:02:46.960
on it's not necessarily the fact

01:02:46.960 --> 01:02:50.210
that there's a cash outlay would not necessarily be,

01:02:52.280 --> 01:02:55.630
you know, credit dilutive.

01:02:55.630 --> 01:02:59.920
<v ->So if it was funded with new debt,</v>

01:03:00.970 --> 01:03:02.830
that would affect the investment grade.

01:03:02.830 --> 01:03:04.610
Is that correct then?

01:03:04.610 --> 01:03:06.290
<v ->I haven't evaluated that case</v>

01:03:06.290 --> 01:03:09.470
and how much pressure that would put on the rating

01:03:09.470 --> 01:03:12.210
but if you added debt to the company,

01:03:12.210 --> 01:03:14.990
that would put pressure on the cash flow metrics

01:03:14.990 --> 01:03:16.510
and the ratings.

01:03:16.510 --> 01:03:21.470
<v ->So was your evaluation and your testimony provided</v>

01:03:22.370 --> 01:03:27.370
prior to that plan of reorganization being associated

01:03:29.910 --> 01:03:34.910
with that 50% shares in terms of that payout to victims

01:03:36.160 --> 01:03:36.993
or after?

01:03:38.730 --> 01:03:40.290
<v ->I believe my testimony was filed</v>

01:03:40.290 --> 01:03:45.290
after it was clear the shares were going into the trust.

01:03:46.500 --> 01:03:49.320
<v ->Okay, so if that changes,</v>

01:03:50.630 --> 01:03:52.830
and then through this, because this is a moving target

01:03:52.830 --> 01:03:57.500
and that plan changes and victims are paid all in cash,

01:03:57.500 --> 01:03:59.410
have you evaluated the effects of that

01:03:59.410 --> 01:04:01.230
on the plan of reorganization?

01:04:02.340 --> 01:04:03.173
<v ->I have not.</v>

01:04:03.173 --> 01:04:05.470
I have only evaluated the company's plan.

01:04:08.858 --> 01:04:11.280
<v ->On page 3-2, you indicate</v>

01:04:11.280 --> 01:04:15.490
that a stable regulatory environment is key

01:04:15.490 --> 01:04:16.540
to the credit rating.

01:04:17.430 --> 01:04:18.263
Is that correct?

01:04:19.760 --> 01:04:21.120
<v ->Yes.</v>

01:04:21.120 --> 01:04:22.810
<v ->And help me understand what you mean</v>

01:04:22.810 --> 01:04:25.150
by stable regulatory environment

01:04:25.150 --> 01:04:28.940
in terms of does that mean unchanging or what's stable?

01:04:30.480 --> 01:04:35.480
<v ->So investors like predictability</v>

01:04:35.550 --> 01:04:38.540
or another way of saying it is they don't like uncertainty,

01:04:38.540 --> 01:04:41.310
so you have the regulatory compact

01:04:41.310 --> 01:04:46.140
and in terms of having it operate the way

01:04:46.140 --> 01:04:49.770
that it's expected to operate is what I mean

01:04:49.770 --> 01:04:51.000
by stable there.

01:04:53.090 --> 01:04:55.290
Where a company is acting prudently,

01:04:56.570 --> 01:05:01.180
that they're able to earn a return

01:05:01.180 --> 01:05:03.980
and recover the capital on investments they make

01:05:03.980 --> 01:05:05.020
in a timely basis.

01:05:07.860 --> 01:05:11.990
<v ->So do you think that the regulatory environment</v>

01:05:11.990 --> 01:05:15.850
for PG&E has been shaped by PG&E's actions?

01:05:22.120 --> 01:05:24.100
<v ->I'm not the regulatory expert</v>

01:05:25.359 --> 01:05:30.359
but I think absolutely the wildfires in 2017 and 2018

01:05:34.950 --> 01:05:39.740
have had an impact on PG&E's regulatory situation.

01:05:41.310 --> 01:05:44.060
<v ->Sorry, let me rephrase the question.</v>

01:05:46.190 --> 01:05:50.127
Are PG&E's actions, are those looked at

01:05:52.620 --> 01:05:56.440
at how that regulatory environment is created

01:05:58.090 --> 01:05:59.600
in terms of your analysis?

01:06:03.630 --> 01:06:07.350
<v ->Yes, I think in evaluating the overall business risk</v>

01:06:07.350 --> 01:06:10.860
of a company, also the relationship,

01:06:10.860 --> 01:06:14.350
the regulatory relationship is important.

01:06:14.350 --> 01:06:19.350
And I think obviously from the board on down,

01:06:21.914 --> 01:06:25.300
there's a renewed focus on safety

01:06:25.300 --> 01:06:29.837
and being able to execute on these plans for safety

01:06:32.860 --> 01:06:35.500
is gonna be quite important.

01:06:37.360 --> 01:06:41.720
<v ->So would you agree that in terms of providing stability</v>

01:06:43.370 --> 01:06:48.370
that stable actions from PG&E would create

01:06:50.060 --> 01:06:53.280
more stable regulatory environment

01:06:54.270 --> 01:06:57.950
and that unstable actions from PG&E

01:06:57.950 --> 01:06:59.840
might provide the converse

01:06:59.840 --> 01:07:03.450
and lots of changes to regulation in response?

01:07:06.840 --> 01:07:09.310
<v ->So I don't know exactly what to make</v>

01:07:09.310 --> 01:07:12.210
of the word stable and unstable,

01:07:12.210 --> 01:07:17.210
but I think that from PG&E's standpoint

01:07:18.080 --> 01:07:20.810
and in some of the other testimony here

01:07:20.810 --> 01:07:23.130
in terms of governance and safety,

01:07:24.780 --> 01:07:27.650
they say there's a new tone from the top

01:07:27.650 --> 01:07:29.680
or they want to set a tone

01:07:29.680 --> 01:07:34.470
and there's gonna be more governance around safety and risk

01:07:34.470 --> 01:07:36.640
and they have a detailed plan.

01:07:36.640 --> 01:07:40.880
Executing on that is very important

01:07:40.880 --> 01:07:42.940
from a regulatory standpoint.

01:07:42.940 --> 01:07:46.400
It's very important from an investor standpoint.

01:07:46.400 --> 01:07:51.400
And I think that if they're able to do that,

01:07:51.670 --> 01:07:56.170
that improves the business profile of the company

01:07:56.170 --> 01:07:59.380
in conjunction with what I had said before,

01:08:00.590 --> 01:08:05.590
which is in having AB1054 implemented the way

01:08:07.180 --> 01:08:10.415
that I think generally it's expected in the market.

01:08:10.415 --> 01:08:11.770
<v ->Okay.</v>

01:08:11.770 --> 01:08:15.010
In your statement, you said it was based on what they say.

01:08:17.550 --> 01:08:22.187
Is it typical for a large investor

01:08:24.020 --> 01:08:27.010
to go based on what they say

01:08:27.010 --> 01:08:32.010
or more based on their actions or something more formal

01:08:33.680 --> 01:08:34.930
in terms of an agreement?

01:08:36.760 --> 01:08:40.720
<v ->So I guess my statement was not articulate,</v>

01:08:40.720 --> 01:08:45.720
but the company filed testimony about concrete actions

01:08:47.010 --> 01:08:50.240
that it's taken around governance and safety.

01:08:50.240 --> 01:08:53.970
And absolutely, investors are gonna pay close attention

01:08:53.970 --> 01:08:56.390
to the actions the company are taking.

01:08:57.830 --> 01:08:58.663
I was just referring

01:08:58.663 --> 01:09:02.150
to how the company describing their plan.

01:09:03.320 --> 01:09:05.110
<v ->And I appreciate that distinction</v>

01:09:05.110 --> 01:09:08.170
and the reason why I ask the question is

01:09:08.170 --> 01:09:11.740
because just holding up the two documents,

01:09:12.740 --> 01:09:15.070
the testimony that's been provided to the commission

01:09:15.070 --> 01:09:18.290
and the plan of reorganization aren't the same.

01:09:18.290 --> 01:09:20.360
So I guess what I'm trying to ask is

01:09:22.120 --> 01:09:25.090
are you simply looking at the testimony

01:09:25.090 --> 01:09:29.980
or what PG&E says and is it safe to assume

01:09:29.980 --> 01:09:34.850
that other large investors might instead look

01:09:34.850 --> 01:09:36.890
at the plan of reorganization

01:09:36.890 --> 01:09:38.440
as the basis of their decision?

01:09:41.460 --> 01:09:44.450
<v ->I think that investors will look at both.</v>

01:09:45.420 --> 01:09:49.040
So I think obviously people will study the plan

01:09:49.040 --> 01:09:52.170
and they'll review the testimony carefully

01:09:52.170 --> 01:09:56.310
and they'll look at the actions from the state.

01:09:56.310 --> 01:10:00.440
So I think that investors will generally try

01:10:00.440 --> 01:10:03.590
to take in as much information as they can on the topic.

01:10:04.530 --> 01:10:06.660
<v ->And what will be weighted more heavily?</v>

01:10:06.660 --> 01:10:09.490
Will it be more heavily weighted

01:10:09.490 --> 01:10:12.750
in terms of what is said in testimony

01:10:12.750 --> 01:10:15.650
or more heavily weighted about what is committed to

01:10:15.650 --> 01:10:17.700
in writing in the plan of reorganization?

01:10:20.550 --> 01:10:22.160
<v ->It's hard for me to comment on that</v>

01:10:22.160 --> 01:10:24.810
because both could be very important.

01:10:32.130 --> 01:10:35.260
<v ->So given that it's likely</v>

01:10:35.260 --> 01:10:40.260
that the PG&E actions cause and provide a response

01:10:44.150 --> 01:10:46.370
in terms of the regulatory actions,

01:10:49.040 --> 01:10:54.040
do you feel that it's appropriate for the commission

01:10:54.280 --> 01:10:58.920
to ensure that there are more stringent regulations

01:11:00.000 --> 01:11:02.970
around safe and reliable service

01:11:02.970 --> 01:11:05.400
to provide more stability to investors?

01:11:11.000 --> 01:11:12.920
<v ->I don't really think it's my role</v>

01:11:12.920 --> 01:11:17.420
to comment on actions the commission should take

01:11:17.420 --> 01:11:20.370
in terms of my role here today is more

01:11:20.370 --> 01:11:24.420
as commenting on the ability of the company

01:11:24.420 --> 01:11:26.970
to finance itself post-bankruptcy.

01:11:26.970 --> 01:11:29.760
So I don't consider myself an expert

01:11:29.760 --> 01:11:34.060
on the type of regulatory issue that you're raising.

01:11:35.570 --> 01:11:36.704
<v ->Understood.</v>

01:11:36.704 --> 01:11:39.030
So let me I guess ask the question a little more generally.

01:11:39.030 --> 01:11:42.240
If there was a stringent, for a company,

01:11:43.520 --> 01:11:47.470
if there was a stringent regulatory threshold

01:11:47.470 --> 01:11:52.470
that was measured that was you need to reduce risks

01:11:54.500 --> 01:11:59.500
by 35% and that was a regulated threshold,

01:12:00.110 --> 01:12:04.070
would that be more relied upon by investors

01:12:04.070 --> 01:12:09.070
than, say, more as you said unstable regulatory frameworks

01:12:10.700 --> 01:12:14.750
that are based upon perhaps unknown penalties in the future?

01:12:18.140 --> 01:12:22.890
<v ->So if there's a specific regulation or rule</v>

01:12:22.890 --> 01:12:27.030
that impacts the company's financial performance,

01:12:27.030 --> 01:12:31.270
investors will absolutely carefully review that

01:12:31.270 --> 01:12:35.140
and estimate if that will create,

01:12:36.330 --> 01:12:38.140
how that will impact the financial performance

01:12:38.140 --> 01:12:38.973
of the company.

01:12:43.240 --> 01:12:46.420
<v ->So I'm trying to also understand the impacts</v>

01:12:46.420 --> 01:12:50.800
of other things that are swirling around PG&E

01:12:50.800 --> 01:12:55.800
in terms of how you've brought those into your testimony

01:12:56.950 --> 01:12:58.800
and the advice that you're providing.

01:12:59.830 --> 01:13:04.240
So have you taken into account what's happening

01:13:04.240 --> 01:13:08.070
in Judge Alsup's court

01:13:08.070 --> 01:13:13.070
in terms of further criminal behavior

01:13:13.370 --> 01:13:14.730
into your calculations?

01:13:19.040 --> 01:13:24.040
<v ->I've generally reviewed what's public about the company,</v>

01:13:25.360 --> 01:13:27.210
including that case.

01:13:29.530 --> 01:13:34.530
But if there are new actions that have not happened

01:13:34.570 --> 01:13:36.520
or are not public at this point in time,

01:13:36.520 --> 01:13:37.920
I have not factored that in.

01:13:39.242 --> 01:13:40.075
<v ->Okay.</v>

01:13:40.940 --> 01:13:45.940
So when you're looking at the history of a company

01:13:46.610 --> 01:13:51.610
to sort of project and forecast future results,

01:13:53.830 --> 01:13:55.740
is it safe to say that a company

01:13:55.740 --> 01:14:00.740
that has gotten itself into legal troubles

01:14:02.610 --> 01:14:05.190
or perhaps shown a pattern of that,

01:14:05.190 --> 01:14:08.610
that that pattern would be used

01:14:08.610 --> 01:14:11.010
as a way to forecast what the future would hold?

01:14:14.330 --> 01:14:19.330
<v ->So track record or historical performance will be a factor</v>

01:14:20.160 --> 01:14:22.960
that investors make in investment decisions,

01:14:24.840 --> 01:14:27.310
so I think that is the case.

01:14:28.230 --> 01:14:30.600
In the case of PG&E,

01:14:30.600 --> 01:14:35.600
there's been really a very significant change in management,

01:14:36.120 --> 01:14:38.080
a significant change in the board,

01:14:38.980 --> 01:14:43.960
and so while there has been certainly a history

01:14:43.960 --> 01:14:48.160
of some safety issues, there is new management

01:14:48.160 --> 01:14:50.670
that's focused on making significant changes.

01:14:56.230 --> 01:14:59.390
<v ->Based on sort of your expert opinion,</v>

01:15:00.230 --> 01:15:04.837
is it typical when companies are in bankruptcy

01:15:06.290 --> 01:15:11.173
that they are I guess more guarded,

01:15:14.550 --> 01:15:18.530
more tend to keep information

01:15:20.660 --> 01:15:24.470
that might have an adverse effect on bankruptcy decisions

01:15:24.470 --> 01:15:25.800
more close to the vest?

01:15:29.239 --> 01:15:33.240
<v ->I don't have experience that informs that.</v>

01:15:33.240 --> 01:15:38.240
In bankruptcy, generally most information is public

01:15:38.630 --> 01:15:41.230
and so it may be even more transparent

01:15:42.703 --> 01:15:45.127
than when a company's outside of bankruptcy.

01:15:45.127 --> 01:15:46.470
<v ->Okay.</v>

01:15:46.470 --> 01:15:50.240
At the top of 3-3, you state,

01:15:50.240 --> 01:15:51.750
"Accordingly, in determining

01:15:51.750 --> 01:15:55.680
"a utility's competitive position, standard imports,

01:15:55.680 --> 01:16:00.680
"global rating weighs regulatory advantage at 60%."

01:16:03.120 --> 01:16:05.960
Can you tell me what goes into that 60% rating?

01:16:09.090 --> 01:16:09.923
<v ->Sure.</v>

01:16:09.923 --> 01:16:13.940
So that goes into the regulatory construct

01:16:13.940 --> 01:16:15.610
that I had touched on before.

01:16:17.040 --> 01:16:22.040
The ability to recover costs, how transparent that is,

01:16:24.960 --> 01:16:29.860
the timeframe of that, if there are tracker mechanisms

01:16:29.860 --> 01:16:34.537
that make recovering capital more automated,

01:16:35.880 --> 01:16:37.430
subject to review.

01:16:37.430 --> 01:16:41.800
So also different jurisdictions,

01:16:41.800 --> 01:16:45.670
like you mentioned track record, have track records,

01:16:45.670 --> 01:16:50.670
and so people will evaluate how a commission has operated

01:16:51.940 --> 01:16:56.940
over time in determining whether there's additional risk

01:16:58.480 --> 01:17:00.230
around unexpected outcomes.

01:17:02.380 --> 01:17:07.380
<v ->So given that, do you see</v>

01:17:07.500 --> 01:17:11.570
that it's sort of a difficult regulatory position

01:17:11.570 --> 01:17:16.570
that the CPUC has in front of it to promote that rating

01:17:17.150 --> 01:17:21.370
so that PG&E has a more stable future,

01:17:21.370 --> 01:17:24.780
while at the same time responding

01:17:24.780 --> 01:17:27.360
to sort of I guess the facts on the ground

01:17:27.360 --> 01:17:30.590
in providing additional structure

01:17:30.590 --> 01:17:33.130
and changes to the regulatory structure,

01:17:35.113 --> 01:17:38.013
do you see that as a difficult balance for the commission?

01:17:40.340 --> 01:17:42.620
<v ->Well, I certainly think</v>

01:17:42.620 --> 01:17:45.400
the commission has a difficult job.

01:17:45.400 --> 01:17:50.400
I feel that having constructive regulatory relationships

01:17:53.720 --> 01:17:55.140
is a two-way street.

01:17:56.270 --> 01:18:01.270
And my view is that it's a favorable public policy

01:18:02.340 --> 01:18:07.340
and good for a state for the utilities and the commissions

01:18:09.340 --> 01:18:11.540
to have a constructive working relationship.

01:18:13.190 --> 01:18:14.650
<v Judge>Mr. Abrams, just a time check.</v>

01:18:14.650 --> 01:18:15.950
How much more do you have?

01:18:17.770 --> 01:18:20.820
<v ->I would say probably 15 more minutes.</v>

01:18:20.820 --> 01:18:22.190
<v ->Okay.</v>

01:18:22.190 --> 01:18:27.190
Let's go ahead and take a recess now until 2:35

01:18:28.100 --> 01:18:29.350
by the clock on the wall.

01:18:30.490 --> 01:18:32.627
We'll be in recess, off the record.

01:18:34.701 --> 01:18:37.618
(people murmuring)

01:19:03.430 --> 01:19:07.670
Before we go on the record, just a scheduling update.

01:19:07.670 --> 01:19:11.590
By my calculation, Mr. Abrams has his last cross

01:19:11.590 --> 01:19:13.150
before Mr. Plaster.

01:19:15.690 --> 01:19:19.470
Commissioner Batjer and I may have one or two questions,

01:19:19.470 --> 01:19:22.350
or Mr. Batjer, and then if there's any redirect,

01:19:22.350 --> 01:19:26.430
and then Mr. Vesey would be taking the stand.

01:19:26.430 --> 01:19:28.920
So if parties are prepared for cross on Mr. Vesey,

01:19:28.920 --> 01:19:31.270
I'm planning on going until four o'clock today.

01:19:35.800 --> 01:19:36.840
Everybody ready?

01:19:39.020 --> 01:19:39.853
On the record.

01:19:41.260 --> 01:19:42.310
Mr. Abrams, go ahead.

01:19:43.490 --> 01:19:44.690
<v ->Thank you, Your Honor.</v>

01:19:46.580 --> 01:19:47.840
Thanks very much.

01:19:47.840 --> 01:19:52.840
Just to continue on, on page 3-3, lines eight and nine

01:19:54.950 --> 01:19:56.430
of your testimony, you state,

01:19:57.370 --> 01:20:01.330
"A company's ability to repay debt depends in part

01:20:02.200 --> 01:20:06.390
"on its expected future cash flows from operations."

01:20:08.590 --> 01:20:12.460
Can you please go into what goes into that analysis

01:20:12.460 --> 01:20:13.370
of cash flows?

01:20:15.750 --> 01:20:16.583
<v ->Sure.</v>

01:20:17.840 --> 01:20:20.530
You would look at a company's plan,

01:20:21.590 --> 01:20:23.660
in this case the plan that was filed,

01:20:24.770 --> 01:20:29.770
and this is referring to an operating cash flow number.

01:20:32.330 --> 01:20:35.620
Like EBITDA and then adjusting from there.

01:20:37.000 --> 01:20:37.870
<v Will>Thank you.</v>

01:20:45.610 --> 01:20:49.990
So also on page 3-3, lines 16 and 18 of your testimony,

01:20:49.990 --> 01:20:54.990
you state, "A weaker business risk profile will allow

01:20:55.090 --> 01:20:56.610
"for lower leverage,

01:20:56.610 --> 01:20:58.800
"whereas a stronger business risk profile

01:20:58.800 --> 01:21:03.800
"will permit higher leverage at the same credit rating."

01:21:05.220 --> 01:21:06.600
Is it a fair characterization

01:21:06.600 --> 01:21:09.010
that these financial risks can be leveraged

01:21:09.010 --> 01:21:10.540
in one of two ways?

01:21:12.410 --> 01:21:16.990
Either PG&E can mitigate their risks by their operations,

01:21:16.990 --> 01:21:19.470
by hardening infrastructure,

01:21:20.700 --> 01:21:23.700
strengthening their business processes and things like that,

01:21:24.970 --> 01:21:29.150
and or they can address that by hedging their risks

01:21:30.670 --> 01:21:33.570
either through this wildfire fund as an example

01:21:33.570 --> 01:21:37.900
or through other public means?

01:21:40.040 --> 01:21:41.760
<v John>Yes, I think that</v>

01:21:43.270 --> 01:21:47.290
as PG&E executes on its safety plan

01:21:47.290 --> 01:21:50.370
and has success, that would be a factor

01:21:50.370 --> 01:21:51.850
in lowering business risk,

01:21:53.000 --> 01:21:58.000
as would seeing the implementation of AB1054

01:21:59.200 --> 01:22:02.780
and how that operates moving forward.

01:22:02.780 --> 01:22:06.370
I think those would be two important factors

01:22:06.370 --> 01:22:07.720
in assessing business risk.

01:22:11.750 --> 01:22:13.810
<v ->So given that there's that balance</v>

01:22:13.810 --> 01:22:16.080
between doing those things,

01:22:18.150 --> 01:22:20.470
would you say that in some ways,

01:22:20.470 --> 01:22:24.420
if a goal is to achieve that investment grade credit rating

01:22:26.260 --> 01:22:30.960
and you're able to achieve that through the public,

01:22:30.960 --> 01:22:34.650
through rate payer reimbursement,

01:22:35.510 --> 01:22:39.560
through a $21 billion wildfire fund,

01:22:40.540 --> 01:22:45.540
and other means, that you wouldn't have to achieve them

01:22:50.000 --> 01:22:54.820
through operations and businesses processes too

01:22:54.820 --> 01:22:55.820
as you move forward?

01:22:57.170 --> 01:22:59.270
<v ->I really think you need both.</v>

01:23:00.600 --> 01:23:05.600
So having a track record of strong operations

01:23:09.040 --> 01:23:12.310
is gonna be a very important factor

01:23:12.310 --> 01:23:14.830
in assessing business risk, as with safety.

01:23:14.830 --> 01:23:16.230
And I think that

01:23:16.230 --> 01:23:20.910
that also fosters positive regulatory relationships

01:23:21.760 --> 01:23:23.560
and then at the same time,

01:23:23.560 --> 01:23:26.783
seeing how the commission rules,

01:23:30.310 --> 01:23:32.900
in terms of when the company has prudent costs

01:23:32.900 --> 01:23:37.400
that are incurred, how they're treated with recovery.

01:23:37.400 --> 01:23:39.300
I think all that really goes together.

01:23:41.180 --> 01:23:46.180
<v ->Okay, so I guess what I'm concerned about is</v>

01:23:49.530 --> 01:23:53.610
part of the motivation for the wildfire fund,

01:23:54.570 --> 01:23:58.430
part of the motivation behind AB1054,

01:23:58.430 --> 01:24:03.430
has been to really substantiate the credit rating for PG&E.

01:24:04.040 --> 01:24:06.870
And of course there's a lot of benefits to that

01:24:06.870 --> 01:24:11.870
but I'm concerned that that may provide adverse motivations

01:24:15.490 --> 01:24:19.450
for a company to achieve that through other means.

01:24:19.450 --> 01:24:21.400
And so given that you stated

01:24:21.400 --> 01:24:25.770
that it's the track record of the company,

01:24:28.260 --> 01:24:31.850
is the track record of PG&E to date around safety

01:24:31.850 --> 01:24:36.850
and risk mitigation what you're relying upon

01:24:37.120 --> 01:24:39.900
as part of your analysis?

01:24:41.110 --> 01:24:44.780
<v ->So that is a factor in why I mentioned</v>

01:24:44.780 --> 01:24:48.910
that we believe they're gonna have heightened business risk

01:24:48.910 --> 01:24:52.510
or that the rating agencies are gonna be more conservative

01:24:52.510 --> 01:24:53.770
around business risk

01:24:53.770 --> 01:24:57.660
because of some of the issues around safety.

01:25:00.060 --> 01:25:03.390
In terms of AB1054,

01:25:04.740 --> 01:25:08.100
I view that as an issue that was important

01:25:08.100 --> 01:25:11.490
to all the California utilities, not just PG&E,

01:25:12.850 --> 01:25:17.300
and it was really I think very important

01:25:17.300 --> 01:25:20.280
to the capital markets to see

01:25:20.280 --> 01:25:24.380
that if the utilities are acting prudently,

01:25:25.590 --> 01:25:28.410
that they're going to get recovery

01:25:28.410 --> 01:25:30.790
and not be essentially a reinsurer

01:25:30.790 --> 01:25:33.180
for all wildfire liabilities.

01:25:33.180 --> 01:25:34.950
But I do think that that's important

01:25:34.950 --> 01:25:37.430
to all the utilities in the state.

01:25:40.090 --> 01:25:44.340
<v ->Can you comment on the effects of asset leans</v>

01:25:44.340 --> 01:25:49.340
in how you credit agencies look at risks?

01:25:50.770 --> 01:25:53.780
So if they're highly leveraged

01:25:53.780 --> 01:25:56.740
and there's lots of asset leans,

01:25:58.490 --> 01:26:01.170
does that affect the credit rating?

01:26:03.020 --> 01:26:08.020
<v ->So the way the agencies generally look at security is</v>

01:26:10.310 --> 01:26:13.070
that it enhances recovery.

01:26:14.130 --> 01:26:17.540
So security isn't a good indicator

01:26:17.540 --> 01:26:19.710
of probability of default.

01:26:19.710 --> 01:26:24.710
It's helpful to recovery when there is a default.

01:26:25.720 --> 01:26:30.720
So that's how the agencies view security.

01:26:31.070 --> 01:26:36.070
The primary benefit is if there is a default case,

01:26:36.220 --> 01:26:38.840
that there's a lower likelihood of capital loss.

01:26:40.310 --> 01:26:42.870
<v ->Okay, I'm sorry, I'm gonna ask a question again.</v>

01:26:42.870 --> 01:26:46.110
<v ->I can try to restate that if it would be helpful</v>

01:26:46.110 --> 01:26:48.800
or ask the question again, and I'll try to do better.

01:26:48.800 --> 01:26:49.633
<v ->Sure.</v>

01:26:49.633 --> 01:26:51.050
No, no, no, it's just, again,

01:26:51.050 --> 01:26:52.920
I'm struggling with the right way to ask the question.

01:26:52.920 --> 01:26:57.920
So if there are, say, 20% of PG&E's assets that have leans

01:27:01.650 --> 01:27:04.980
versus 50% of the assets that have leans,

01:27:04.980 --> 01:27:08.430
how does that affect, in those two scenarios,

01:27:08.430 --> 01:27:10.590
how a credit rating would be determined?

01:27:16.020 --> 01:27:20.120
<v ->In that scenario, it actually probably would not have</v>

01:27:20.120 --> 01:27:25.120
much of an impact because the rating agency,

01:27:25.460 --> 01:27:27.340
using the methodology we talked about,

01:27:27.340 --> 01:27:29.240
business risk, financial,

01:27:29.240 --> 01:27:32.780
would come up with a rating for the company

01:27:32.780 --> 01:27:35.360
and then they would provide notching

01:27:35.360 --> 01:27:38.510
or positive notching on ratings for the collateral.

01:27:38.510 --> 01:27:40.010
In both of those cases,

01:27:40.010 --> 01:27:42.430
I don't think they would change the notching.

01:27:43.530 --> 01:27:47.390
I think it would be two notches in either case,

01:27:47.390 --> 01:27:52.390
whether it's 50% of the assets are under lean or 20%.

01:27:52.920 --> 01:27:55.950
What I would tell you though in this case

01:27:55.950 --> 01:27:58.410
and for utilities generally,

01:27:58.410 --> 01:28:00.800
it's a much higher percentage of the assets

01:28:00.800 --> 01:28:04.110
because a mortgage bond will generally cover

01:28:04.110 --> 01:28:06.990
all the PP&E, or property, plant, and equipment,

01:28:06.990 --> 01:28:11.000
hard assets of a utility.

01:28:11.000 --> 01:28:14.110
And many very highly rated utilities

01:28:14.110 --> 01:28:16.220
still use that structure

01:28:16.220 --> 01:28:20.460
because it improves their funding costs.

01:28:20.460 --> 01:28:23.540
So even though they could issue on an unsecured basis,

01:28:23.540 --> 01:28:26.440
they choose to issue with mortgage bonds

01:28:26.440 --> 01:28:29.118
because it lowers their funding cost.

01:28:29.118 --> 01:28:30.540
<v ->Okay.</v>

01:28:30.540 --> 01:28:33.540
So shareholders would look at this credit rating

01:28:33.540 --> 01:28:35.868
in terms of how they would evaluate the risk

01:28:35.868 --> 01:28:38.220
of a company, yes?

01:28:39.450 --> 01:28:41.320
<v ->It would be one factor.</v>

01:28:41.320 --> 01:28:42.820
<v ->Okay.</v>

01:28:42.820 --> 01:28:47.760
So if there are secured investors

01:28:48.640 --> 01:28:52.630
who have the asset leans,

01:28:53.840 --> 01:28:58.447
and so you have unsecured stock shares,

01:29:01.460 --> 01:29:06.460
is it detrimental or beneficial to the shareholders

01:29:08.100 --> 01:29:13.100
that lots of the assets are with a lean for other investors?

01:29:17.780 --> 01:29:21.770
<v ->So I do not think it's detrimental</v>

01:29:21.770 --> 01:29:26.190
for a utility to access the debt markets

01:29:26.190 --> 01:29:28.380
with a mortgage bond structure.

01:29:28.380 --> 01:29:32.760
In either case, whether there's secured debt

01:29:32.760 --> 01:29:37.580
or unsecured debt, those assets are a priority claim

01:29:37.580 --> 01:29:42.580
over equity, so I don't think that has an impact.

01:29:44.140 --> 01:29:48.050
Issuing under secured debt, if it's more cost effective,

01:29:49.270 --> 01:29:52.340
is I guess a benefit to the overall enterprise.

01:29:53.480 --> 01:29:56.230
But to your initial question,

01:29:56.230 --> 01:29:58.400
I think ratings are one factor

01:29:58.400 --> 01:30:03.400
that equity investors will look at

01:30:04.280 --> 01:30:09.280
because ratings are one indicator

01:30:09.363 --> 01:30:12.060
of risk profile credit quality.

01:30:14.100 --> 01:30:17.320
<v Judge>Mr. Abrams, if you could wrap up pretty quickly.</v>

01:30:17.320 --> 01:30:20.600
I also think a number of these topics have been covered

01:30:20.600 --> 01:30:22.360
by other parties' cross,

01:30:22.360 --> 01:30:25.630
so it would be reflected on the record.

01:30:25.630 --> 01:30:29.790
I understand that you're developing a little bit more detail

01:30:29.790 --> 01:30:32.650
but if you could wrap up your cross in the next few minutes,

01:30:32.650 --> 01:30:34.310
that would help us with our scheduling.

01:30:34.310 --> 01:30:36.860
<v ->Okay, I will endeavor to do that, thank you.</v>

01:30:36.860 --> 01:30:37.700
<v Judge>Thank you.</v>

01:30:41.100 --> 01:30:43.400
<v ->And so my reason for this question is this.</v>

01:30:43.400 --> 01:30:45.940
It's just purely trying to look at the interest

01:30:45.940 --> 01:30:50.600
for victims who are gonna be left with these shares.

01:30:50.600 --> 01:30:53.730
And part of our concern is, quite frankly,

01:30:53.730 --> 01:30:57.230
as other investor classes secure asset leans

01:30:57.230 --> 01:30:59.880
because they're unsure about PG&E's financial future,

01:31:01.080 --> 01:31:05.860
those with just shares who are counting on it

01:31:05.860 --> 01:31:10.160
to build half of their home that was burned down by PG&E,

01:31:10.160 --> 01:31:11.720
they're wondering, well, look,

01:31:11.720 --> 01:31:14.640
here are all these investors who are getting asset leans

01:31:14.640 --> 01:31:16.550
to secure their investment.

01:31:16.550 --> 01:31:17.710
How am I secured?

01:31:18.930 --> 01:31:20.880
So how should we look at your analysis

01:31:20.880 --> 01:31:22.430
and come to that determination?

01:31:23.700 --> 01:31:26.390
<v ->So as an equity holder,</v>

01:31:26.390 --> 01:31:31.390
I think that you should look at other comparable companies

01:31:33.910 --> 01:31:37.180
and how their equity trades in the market.

01:31:38.370 --> 01:31:42.300
And you'll be one class of shareholders

01:31:42.300 --> 01:31:45.690
but there's obviously publicly traded stock today

01:31:45.690 --> 01:31:50.690
and there will be more upon exit, in the exit financing.

01:31:52.780 --> 01:31:57.070
There's currently a backstop in place,

01:31:57.070 --> 01:32:00.570
so there's that in place to help the company exit.

01:32:01.990 --> 01:32:06.040
From your position as an equity holder,

01:32:06.040 --> 01:32:09.160
I think the credit ratings should be one factor

01:32:09.160 --> 01:32:12.927
that you look at and you can also look

01:32:14.590 --> 01:32:16.080
at other comparable companies

01:32:16.080 --> 01:32:21.050
and they'll be liquid benchmarks, outside research,

01:32:21.050 --> 01:32:25.490
there are a lot of resources that you'll be able to review

01:32:25.490 --> 01:32:29.060
to make your determination on value

01:32:29.060 --> 01:32:31.390
once the company exits bankruptcy.

01:32:34.470 --> 01:32:37.530
<v ->So I guess just a question on that.</v>

01:32:37.530 --> 01:32:41.030
To be able to evaluate that once we exit bankruptcy,

01:32:44.010 --> 01:32:46.460
the victims in this case will have no opportunity

01:32:46.460 --> 01:32:48.460
to evaluate that after bankruptcy

01:32:48.460 --> 01:32:50.570
because we already own it.

01:32:52.600 --> 01:32:55.830
So how do we evaluate now?

01:32:56.830 --> 01:32:59.670
Because we've got to make a decision here coming up.

01:32:59.670 --> 01:33:03.730
How do we evaluate now based on what you've provided,

01:33:03.730 --> 01:33:05.930
whether this is a safe investment

01:33:05.930 --> 01:33:07.350
given the statements that I made

01:33:07.350 --> 01:33:09.840
about what other investors are doing?

01:33:09.840 --> 01:33:10.890
<v ->So that's actually--</v>

01:33:10.890 --> 01:33:12.360
<v Kevin>Out of the scope, Your Honor.</v>

01:33:14.710 --> 01:33:16.360
<v Judge>Overruled, you can answer.</v>

01:33:16.360 --> 01:33:17.193
<v ->Sure.</v>

01:33:17.193 --> 01:33:22.193
So really what my testimony was focused on was

01:33:22.680 --> 01:33:25.770
post-exit access to the capital markets

01:33:26.955 --> 01:33:29.890
on that equity component, since there is the backstop.

01:33:29.890 --> 01:33:32.540
And so we're relying on that backstop

01:33:32.540 --> 01:33:35.250
that the company negotiated that,

01:33:35.250 --> 01:33:38.560
so that would probably be a question for the company

01:33:38.560 --> 01:33:41.990
in terms of the backstop agreement

01:33:41.990 --> 01:33:44.800
that they reached with institutional investors.

01:33:48.010 --> 01:33:50.700
<v ->So this should not be looked at as an analysis</v>

01:33:50.700 --> 01:33:52.520
for looking after bankruptcy?

01:33:54.060 --> 01:33:55.970
<v ->This is a forward looking analysis</v>

01:33:55.970 --> 01:33:59.850
but in terms of the equity required to exit bankruptcy,

01:34:00.820 --> 01:34:03.910
that is committed to and so we didn't opine

01:34:03.910 --> 01:34:07.190
on valuation or pricing or things like that.

01:34:09.428 --> 01:34:10.261
<v ->Okay.</v>

01:34:14.990 --> 01:34:15.823
Okay.

01:34:19.578 --> 01:34:20.470
I'll stop there, thanks.

01:34:20.470 --> 01:34:21.670
<v ->Thank you, Mr. Abrams.</v>

01:34:25.220 --> 01:34:27.490
Now from my chart, I had no other cross.

01:34:27.490 --> 01:34:28.340
Is that correct?

01:34:28.340 --> 01:34:30.240
Any other cross for Mr. Plaster?

01:34:31.230 --> 01:34:33.320
Okay, I have a question.

01:34:33.320 --> 01:34:35.290
Mr. Plaster, earlier you had said

01:34:35.290 --> 01:34:39.300
that you had not had discussions with rating agencies

01:34:39.300 --> 01:34:42.910
regarding PG&E's likely credit rating, is that correct?

01:34:45.080 --> 01:34:46.210
<v John>That's correct.</v>

01:34:46.210 --> 01:34:49.660
<v ->Do you know if PG&E had meetings with rating agencies</v>

01:34:49.660 --> 01:34:52.260
regarding its potential credit rating?

01:34:54.260 --> 01:34:57.790
<v John>I believe PG&E has regular discussions</v>

01:34:57.790 --> 01:34:59.040
with the rating agencies, yes.

01:34:59.040 --> 01:35:02.430
<v Judge>And would that be a question for Mr. Wells?</v>

01:35:02.430 --> 01:35:03.263
<v ->Yes.</v>

01:35:03.263 --> 01:35:04.096
<v ->Okay.</v>

01:35:05.580 --> 01:35:06.413
Thank you.

01:35:06.413 --> 01:35:11.250
Commissioner, do you have a question?

01:35:12.370 --> 01:35:13.203
<v ->Judge, thank you.</v>

01:35:13.203 --> 01:35:16.020
Mr. Plaster, thank you for your testimony today.

01:35:16.020 --> 01:35:17.090
I'm gonna ask this question.

01:35:17.090 --> 01:35:19.880
It may be better posed also to Mr. Wells,

01:35:19.880 --> 01:35:21.680
but I'm gonna give it a whirl, okay?

01:35:22.550 --> 01:35:25.190
Given what you just said to Mr. Abrams.

01:35:25.190 --> 01:35:30.190
Given if the plan were found to be under-capitalized

01:35:31.800 --> 01:35:34.050
and therefore the company, PG&E,

01:35:34.050 --> 01:35:37.960
does not receive the rating your analysis has determined,

01:35:37.960 --> 01:35:42.720
what options are available to the company for June 30, 2020?

01:35:46.610 --> 01:35:49.490
<v ->Well, I don't know if I should comment</v>

01:35:49.490 --> 01:35:52.370
on anything other than the current plan.

01:35:52.370 --> 01:35:56.200
If the plan would be altered,

01:35:56.200 --> 01:35:57.500
I think the company would have

01:35:57.500 --> 01:36:01.950
to evaluate accessing different markets for capital

01:36:03.420 --> 01:36:06.040
to have less leverage on the business.

01:36:07.160 --> 01:36:09.470
<v ->Gonna give it a whirl with Mr. Wells too then.</v>

01:36:09.470 --> 01:36:11.360
Thank you very much.

01:36:11.360 --> 01:36:13.040
Thank you, Judge.

01:36:13.040 --> 01:36:14.720
<v Judge>Thank you.</v>

01:36:14.720 --> 01:36:15.790
Is there any redirect?

01:36:15.790 --> 01:36:16.623
<v Kevin>No, Your Honor.</v>

01:36:16.623 --> 01:36:18.140
Thank you.
<v ->Thank you.</v>

01:36:18.140 --> 01:36:20.070
Anything else for Mr. Plaster?

01:36:21.160 --> 01:36:24.470
Seeing none, thank you, Mr. Plaster, you are excused.

01:36:24.470 --> 01:36:26.860
PG&E, your next witness is?

01:36:27.790 --> 01:36:29.260
<v Kevin>Andrew Vesey.</v>

01:36:29.260 --> 01:36:30.660
<v ->Thank you, off the record.</v>

01:36:33.292 --> 01:36:36.209
(people murmuring)

01:38:01.510 --> 01:38:02.960
<v Woman>I'll be leaving us.</v>

01:38:08.553 --> 01:38:10.636
(laughs)

01:38:12.590 --> 01:38:13.490
Have a nice night.

01:38:15.008 --> 01:38:17.925
(people murmuring)

01:38:57.895 --> 01:38:58.978
<v ->Okay, okay.</v>

01:39:20.180 --> 01:39:22.180
<v Man>Your Honor, while we're off the record,</v>

01:39:22.180 --> 01:39:23.013
I'm sorry, didn't--

01:39:23.013 --> 01:39:24.432
<v Woman>Additional copies and--</v>

01:39:24.432 --> 01:39:26.532
<v Man>Little worried about the schedule.</v>

01:39:27.372 --> 01:39:28.205
Would there be any possibility

01:39:28.205 --> 01:39:29.450
of going a little later today?

01:39:36.728 --> 01:39:38.710
<v Woman>Oh, yeah, yeah, yeah.</v>

01:39:38.710 --> 01:39:42.090
<v Man>CERN is, Mr. Vesey has waited really patiently</v>

01:39:42.090 --> 01:39:43.240
and he needs to get back to his job,

01:39:43.240 --> 01:39:45.660
so if we could if not finish him today,

01:39:45.660 --> 01:39:47.570
at least make sure he gets off tomorrow morning.

01:39:47.570 --> 01:39:50.133
And then we have Wells also is my concern.

01:39:50.133 --> 01:39:51.780
<v Woman>Tom, I don't need three copies of this one,</v>

01:39:51.780 --> 01:39:53.070
so I will hang onto this one,

01:39:53.070 --> 01:39:55.760
but I'll give you this one back.

01:39:55.760 --> 01:39:57.120
Because you've got three of these.

01:39:57.120 --> 01:39:59.000
<v ->Yeah, I'll work that differently.</v>

01:40:05.419 --> 01:40:08.780
I mean, my fondest hope would be to finish him today

01:40:08.780 --> 01:40:11.130
but if that's not possible, at least tomorrow morning,

01:40:11.130 --> 01:40:15.650
but then we run into Wells, and so...

01:40:22.920 --> 01:40:23.753
Thank you.

01:40:30.060 --> 01:40:31.650
Thank you for your consideration.

01:40:43.030 --> 01:40:43.863
<v ->On the record.</v>

01:40:44.797 --> 01:40:45.630
Mr. Vesey.

01:40:46.484 --> 01:40:48.180
Do you swear to tell the truth, the whole truth,

01:40:48.180 --> 01:40:49.013
and nothing but the truth?

01:40:49.013 --> 01:40:50.170
<v Andrew>I do.</v>

01:40:50.170 --> 01:40:51.380
<v ->Thank you, please be seated.</v>

01:40:51.380 --> 01:40:55.820
State your full name, spell your last name for the record.

01:40:55.820 --> 01:40:57.540
<v Andrew>Andrew Martin Vesey.</v>

01:40:57.540 --> 01:41:00.360
That's V as in victory, E-S-E-Y.

01:41:02.320 --> 01:41:03.940
<v ->Thank you, who's presenting this witness?</v>

01:41:03.940 --> 01:41:04.773
<v William>I am, Your Honor.</v>

01:41:04.773 --> 01:41:06.400
<v Judge>Mr. Manheim?</v>

01:41:06.400 --> 01:41:07.390
<v William>Good afternoon, Mr. Vesey.</v>

01:41:07.390 --> 01:41:09.670
Could you state your position for PG&E, please?

01:41:09.670 --> 01:41:11.940
<v ->I am the president and CEO</v>

01:41:11.940 --> 01:41:14.470
of the Pacific Gas and Electric Company.

01:41:14.470 --> 01:41:15.303
<v ->Thank you.</v>

01:41:15.303 --> 01:41:19.090
And you're sponsoring portions of chapter five

01:41:19.090 --> 01:41:21.870
of PG&E's prepared testimony, exhibit one, is that correct?

01:41:21.870 --> 01:41:22.960
<v Andrew>That's correct.</v>

01:41:22.960 --> 01:41:25.060
<v ->Okay, and let's identify those sections.</v>

01:41:25.960 --> 01:41:28.180
There are a few sections

01:41:28.180 --> 01:41:31.200
that are sponsored by other witnesses

01:41:31.200 --> 01:41:35.120
and it may be moreuseful to identify the portions

01:41:35.120 --> 01:41:37.160
of chapter five you're not sponsoring.

01:41:38.270 --> 01:41:41.240
So I'll list those, if you can confirm.

01:41:41.240 --> 01:41:46.240
So as organized, you are not sponsoring section D1A1,

01:41:53.761 --> 01:41:56.717
D1D1, and DH.

01:42:07.240 --> 01:42:09.550
But otherwise, I believe you are sponsoring

01:42:09.550 --> 01:42:10.870
all other portions, is that correct?

01:42:10.870 --> 01:42:11.710
<v Andrew>That's correct.</v>

01:42:11.710 --> 01:42:14.540
<v ->And was that testimony prepared by you</v>

01:42:14.540 --> 01:42:15.670
or under your direction?

01:42:15.670 --> 01:42:17.166
<v ->Yes.</v>

01:42:17.166 --> 01:42:19.100
<v William>And do you have any corrections</v>

01:42:19.100 --> 01:42:20.310
to your testimony?

01:42:20.310 --> 01:42:21.143
<v ->No, I do not.</v>

01:42:23.319 --> 01:42:24.152
<v ->Let me just.</v>

01:42:30.060 --> 01:42:34.540
Sorry, in exhibit marked PG&E-7,

01:42:36.500 --> 01:42:39.660
there are a couple of corrections

01:42:39.660 --> 01:42:44.160
that were identified for chapter five.

01:42:45.650 --> 01:42:47.150
Your Honor, may I approach?

01:42:47.150 --> 01:42:49.390
I'm not sure if Mr. Vesey has these exhibits.

01:42:49.390 --> 01:42:52.270
<v Judge>I have, go ahead.</v>

01:42:52.270 --> 01:42:53.240
<v William>May I approach the witness?</v>

01:42:53.240 --> 01:42:54.073
<v Judge>Yes.</v>

01:42:54.950 --> 01:42:57.350
Or actually, Mr. Manheim,

01:42:57.350 --> 01:43:00.850
if you just wanna read out what those are first

01:43:00.850 --> 01:43:04.740
and then so that we all know which part you're finding.

01:43:04.740 --> 01:43:09.740
<v ->Yeah, so in PG&E-7, there was a change on page 5-7</v>

01:43:11.990 --> 01:43:16.990
that's noted, the addition of the word safety on line 33.

01:43:21.770 --> 01:43:24.333
And on page 5-8, line two,

01:43:28.610 --> 01:43:32.450
the addition of the word safety following independent.

01:43:37.726 --> 01:43:40.360
And finally, on page 5-4,

01:43:45.230 --> 01:43:50.230
I'm sorry, 5-14 as indicated in that exhibit on line 20.

01:43:53.000 --> 01:43:56.160
Instead of 35 events, it should be 34 events.

01:43:57.220 --> 01:44:01.050
And on line 21, following the words enterprise risks,

01:44:02.060 --> 01:44:04.920
the words potentially catastrophic have been added

01:44:05.970 --> 01:44:07.130
to the parenthetical.

01:44:07.130 --> 01:44:09.130
<v Judge>I'm sorry, what was that last one?</v>

01:44:09.130 --> 01:44:10.690
<v ->On page 5-14.</v>

01:44:13.510 --> 01:44:14.860
Okay.

01:44:14.860 --> 01:44:16.070
Line 21.

01:44:17.920 --> 01:44:20.290
Following the words enterprise risk,

01:44:20.290 --> 01:44:22.700
the words potentially catastrophic were added

01:44:23.730 --> 01:44:25.080
prior to the parenthetical.

01:44:27.290 --> 01:44:31.990
Parenthetical, I'm sorry.

01:44:31.990 --> 01:44:34.170
Can I, excuse me for the clunkiness of this,

01:44:34.170 --> 01:44:37.110
but we did submit these changes to parties in advance.

01:44:37.990 --> 01:44:39.000
<v Judge>Thank you.</v>

01:44:39.000 --> 01:44:40.330
You may proceed.

01:44:40.330 --> 01:44:43.060
<v ->So with those corrections noted,</v>

01:44:44.680 --> 01:44:46.290
is your testimony true and correct

01:44:46.290 --> 01:44:47.740
to the best of your knowledge?

01:44:47.740 --> 01:44:49.192
<v Andrew>Yes, it is.</v>

01:44:49.192 --> 01:44:50.044
<v William>Thank you.</v>

01:44:50.044 --> 01:44:53.070
The witness is available for cross-examination.

01:44:53.070 --> 01:44:54.270
<v Judge>Thank you.</v>

01:44:54.270 --> 01:44:55.940
I believe Mr. Long is starting for TURN?

01:44:55.940 --> 01:44:58.190
<v ->Yes, thank you, Your Honor.</v>

01:44:58.190 --> 01:45:00.690
Good afternoon, Mr. Vesey, I'm Tom Long with TURN.

01:45:01.630 --> 01:45:04.040
I want to begin by asking to turn to your testimony

01:45:04.040 --> 01:45:07.390
at page 5-4, bottom paragraph.

01:45:13.750 --> 01:45:15.200
And when you're there.

01:45:15.200 --> 01:45:16.280
<v Andrew>I'm there.</v>

01:45:16.280 --> 01:45:19.800
<v ->Okay, in this paragraph, you're stating your understanding</v>

01:45:19.800 --> 01:45:24.050
as to what AB1054 requires the commission to decide here,

01:45:24.050 --> 01:45:24.883
is that right?

01:45:24.883 --> 01:45:25.830
<v ->That's correct.</v>

01:45:25.830 --> 01:45:27.840
<v ->And one of the things the commission must decide is</v>

01:45:27.840 --> 01:45:32.840
whether PG&E's, quote, "resulting governance structure,"

01:45:33.960 --> 01:45:36.330
close quote, is acceptable in light

01:45:36.330 --> 01:45:38.620
of the company's safety history, et cetera.

01:45:38.620 --> 01:45:39.460
Is that right?

01:45:39.460 --> 01:45:40.790
<v Andrew>That's correct.</v>

01:45:40.790 --> 01:45:44.400
<v ->Can we agree that resulting governance structure</v>

01:45:44.400 --> 01:45:47.250
refers to governance structure

01:45:47.250 --> 01:45:48.960
after emergence from bankruptcy?

01:45:48.960 --> 01:45:50.600
<v ->Yes.</v>

01:45:50.600 --> 01:45:52.360
<v ->So I'm gonna have some questions for you</v>

01:45:52.360 --> 01:45:53.390
for the next few minutes

01:45:53.390 --> 01:45:56.520
about PG&E's resulting governance structure.

01:45:58.110 --> 01:46:01.160
Let's start with section C of your testimony,

01:46:01.160 --> 01:46:04.250
which begins on page five, 5-5.

01:46:07.070 --> 01:46:10.890
Title that powering leadership, et cetera.

01:46:12.325 --> 01:46:15.090
It mentions several officer positions,

01:46:15.090 --> 01:46:17.970
if I have them all listed here on my notes correctly,

01:46:17.970 --> 01:46:22.750
it's the Chief Risk Officer, Chief Safety Officer,

01:46:22.750 --> 01:46:25.040
the Chief Ethics and Compliance Officer,

01:46:25.040 --> 01:46:27.380
the Chief Customer Officer,

01:46:27.380 --> 01:46:30.170
Senior Vice President of Electric Operations,

01:46:30.170 --> 01:46:32.240
and the Interim Lead for Gas Operations.

01:46:33.250 --> 01:46:37.060
Those positions you mentioned in that section C,

01:46:37.060 --> 01:46:38.162
is that right?

01:46:38.162 --> 01:46:40.113
<v ->That's right.</v>

01:46:40.113 --> 01:46:45.113
<v ->And am I correct that after the emergence from bankruptcy,</v>

01:46:46.090 --> 01:46:47.860
there will be some changes

01:46:47.860 --> 01:46:50.950
in who some but not all of those positions report to?

01:46:52.130 --> 01:46:56.850
That is, I'm just trying to set up further questions.

01:46:56.850 --> 01:46:57.820
We'll get into it in more detail,

01:46:57.820 --> 01:46:59.680
but do I have the general idea correct?

01:46:59.680 --> 01:47:00.680
<v ->Yes, that's correct.</v>

01:47:00.680 --> 01:47:01.990
<v ->Okay, all right.</v>

01:47:01.990 --> 01:47:05.360
Now I'd like to ask you to turn to a document

01:47:05.360 --> 01:47:10.360
and I'm gonna ask the judge to identify this document.

01:47:12.660 --> 01:47:14.660
It's the one, Your Honor, that's labeled

01:47:16.160 --> 01:47:20.170
"Response to TURN Data Requests 14-1 and 14-2."

01:47:21.240 --> 01:47:22.422
<v Judge>Thank you.</v>

01:47:22.422 --> 01:47:24.750
The TURN cross-examination exhibit

01:47:24.750 --> 01:47:28.770
labeled "PG&E Response to TURN Data Requests 14-1 and 14-2"

01:47:30.130 --> 01:47:32.230
is marked as TURN X3.

01:47:33.962 --> 01:47:36.120
<v ->Do you have that document in front of you, Mr. Vesey?</v>

01:47:37.000 --> 01:47:39.140
<v ->I have the one you provided me,</v>

01:47:39.140 --> 01:47:40.750
which is TURN X2, so.

01:47:42.480 --> 01:47:44.480
<v ->Oh, did I not give you that one?</v>

01:47:44.480 --> 01:47:45.410
My apologies.

01:47:45.410 --> 01:47:46.550
<v Judge>Off the record.</v>

01:48:06.048 --> 01:48:08.965
(people murmuring)

01:48:21.850 --> 01:48:23.580
<v ->All right, I now have it in front of me.</v>

01:48:23.580 --> 01:48:24.413
<v Judge>On the record.</v>

01:48:24.413 --> 01:48:25.246
Mr. Long?

01:48:25.246 --> 01:48:26.890
<v ->Okay, now you have it, Mr. Vesey?</v>

01:48:26.890 --> 01:48:27.723
<v ->Yes, I do.</v>

01:48:27.723 --> 01:48:28.556
<v ->Thank you.</v>

01:48:29.960 --> 01:48:34.790
I'm just gonna read the question that we asked in 14-1.

01:48:36.140 --> 01:48:39.630
Provide a post-emergence organization chart

01:48:39.630 --> 01:48:41.220
showing reporting relationships

01:48:41.220 --> 01:48:43.970
for all utility executive positions discussed

01:48:43.970 --> 01:48:45.400
in Mr. Vesey's testimony.

01:48:46.260 --> 01:48:49.310
The charts should include members of the board,

01:48:49.310 --> 01:48:50.980
excuse me, parenthesis S,

01:48:50.980 --> 01:48:54.050
and board committees where applicable.

01:48:54.050 --> 01:48:55.910
And then I'm gonna paraphrase the answer

01:48:55.910 --> 01:48:58.000
and you can tell me if it's a fair paraphrase.

01:48:59.349 --> 01:49:01.520
The response says that PG&E does not have

01:49:01.520 --> 01:49:04.440
a post-emergence organization chart available

01:49:04.440 --> 01:49:06.760
to provide at this point, is that right?

01:49:06.760 --> 01:49:07.593
<v ->That's correct.</v>

01:49:07.593 --> 01:49:09.470
<v ->And that's still the case?</v>

01:49:09.470 --> 01:49:10.303
<v ->Yes.</v>

01:49:12.280 --> 01:49:15.890
<v ->And you do not have even an organization chart</v>

01:49:15.890 --> 01:49:20.890
that shows the officer positions they report to

01:49:20.950 --> 01:49:22.400
and what organizations they oversee

01:49:22.400 --> 01:49:25.140
for the officers that you reference in your testimony

01:49:25.140 --> 01:49:26.040
I just listed?

01:49:26.040 --> 01:49:28.790
<v ->I think for the officers that we just listed,</v>

01:49:30.400 --> 01:49:31.510
we can answer that question

01:49:31.510 --> 01:49:33.380
because they're two specific that we addressed,

01:49:33.380 --> 01:49:34.520
which is a change.

01:49:35.720 --> 01:49:37.930
And this is not in response

01:49:37.930 --> 01:49:41.340
that we have an overall post-emergence organization chart,

01:49:41.340 --> 01:49:43.390
as we will be going through

01:49:43.390 --> 01:49:45.110
hopefully significant reorganization,

01:49:45.110 --> 01:49:47.830
we've had regionalization.

01:49:47.830 --> 01:49:51.950
But upon emergence, upon approval of the plan,

01:49:51.950 --> 01:49:53.770
two of the officers that are listed in here

01:49:53.770 --> 01:49:55.940
will have different reporting relationships.

01:49:55.940 --> 01:49:57.690
<v ->Okay, so I think your answer was.</v>

01:49:58.620 --> 01:50:00.670
My question went to it, is there an organization chart

01:50:00.670 --> 01:50:02.250
and I think the answer is still no.

01:50:02.250 --> 01:50:03.083
<v ->No.</v>

01:50:03.083 --> 01:50:04.990
<v ->But you're willing to talk about it?</v>

01:50:04.990 --> 01:50:05.823
<v ->Yes.</v>

01:50:05.823 --> 01:50:06.656
<v ->Okay.</v>

01:50:07.550 --> 01:50:11.760
And then I just want to just address something

01:50:11.760 --> 01:50:14.170
that's also stated in the answer one

01:50:14.170 --> 01:50:16.420
to the data requests we were just looking at.

01:50:17.370 --> 01:50:22.370
It says "PG&E previously produced recent organization charts

01:50:25.042 --> 01:50:26.542
"in response to question three

01:50:27.400 --> 01:50:30.070
"in AHC's second set of data requests."

01:50:30.070 --> 01:50:32.480
And then it gives a citation to that one.

01:50:33.600 --> 01:50:38.600
I've given you that, the referenced document there,

01:50:40.530 --> 01:50:45.220
which is the attachment to AHC data request dash three,

01:50:45.220 --> 01:50:46.280
attachment four.

01:50:47.170 --> 01:50:51.940
And Your Honor, if I could have that document marked

01:50:51.940 --> 01:50:54.310
as the next exhibit in order, I'd appreciate it.

01:50:56.080 --> 01:50:58.360
<v Judge>This is the TURN cross-examination exhibit</v>

01:50:58.360 --> 01:51:02.380
"PG&E Response to AHC Data Request 2-3"

01:51:02.380 --> 01:51:04.750
and attachment four, is that what you're referencing?

01:51:04.750 --> 01:51:06.294
<v ->Exactly, Your Honor.</v>

01:51:06.294 --> 01:51:08.340
<v Judge>That will be marked as TURN X4.</v>

01:51:11.030 --> 01:51:12.200
<v ->Thank you, Your Honor.</v>

01:51:12.200 --> 01:51:14.138
And I don't want to take a lot of time with this, Mr. Vesey,

01:51:14.138 --> 01:51:18.480
but this document that's referenced

01:51:18.480 --> 01:51:22.340
in that data request response I just read,

01:51:22.340 --> 01:51:25.330
this is not a post-emergence organization chart,

01:51:25.330 --> 01:51:26.163
is that right?

01:51:27.210 --> 01:51:29.615
<v ->This is the current organization chart,</v>

01:51:29.615 --> 01:51:33.787
as far as I can tell.

01:51:33.787 --> 01:51:36.350
<v ->So it's not responsive to the question,</v>

01:51:38.060 --> 01:51:41.330
to the request for a post-emergence organization chart,

01:51:41.330 --> 01:51:42.163
is that right?

01:51:43.280 --> 01:51:48.230
<v ->Well, as I said, the thing that would drive a change</v>

01:51:48.230 --> 01:51:51.580
in organization is gonna be the move to a few things,

01:51:51.580 --> 01:51:53.820
including the regionalization.

01:51:53.820 --> 01:51:55.450
When we think about an organization chart,

01:51:55.450 --> 01:51:57.130
it has to involve a lot of the other changes

01:51:57.130 --> 01:51:58.130
that are being made.

01:51:59.851 --> 01:52:03.370
On emergence, lacking anything else,

01:52:03.370 --> 01:52:07.070
the points that I made before around two positions,

01:52:07.070 --> 01:52:12.070
one the now newly defined Chief Risk Officer

01:52:12.290 --> 01:52:15.060
and the new Chief Safety Officer

01:52:15.060 --> 01:52:17.860
will have a different reporting relationship.

01:52:17.860 --> 01:52:19.010
<v ->My question was narrow.</v>

01:52:19.010 --> 01:52:22.240
This is not a post-emergence organization chart, correct?

01:52:22.240 --> 01:52:23.073
<v ->That's correct.</v>

01:52:23.073 --> 01:52:23.906
<v ->Okay.</v>

01:52:23.906 --> 01:52:25.990
And in fact, it's not even all that current.

01:52:25.990 --> 01:52:29.350
It's dated as of October 31st, 2019.

01:52:30.715 --> 01:52:33.440
The legend at the top of the first page?

01:52:34.370 --> 01:52:35.950
And we have a more recent organization chart,

01:52:35.950 --> 01:52:37.530
which I'll show you later in my cross.

01:52:37.530 --> 01:52:40.600
But so this is not even the current organization chart,

01:52:40.600 --> 01:52:42.180
is that right?

01:52:42.180 --> 01:52:44.680
<v ->It's dated 10-31-2019.</v>

01:52:44.680 --> 01:52:46.660
<v ->So that's not the current organization chart, correct?</v>

01:52:46.660 --> 01:52:47.500
<v ->That's correct.</v>

01:52:54.500 --> 01:52:57.140
<v ->Okay, now let's talk about some of these positions.</v>

01:52:59.130 --> 01:53:01.020
Going first to the Chief Risk Officer,

01:53:01.020 --> 01:53:04.550
which you discuss at the beginning of page 5-6.

01:53:07.647 --> 01:53:10.447
This is a position that already exists, is that correct?

01:53:11.690 --> 01:53:14.520
<v ->The position described here already exists.</v>

01:53:14.520 --> 01:53:17.500
<v ->That position now reports to the Chief Financial Officer,</v>

01:53:17.500 --> 01:53:18.333
is that correct?

01:53:18.333 --> 01:53:19.166
<v ->That's correct.</v>

01:53:20.030 --> 01:53:23.620
<v ->And post-emergence, this position will report</v>

01:53:23.620 --> 01:53:25.790
to the corporation's CEO, is that correct?

01:53:27.050 --> 01:53:29.210
<v ->This position modified will report</v>

01:53:29.210 --> 01:53:30.800
to the corporation's CEO.

01:53:30.800 --> 01:53:31.633
<v ->Okay.</v>

01:53:31.633 --> 01:53:32.910
How will it be modified?

01:53:32.910 --> 01:53:37.560
<v ->Currently, the Chief Risk Officer also has responsibility</v>

01:53:37.560 --> 01:53:39.370
for internal audit.

01:53:39.370 --> 01:53:41.440
It's the intention that upon emergence,

01:53:41.440 --> 01:53:43.610
the Chief Risk Officer reporting to the CEO

01:53:43.610 --> 01:53:46.520
will solely be focused, his entire remit will be

01:53:47.980 --> 01:53:49.550
as Chief Risk Officer.

01:53:50.630 --> 01:53:54.020
As Chief Risk Officer, so it's a single focused position.

01:53:55.480 --> 01:53:58.860
<v ->So the new position will drop any duties</v>

01:53:58.860 --> 01:54:02.170
related to internal audit, is that what you're saying?

01:54:02.170 --> 01:54:03.003
<v ->Yes.</v>

01:54:03.003 --> 01:54:03.836
<v ->Okay.</v>

01:54:12.400 --> 01:54:14.060
I'm gonna just back up just a moment, Mr. Vesey,

01:54:14.060 --> 01:54:16.030
and I'm sorry for a little discontinuity here

01:54:16.030 --> 01:54:20.230
but I failed to just establish a few basic things

01:54:20.230 --> 01:54:22.480
about you, your position.

01:54:22.480 --> 01:54:26.030
You were appointed in August of 2019, is that correct?

01:54:26.030 --> 01:54:27.780
<v ->August 19th, 2019.</v>

01:54:28.900 --> 01:54:32.190
<v ->And who were you hired by specifically?</v>

01:54:32.190 --> 01:54:35.020
<v ->Who was, by specifically?</v>

01:54:36.310 --> 01:54:38.383
By the corporation.

01:54:38.383 --> 01:54:41.930
I can't tell you specifically what approved it,

01:54:41.930 --> 01:54:44.090
as by the Board of the Utility.

01:54:46.380 --> 01:54:48.520
<v ->So you were hired, I'm sorry,</v>

01:54:48.520 --> 01:54:49.590
I got a little confused there.

01:54:49.590 --> 01:54:50.423
But you were?

01:54:52.220 --> 01:54:55.530
<v ->For clarity, it's hard for me to answer the question,</v>

01:54:55.530 --> 01:54:57.720
who hired me, I don't really know what that means.

01:54:57.720 --> 01:54:59.500
<v ->Okay, well, and I don't mean the individual.</v>

01:54:59.500 --> 01:55:02.140
I mean were you hired by the Board of Directors,

01:55:02.140 --> 01:55:04.655
and which Board of Directors was it?

01:55:04.655 --> 01:55:05.488
<v ->The Board of Directors,</v>

01:55:05.488 --> 01:55:08.020
and I would assume the Board of Directors at the utility,

01:55:08.020 --> 01:55:13.020
but it's the Board of Directors of the corporation,

01:55:13.160 --> 01:55:16.830
probably at that time chaired by the utility board chair.

01:55:16.830 --> 01:55:20.960
But I don't have insight into exactly those mechanisms.

01:55:20.960 --> 01:55:22.410
<v ->Could have been one of the two boards</v>

01:55:22.410 --> 01:55:23.680
that hired you formally.

01:55:23.680 --> 01:55:24.513
<v ->Yes.</v>

01:55:25.845 --> 01:55:28.030
<v ->And I asked Mr. Johnson this</v>

01:55:28.030 --> 01:55:30.062
but I just want to get your understanding.

01:55:30.062 --> 01:55:33.370
Do you have a formal reporting relationship

01:55:33.370 --> 01:55:36.560
with the CEO of the corporation?

01:55:36.560 --> 01:55:38.460
<v ->A formal reporting relationship, no.</v>

01:55:40.800 --> 01:55:42.490
<v ->But I think he said you work together closely, that fair?</v>

01:55:42.490 --> 01:55:44.290
<v ->Very closely, yes.</v>

01:55:44.290 --> 01:55:47.370
<v Judge>Let's make sure that the question is finished</v>

01:55:47.370 --> 01:55:49.870
before the answer comes out, to keep the reporters happy.

01:55:49.870 --> 01:55:50.703
<v ->Okay.</v>

01:55:52.220 --> 01:55:54.049
<v Judge>Or at least happier.</v>

01:55:54.049 --> 01:55:55.527
(laughs)

01:55:55.527 --> 01:55:56.510
<v ->And I'll try to slow down too.</v>

01:55:59.400 --> 01:56:03.710
All right, now we were talking about the Chief Risk Officer.

01:56:07.000 --> 01:56:12.000
We're explaining that this position will shed one

01:56:12.800 --> 01:56:17.250
of its current duties and will report,

01:56:18.470 --> 01:56:20.240
instead of the current situation

01:56:20.240 --> 01:56:21.740
where that person is reporting

01:56:21.740 --> 01:56:23.570
to the Chief Financial Officer,

01:56:23.570 --> 01:56:26.010
this position will post-emergence report

01:56:26.010 --> 01:56:28.610
to the corporate CEO, do I have that right?

01:56:28.610 --> 01:56:29.443
<v ->Yes.</v>

01:56:30.790 --> 01:56:33.130
<v ->So how is this an improvement</v>

01:56:33.130 --> 01:56:35.100
over the current governance structure?

01:56:38.100 --> 01:56:40.680
<v ->Well, I would answer in two ways.</v>

01:56:40.680 --> 01:56:43.550
One, I think singular focus is always very important.

01:56:45.070 --> 01:56:50.070
If we think about some of the root causes

01:56:50.170 --> 01:56:53.250
of performance over the last 10 years,

01:56:53.250 --> 01:56:55.200
common to all those events was

01:56:56.460 --> 01:56:58.990
not having a full appreciation of risks.

01:57:00.540 --> 01:57:04.740
So broadly speaking, the idea of having an individual

01:57:04.740 --> 01:57:07.310
with a singular focus on risk governance,

01:57:07.310 --> 01:57:10.390
meaning standards, processes, procedures,

01:57:10.390 --> 01:57:13.370
how do you understand that providing an independent view

01:57:14.290 --> 01:57:16.150
to the corporation's CEO and to the board

01:57:16.150 --> 01:57:17.510
I think is very important.

01:57:17.510 --> 01:57:19.130
Now some of those functions were met

01:57:19.130 --> 01:57:23.880
with the current incumbent but I think the singular focus is

01:57:23.880 --> 01:57:25.530
number one, which is quite important.

01:57:25.530 --> 01:57:28.450
The second change, which I also believe is important,

01:57:28.450 --> 01:57:31.880
is I believe that, and I think this has been mentioned

01:57:31.880 --> 01:57:34.400
before in Mr. Johnson's testimony,

01:57:34.400 --> 01:57:36.590
is that if something of that level of importance,

01:57:36.590 --> 01:57:39.250
which is that connected to a number of the issues

01:57:39.250 --> 01:57:40.950
that have impacted the company,

01:57:40.950 --> 01:57:43.650
having a direct report into the corporate CEO

01:57:43.650 --> 01:57:46.239
gives it the status and the importance

01:57:46.239 --> 01:57:49.730
to undertake its responsibilities.

01:57:49.730 --> 01:57:52.890
<v ->Okay, so in terms of having this position report</v>

01:57:52.890 --> 01:57:57.020
directly to the corporate CEO,

01:57:57.020 --> 01:57:59.800
the benefit of that is enhanced status,

01:57:59.800 --> 01:58:01.010
is that your testimony?

01:58:01.010 --> 01:58:02.820
<v ->That's one of the benefits, yes.</v>

01:58:02.820 --> 01:58:04.510
<v ->Okay, well, are there any other benefits</v>

01:58:04.510 --> 01:58:06.660
of that change in reporting relationship?

01:58:06.660 --> 01:58:09.420
<v ->Only in the fact that it's direct to the CEO,</v>

01:58:09.420 --> 01:58:14.070
it's unfiltered, it actually becomes much more independent

01:58:14.070 --> 01:58:18.050
than reporting down into a report to the CEO.

01:58:18.050 --> 01:58:20.130
So I think even in that sense, it's status,

01:58:20.130 --> 01:58:23.170
but also line of sight and responsibility

01:58:23.170 --> 01:58:26.540
and accountability to the corporation at the highest level.

01:58:26.540 --> 01:58:30.260
<v ->So among the risks and probably most of the risks</v>

01:58:30.260 --> 01:58:33.180
that the Chief Risk Officer is going to be concerned with

01:58:33.180 --> 01:58:36.760
are risks associated with the operation of the utility,

01:58:36.760 --> 01:58:38.000
am I right?

01:58:38.000 --> 01:58:40.420
<v ->It's among the risks that they have to be responsible for.</v>

01:58:40.420 --> 01:58:41.730
<v Tom>Okay, not most though, you're not willing to--</v>

01:58:41.730 --> 01:58:43.090
<v ->Well, I don't know how to do the math</v>

01:58:43.090 --> 01:58:44.730
but it's a significant portion.

01:58:44.730 --> 01:58:46.580
But you know, there are many other risks

01:58:46.580 --> 01:58:48.290
that impact the company.

01:58:48.290 --> 01:58:49.123
<v ->Okay.</v>

01:58:50.810 --> 01:58:52.870
And you're in charge of the utility, right?

01:58:52.870 --> 01:58:54.280
<v ->That's correct.</v>

01:58:54.280 --> 01:58:55.930
<v ->What will be your relationship,</v>

01:58:57.990 --> 01:58:59.850
in terms of formal reporting hierarchy,

01:58:59.850 --> 01:59:03.100
what will be your relationship with the Chief Risk Officer?

01:59:03.100 --> 01:59:03.933
<v ->Well, I don't believe</v>

01:59:03.933 --> 01:59:06.520
that there's gonna be a reporting relationship,

01:59:06.520 --> 01:59:08.600
but just like we have today

01:59:08.600 --> 01:59:13.000
with the Chief Compliance Officer that reports to the CEO

01:59:13.000 --> 01:59:16.290
and other executive officer reporting to the CEO,

01:59:16.290 --> 01:59:18.610
it's a close collaborative relationship.

01:59:18.610 --> 01:59:22.120
Sometimes it's more evident outside an independent view.

01:59:23.100 --> 01:59:26.315
But I expect that relationship to be collaborative,

01:59:26.315 --> 01:59:30.750
productive, but also one that is independent

01:59:30.750 --> 01:59:31.970
from my responsibilities,

01:59:31.970 --> 01:59:34.500
which I do think is an important thing.

01:59:34.500 --> 01:59:38.130
<v ->So the Chief Risk Officer will not be reporting to you.</v>

01:59:38.130 --> 01:59:39.680
Correct?
<v ->No, that's correct.</v>

01:59:41.566 --> 01:59:45.520
<v ->How will you be getting the benefit</v>

01:59:45.520 --> 01:59:50.520
of the output of the Chief Risk Officer

01:59:51.540 --> 01:59:54.160
and the Chief Risk Officer's organization

01:59:54.160 --> 01:59:56.990
if they don't have a reporting relationship with you?

01:59:56.990 --> 01:59:59.880
<v ->This is the current situation, so forget for the moment</v>

01:59:59.880 --> 02:00:03.260
where the Chief Risk Officer reports

02:00:03.260 --> 02:00:07.500
and the fact that today is not a singular focus.

02:00:07.500 --> 02:00:08.620
It's the regular meetings.

02:00:08.620 --> 02:00:11.390
I get regular meetings with the Chief Risk Officer,

02:00:11.390 --> 02:00:16.150
reviewing both the protocol, the bow tie analysis,

02:00:16.150 --> 02:00:19.970
all the work that goes into the proceeding

02:00:19.970 --> 02:00:22.850
in their own enterprise and operating risk management.

02:00:22.850 --> 02:00:26.610
We sit down on a regular basis, we talk about the risks.

02:00:26.610 --> 02:00:30.070
It's an ongoing relationship.

02:00:30.070 --> 02:00:32.390
I have, at least quarterly I sit down

02:00:32.390 --> 02:00:34.330
with the current Chief Risk Officer,

02:00:34.330 --> 02:00:37.660
go over those issues, comment.

02:00:37.660 --> 02:00:41.110
It impacts the way we do our risk budgets.

02:00:41.110 --> 02:00:43.100
So it's an ongoing role.

02:00:43.100 --> 02:00:44.900
I don't expect that to be different.

02:00:46.800 --> 02:00:48.450
<v ->Okay, thank you.</v>

02:00:48.450 --> 02:00:53.450
Looking at the top of page 5-6, lines four through six,

02:00:54.950 --> 02:00:59.080
you state that PG&E will consult with the governor's office

02:00:59.080 --> 02:01:01.360
and CPUC regarding the identity

02:01:01.360 --> 02:01:04.410
of the initial post-emergence CRO.

02:01:05.367 --> 02:01:08.060
I wanna follow up on that.

02:01:10.430 --> 02:01:15.430
So there's a current Chief Risk Officer.

02:01:16.120 --> 02:01:18.270
Are you saying that the identity

02:01:18.270 --> 02:01:20.350
of the Chief Risk Officer may change

02:01:21.740 --> 02:01:24.738
depending on the outcome of consultations

02:01:24.738 --> 02:01:27.570
with the governor's office or PG&E?

02:01:28.670 --> 02:01:30.040
<v ->Yeah, to be, because we're dealing</v>

02:01:30.040 --> 02:01:33.100
with individuals by name, I would suggest

02:01:33.100 --> 02:01:35.130
that the process then will be used

02:01:35.130 --> 02:01:38.940
to actually fill that new role.

02:01:38.940 --> 02:01:41.410
We'll view the incumbent as well as others

02:01:41.410 --> 02:01:43.810
and I expect there to be a consultation process.

02:01:44.650 --> 02:01:47.290
<v ->Consultation with the governor's office and the PUC.</v>

02:01:47.290 --> 02:01:50.370
Can you explain a little bit how that will work?

02:01:50.370 --> 02:01:51.830
<v ->Because I'm not gonna manage it</v>

02:01:51.830 --> 02:01:54.230
and I don't have insight into it, I can't.

02:01:55.100 --> 02:01:58.630
But my general sense is that if we have a candidate,

02:01:58.630 --> 02:02:00.740
we would present those credentials and take input

02:02:00.740 --> 02:02:02.950
before we make any final decision.

02:02:02.950 --> 02:02:04.000
It's a consultation.

02:02:05.110 --> 02:02:07.310
<v ->Okay, and then would that be a public process</v>

02:02:07.310 --> 02:02:10.830
or would that be a behind the scenes private process?

02:02:10.830 --> 02:02:12.700
<v ->I really can't talk to that.</v>

02:02:12.700 --> 02:02:13.533
<v ->Well, who can?</v>

02:02:13.533 --> 02:02:14.840
I mean, it's in your testimony.

02:02:16.850 --> 02:02:17.870
<v ->Who can?</v>

02:02:17.870 --> 02:02:22.870
I would imagine that's it's basically the regulatory group

02:02:23.640 --> 02:02:26.560
and I think that Robert Kenny is giving testimony later.

02:02:27.937 --> 02:02:29.250
It would also most likely be those

02:02:29.250 --> 02:02:31.310
who were involved in the ongoing conversations

02:02:31.310 --> 02:02:33.560
with the governor office and negotiations

02:02:33.560 --> 02:02:35.790
and other elements of the relationship

02:02:35.790 --> 02:02:37.270
that falls under John Simon.

02:02:37.270 --> 02:02:39.210
I just don't have the details of it.

02:02:39.210 --> 02:02:40.780
I'm sure they could be provided,

02:02:40.780 --> 02:02:42.450
but I'm just not aware of them.

02:02:42.450 --> 02:02:43.360
<v ->Your Honor, given that answer,</v>

02:02:43.360 --> 02:02:46.070
could I ask if you could ask PG&E

02:02:46.070 --> 02:02:49.740
to allow me to follow up on that question with Mr. Kenny?

02:02:49.740 --> 02:02:50.573
<v Judge>Yes.</v>

02:02:54.430 --> 02:02:57.006
<v Man>He'll be here, you can ask him.</v>

02:02:57.006 --> 02:02:59.070
<v ->And without objection from PG&E?</v>

02:03:00.430 --> 02:03:01.263
<v Judge>Well, they might object</v>

02:03:01.263 --> 02:03:03.830
to the form of the question, but you're certainly allowed,

02:03:03.830 --> 02:03:06.930
since Mr. Vesey has referred the question to Mr. Kenny,

02:03:06.930 --> 02:03:08.880
you're certainly free to ask Mr. Kenny.

02:03:15.850 --> 02:03:17.350
There may be other objections.

02:03:19.120 --> 02:03:20.070
Go ahead, Mr. Long.

02:03:30.120 --> 02:03:32.530
<v ->Turning now to page 5-8 of your testimony.</v>

02:03:37.120 --> 02:03:41.480
Very top bullet, you refer to quarterly in person reports

02:03:41.480 --> 02:03:45.380
to CPUC staff, in conjunction with the independent advisor.

02:03:45.380 --> 02:03:47.420
Do you see that, independent safety advisor?

02:03:47.420 --> 02:03:48.253
<v ->Yes.</v>

02:03:50.350 --> 02:03:54.940
<v ->Are those to be public documents?</v>

02:03:54.940 --> 02:03:58.630
<v ->I really don't, there must be a protocol for this.</v>

02:03:58.630 --> 02:04:01.560
I don't know what it is and it would align with that

02:04:02.510 --> 02:04:04.580
so I can't answer that either.

02:04:04.580 --> 02:04:06.410
<v ->How about Mr. Kenny for that one too?</v>

02:04:06.410 --> 02:04:08.960
<v ->I assume that would be a very good person to ask.</v>

02:04:15.600 --> 02:04:18.700
<v ->All right, now let's move on to the Chief Safety Officer,</v>

02:04:18.700 --> 02:04:21.050
which you discuss on page 5-8.

02:04:22.300 --> 02:04:25.590
That position currently directly reports to you,

02:04:25.590 --> 02:04:26.423
is that correct?

02:04:26.423 --> 02:04:27.256
<v ->That's correct.</v>

02:04:28.270 --> 02:04:32.743
<v ->Lines 15 and 16 describe the CSO</v>

02:04:33.580 --> 02:04:37.000
as someone who currently partners with the lines of business

02:04:38.093 --> 02:04:42.007
to develop and monitor enterprise-wide safety.

02:04:43.800 --> 02:04:45.540
So that's, when you're talking

02:04:45.540 --> 02:04:46.730
about the lines of business there,

02:04:46.730 --> 02:04:51.730
do you mean, for example, electric operations,

02:04:52.280 --> 02:04:54.830
gas operations, generation?

02:04:54.830 --> 02:04:55.663
<v ->Yes.</v>

02:04:58.730 --> 02:05:03.010
<v ->Now but the proposal is for post-bankruptcy,</v>

02:05:03.010 --> 02:05:07.268
upon emergence for this position to report directly

02:05:07.268 --> 02:05:09.990
to corporate CEO, is that correct?

02:05:09.990 --> 02:05:10.840
<v ->That's correct.</v>

02:05:14.580 --> 02:05:17.840
<v ->I think if I understood Mr. Johnson correctly,</v>

02:05:17.840 --> 02:05:21.280
so the corporate CEO has no direct responsibility

02:05:22.140 --> 02:05:25.030
for those lines of business (mumbles), is that right?

02:05:27.687 --> 02:05:29.920
<v ->If that's what he said, that's correct.</v>

02:05:31.220 --> 02:05:34.270
<v ->Why should this position report to the corporate CEO?</v>

02:05:34.270 --> 02:05:36.860
<v ->Well, again, my view is that given</v>

02:05:36.860 --> 02:05:39.250
that this is one of the top issues

02:05:39.250 --> 02:05:43.180
of performance deficit for the corporation overall,

02:05:43.180 --> 02:05:44.920
and I view the corporation overall

02:05:44.920 --> 02:05:47.190
as not only the corporate holding company

02:05:47.190 --> 02:05:48.600
but the operating company,

02:05:49.440 --> 02:05:51.350
that having it again reporting

02:05:51.350 --> 02:05:54.355
to the highest level executive gives it the--

02:05:54.355 --> 02:05:56.323
(phone ringing)

02:05:56.323 --> 02:05:58.770
(laughs)

02:05:58.770 --> 02:06:02.740
Gives it the status to perform its role.

02:06:02.740 --> 02:06:07.060
One of those roles is advising, developing programs,

02:06:07.060 --> 02:06:09.630
working in support of the operating units.

02:06:09.630 --> 02:06:12.780
The other is assuring that the risk is managed broadly

02:06:12.780 --> 02:06:16.600
by the corporation and that the govern instructions

02:06:16.600 --> 02:06:20.530
and the standards that apply, apply broadly.

02:06:21.410 --> 02:06:23.540
And there's also this level, quite honestly,

02:06:23.540 --> 02:06:25.470
which I believe is that when you're dealing

02:06:25.470 --> 02:06:28.480
with these major risks, having that independent pathway

02:06:28.480 --> 02:06:30.300
of communication to the corporate CEO

02:06:30.300 --> 02:06:32.150
over the operating company is appropriate.

02:06:32.150 --> 02:06:34.550
It's not an unusual structure.

02:06:34.550 --> 02:06:37.080
I think it works well with the right governance,

02:06:37.080 --> 02:06:38.720
with the right expectations,

02:06:40.090 --> 02:06:42.590
so I think it's reasonable to do that.

02:06:42.590 --> 02:06:46.640
I think reporting into the highest level executive officer

02:06:46.640 --> 02:06:49.020
gives it the importance that it needs,

02:06:49.020 --> 02:06:52.610
which translates into making sure things get done

02:06:52.610 --> 02:06:54.110
and it's adequately resourced.

02:06:55.910 --> 02:06:58.960
<v ->I'm gonna ask you now to turn back</v>

02:06:58.960 --> 02:07:02.040
to the document that's been marked TURN X3.

02:07:03.880 --> 02:07:08.300
Ask you to look at the response to TURN's data request 14-2.

02:07:14.240 --> 02:07:16.620
Actually, I'm just gonna refer you to the question.

02:07:17.720 --> 02:07:19.470
Question asked to provide a comparison

02:07:19.470 --> 02:07:21.170
of the safety-related responsibilities

02:07:21.170 --> 02:07:23.900
of the Chief Safety Officer and the Chief Risk Officer,

02:07:25.030 --> 02:07:27.150
including but not limited to an explanation

02:07:27.150 --> 02:07:29.640
of how those respective responsibilities are different.

02:07:30.640 --> 02:07:31.510
I'm just gonna ask you,

02:07:31.510 --> 02:07:34.310
rather than have you read the answer,

02:07:34.310 --> 02:07:35.210
I'd just like you,

02:07:36.240 --> 02:07:38.540
honestly I had a little trouble understanding.

02:07:40.200 --> 02:07:44.080
Tell me in your own words how you understand those two roles

02:07:44.080 --> 02:07:45.430
to be different.

02:07:45.430 --> 02:07:46.263
<v William>I'm just gonna ask</v>

02:07:46.263 --> 02:07:48.560
that the witness be given time to review the answer,

02:07:48.560 --> 02:07:50.550
since you're asking him to paraphrase it.

02:07:50.550 --> 02:07:52.570
<v ->I'm asking actually his own understanding.</v>

02:07:52.570 --> 02:07:53.403
<v Judge>I think it's--</v>

02:07:53.403 --> 02:07:54.513
<v William>His understanding</v>

02:07:54.513 --> 02:07:55.690
of a data report he hasn't read yet.

02:07:55.690 --> 02:07:57.420
<v Judge>Let's just not use the data request.</v>

02:07:57.420 --> 02:08:01.390
I think there's a pending question for this witness to ask

02:08:01.390 --> 02:08:04.600
to explain the difference or distinction of roles

02:08:04.600 --> 02:08:07.560
between the Chief Risk Officer and the Chief Safety Officer.

02:08:07.560 --> 02:08:09.470
Is that a fair paraphrase?

02:08:09.470 --> 02:08:11.040
And do you understand that question, Mr. Vesey?

02:08:11.040 --> 02:08:12.870
<v ->Yes, but in my view.</v>

02:08:13.720 --> 02:08:14.620
<v Judge>Go right ahead and answer.</v>

02:08:14.620 --> 02:08:15.770
<v ->Very good, thank you.</v>

02:08:17.351 --> 02:08:18.780
When you think about the two roles,

02:08:18.780 --> 02:08:22.700
the Chief Safety Officer literally is a tactician

02:08:22.700 --> 02:08:25.670
who helps manage risks around safety,

02:08:25.670 --> 02:08:28.420
both currently workforce,

02:08:28.420 --> 02:08:31.330
but going forward also workforce and public safety.

02:08:31.330 --> 02:08:32.163
All right.

02:08:33.090 --> 02:08:35.690
The mechanisms, how we think about risk,

02:08:35.690 --> 02:08:37.520
how we quantify it, how we measure it,

02:08:37.520 --> 02:08:40.140
how do we assure that our mitigations are right,

02:08:40.140 --> 02:08:42.070
these are the procedures and processes

02:08:42.070 --> 02:08:44.970
that a Chief Risk Officer would lay out.

02:08:44.970 --> 02:08:48.710
So in fact, the Chief Risk Officer lays out protocol,

02:08:48.710 --> 02:08:52.090
lays out standards for measure, helps quantify,

02:08:53.020 --> 02:08:56.980
helps assure that the risks are appropriately measured.

02:08:56.980 --> 02:09:00.130
The Chief Safety Officer fundamentally is working

02:09:00.130 --> 02:09:02.190
on mitigation strategies and prevention.

02:09:03.050 --> 02:09:06.060
In front of that, there's a whole sense of prioritization

02:09:06.060 --> 02:09:08.880
and that's where understanding how we think about risks

02:09:08.880 --> 02:09:12.950
in quantitative terms has to be consistent

02:09:12.950 --> 02:09:15.750
so you can prioritize risks across the organization

02:09:15.750 --> 02:09:17.660
and across the corporation.

02:09:17.660 --> 02:09:19.770
So the way I think about this, quite honestly,

02:09:19.770 --> 02:09:22.230
is that the Chief Risk Officer basically sets up

02:09:22.230 --> 02:09:24.830
the protocols, the process,

02:09:24.830 --> 02:09:28.760
and the way we measure and think about risk generically.

02:09:28.760 --> 02:09:31.930
The Chief Safety Officer deals with helping

02:09:31.930 --> 02:09:36.730
to identify the risks in the workforce and public safety

02:09:36.730 --> 02:09:39.630
and then actually executes the programs to mitigate those.

02:09:50.860 --> 02:09:54.470
<v ->I sorta get the feeling that from that,</v>

02:09:54.470 --> 02:09:59.390
that the Chief Safety Officer is more of an execution

02:09:59.390 --> 02:10:02.229
and implementation role, I kinda get that.

02:10:02.229 --> 02:10:03.730
Am I on the right track there?

02:10:03.730 --> 02:10:06.020
<v ->I think that's a good portion of it, yes.</v>

02:10:06.020 --> 02:10:08.480
And advising and consulting.

02:10:08.480 --> 02:10:11.480
He or she may not actually execute

02:10:11.480 --> 02:10:13.890
but helps design appropriate risk mitigations

02:10:13.890 --> 02:10:16.500
around safety, public and workforce.

02:10:16.500 --> 02:10:18.970
<v ->Risk Officer is more designing a framework?</v>

02:10:19.990 --> 02:10:22.230
<v ->It's establishing sort of the rules of the road,</v>

02:10:22.230 --> 02:10:23.720
the procedures and the processes

02:10:23.720 --> 02:10:27.200
by which we think about it so that, you know,

02:10:27.200 --> 02:10:30.140
risks emerge from various portions of the business

02:10:30.140 --> 02:10:32.268
and if you don't have a consistent way

02:10:32.268 --> 02:10:34.610
of identifying and measuring them,

02:10:34.610 --> 02:10:35.650
then you get into a challenge

02:10:35.650 --> 02:10:39.490
when you start to allocate resources to mitigate those.

02:10:39.490 --> 02:10:41.620
And so you want it all being done the same way.

02:10:41.620 --> 02:10:44.760
Safety is one particular pocket of risks.

02:10:44.760 --> 02:10:48.510
The Head of Electric Operations deals

02:10:48.510 --> 02:10:50.910
with electrical operations risks.

02:10:50.910 --> 02:10:53.560
The Head of Gas deals with gas risks.

02:10:53.560 --> 02:10:55.990
That's what they do, they program against risks.

02:10:55.990 --> 02:10:57.480
That's what the budgeting process is

02:10:57.480 --> 02:10:59.490
so they can get continuity of service

02:10:59.490 --> 02:11:01.880
by making sure we manage all the risk.

02:11:01.880 --> 02:11:06.090
So the Chief Risk Officer deals with the Head of Safety,

02:11:06.090 --> 02:11:08.060
who's dealing with safety broadly,

02:11:08.060 --> 02:11:10.520
the Head of Electric Ops who deals with electric operations,

02:11:10.520 --> 02:11:12.970
the Head of Gas, the Head of Power Gen.

02:11:12.970 --> 02:11:16.390
They're all managers, owners of and managers of risk

02:11:16.390 --> 02:11:17.690
but the question of governance,

02:11:17.690 --> 02:11:19.910
of how we think about it, how we identify it,

02:11:19.910 --> 02:11:23.440
what's quality, signing off on the appropriateness

02:11:23.440 --> 02:11:25.360
of mitigation plans, I think that's the role

02:11:25.360 --> 02:11:27.550
of the Chief Risk Officer.

02:11:27.550 --> 02:11:29.570
And also to make sure they're scanning the horizon

02:11:29.570 --> 02:11:30.560
for the emergence ones.

02:11:30.560 --> 02:11:33.730
But we do have risk officers in the company.

02:11:33.730 --> 02:11:35.160
They're not called risk officers

02:11:35.160 --> 02:11:38.530
but the Senior Vice President of Electric Ops

02:11:38.530 --> 02:11:41.950
is deploying financial and human resources

02:11:41.950 --> 02:11:45.530
to ensure that the continuity of power

02:11:45.530 --> 02:11:48.420
that deals with all the risks around those assets.

02:11:48.420 --> 02:11:50.280
Right, and that's what they do.

02:11:50.280 --> 02:11:53.580
How we evaluate risk is the growing skill

02:11:53.580 --> 02:11:55.130
that we're learning we have to be better at,

02:11:55.130 --> 02:11:57.820
it's sort of at the root of what we do.

02:11:57.820 --> 02:11:59.340
So you can think about risk owners

02:11:59.340 --> 02:12:00.480
as being a number of them,

02:12:00.480 --> 02:12:04.630
including somebody who will collectively own the safety risk

02:12:04.630 --> 02:12:07.407
but they all are gonna work under the governance structure,

02:12:07.407 --> 02:12:11.100
given the tools, the tool kits, the processes

02:12:11.100 --> 02:12:13.130
that are prescribed by the Chief Risk Officer.

02:12:13.130 --> 02:12:15.120
And then the Chief Risk Officer will have to,

02:12:15.120 --> 02:12:18.130
at some point, have a view whether those responses

02:12:18.130 --> 02:12:20.480
are adequate, have we minimized them to the right level,

02:12:20.480 --> 02:12:22.370
and that's a view that would be conveyed

02:12:22.370 --> 02:12:23.890
not only to the operating business

02:12:23.890 --> 02:12:26.150
but to the corporation and to the Board of Directors

02:12:26.150 --> 02:12:27.900
of the utility and the corporation.

02:12:29.770 --> 02:12:30.603
<v ->Moving on.</v>

02:12:32.410 --> 02:12:35.240
Officer you name is the Chief Ethics and Compliance Officer.

02:12:35.240 --> 02:12:36.073
<v ->Yes.</v>

02:12:36.073 --> 02:12:38.350
<v ->I just have a question there.</v>

02:12:39.430 --> 02:12:42.540
That position is already reporting to the corporate CEO,

02:12:42.540 --> 02:12:43.373
is that correct?

02:12:43.373 --> 02:12:44.206
<v ->That's correct.</v>

02:12:44.206 --> 02:12:46.510
<v ->So there's no change in terms of reporting relationship</v>

02:12:46.510 --> 02:12:48.530
being proposed for that position.

02:12:48.530 --> 02:12:49.980
<v ->That's correct.</v>

02:12:49.980 --> 02:12:52.210
<v ->That's been the case since about 2015</v>

02:12:52.210 --> 02:12:54.430
that that position has reported to the corporate CEO,

02:12:54.430 --> 02:12:55.263
is that right?

02:12:55.263 --> 02:12:57.906
<v ->Subject to check, I'll accept that, yep.</v>

02:12:57.906 --> 02:12:58.739
<v ->All right.</v>

02:12:58.739 --> 02:13:00.890
Now let's move on to a different topic.

02:13:00.890 --> 02:13:03.300
Later in your testimony at page 5-18.

02:13:06.200 --> 02:13:08.750
It's heading B, improving wildfire safety.

02:13:10.067 --> 02:13:10.950
Turn to that, please.

02:13:13.240 --> 02:13:14.840
<v ->Yep, I have it, thank you.</v>

02:13:14.840 --> 02:13:15.990
<v ->Thank you.</v>

02:13:15.990 --> 02:13:17.500
All right, I'm sorry.

02:13:18.410 --> 02:13:23.410
In that section, mentioned various programs

02:13:25.960 --> 02:13:28.330
to improve wildfire safety.

02:13:30.310 --> 02:13:33.130
So for example, you mentioned enhanced vegetation management

02:13:33.130 --> 02:13:38.130
at line nine and what you refer to on lines 12 and 13

02:13:39.060 --> 02:13:44.060
as ambitious wildfire safety inspection program.

02:13:46.490 --> 02:13:48.890
I want to focus on the latter for just a moment.

02:13:50.490 --> 02:13:53.460
Wildfire safety inspection program is a program

02:13:53.460 --> 02:13:56.640
to inspect (mumbles) and distribution facilities,

02:13:56.640 --> 02:13:58.006
is that right?

02:13:58.006 --> 02:13:59.490
<v ->That is correct.</v>

02:13:59.490 --> 02:14:03.240
<v ->What position, with what title,</v>

02:14:03.240 --> 02:14:05.020
is in charge of that program?

02:14:06.601 --> 02:14:07.680
<v ->In charge of the inspection program?</v>

02:14:07.680 --> 02:14:09.840
<v ->The wildfire safety inspection program.</v>

02:14:09.840 --> 02:14:14.040
<v ->I think in terms of designing it is the asset,</v>

02:14:14.970 --> 02:14:18.620
the title I'm probably gonna have to check in the org chart,

02:14:18.620 --> 02:14:20.840
but it's the individual has responsibility

02:14:20.840 --> 02:14:24.290
for the asset management and wild safety programs,

02:14:24.290 --> 02:14:26.760
reporting up, that's a vice presidential position

02:14:26.760 --> 02:14:28.510
reporting up to the Senior Vice President

02:14:28.510 --> 02:14:29.740
of Electric Operations.

02:14:29.740 --> 02:14:30.770
<v ->Okay, so I'm gonna give you</v>

02:14:30.770 --> 02:14:34.690
what I think is the most recent, or I think I've given you,

02:14:34.690 --> 02:14:36.780
it's labeled TURN X2.

02:14:36.780 --> 02:14:40.090
What I think is the most recent org chart

02:14:40.090 --> 02:14:42.660
that I received from PG&E in discovery.

02:14:42.660 --> 02:14:45.020
And if you could help me find that position,

02:14:45.020 --> 02:14:46.360
I would appreciate it.

02:14:46.360 --> 02:14:50.900
<v Judge>Mr. Long, are you referring to TURN X2 or TURN X4?</v>

02:14:50.900 --> 02:14:53.250
<v ->This time, I'm referring to TURN X2.</v>

02:14:53.250 --> 02:14:54.580
<v Judge>Which was distributed yesterday.</v>

02:14:54.580 --> 02:14:56.030
<v ->Was distributed yesterday</v>

02:14:56.030 --> 02:14:59.440
and marked in my cross-examination of Mr. Johnson.

02:14:59.440 --> 02:15:00.550
<v Judge>Okay, thank you.</v>

02:15:02.240 --> 02:15:06.730
<v ->This one is dated the top right of the organization chart,</v>

02:15:06.730 --> 02:15:10.320
pages shows January 31st.

02:15:12.380 --> 02:15:14.210
<v Man>Your Honor, may I just point out the page</v>

02:15:14.210 --> 02:15:17.330
so that we don't have to go through an expedition here?

02:15:17.330 --> 02:15:22.330
It's marked 622 in the bottom right hand corner.

02:15:26.633 --> 02:15:28.510
<v ->I'd rather not have counsel testify.</v>

02:15:28.510 --> 02:15:32.330
<v Judge>Okay, stop, hold on a second, hold on, hold on.</v>

02:15:32.330 --> 02:15:33.200
Let's go off the record

02:15:33.200 --> 02:15:34.710
if you need to get him to the right page.

02:15:34.710 --> 02:15:35.720
Let's get him to the right page,

02:15:35.720 --> 02:15:37.960
however it works to get him to the right page.

02:15:37.960 --> 02:15:41.360
So do you have the page that Mr. Long is referring to?

02:15:41.360 --> 02:15:42.650
<v ->Mm-hmm.</v>

02:15:42.650 --> 02:15:43.483
<v Judge>Okay.</v>

02:15:44.660 --> 02:15:45.493
On the record.

02:15:45.493 --> 02:15:46.326
Go ahead, Mr. Long.

02:15:48.000 --> 02:15:50.830
<v ->What I was asking you to do, Mr. Vesey,</v>

02:15:50.830 --> 02:15:54.110
is to tell me the position

02:15:54.110 --> 02:15:57.600
that's in charge of the wildfire safety inspection program.

02:15:57.600 --> 02:16:02.540
I referenced to the organization chart that's in TURN X2.

02:16:03.780 --> 02:16:04.780
<v ->Right, that's the position</v>

02:16:04.780 --> 02:16:08.170
that's titled Vice President Asset Risk Management

02:16:08.170 --> 02:16:10.900
and Wildfire Safety.

02:16:10.900 --> 02:16:14.520
It is filled by the individual by the name of Debbie Powell

02:16:14.520 --> 02:16:17.540
and it's a direct report to Michael Lewis,

02:16:17.540 --> 02:16:19.440
Senior Vice President of Electric Operations.

02:16:19.440 --> 02:16:23.580
It's the last box in the second row

02:16:23.580 --> 02:16:26.100
on the right hand side.

02:16:26.100 --> 02:16:27.470
<v ->And what page are you on?</v>

02:16:27.470 --> 02:16:28.303
<v Andrew>622.</v>

02:16:34.930 --> 02:16:39.930
<v ->So that, and that refers us to page 1244.</v>

02:16:52.020 --> 02:16:55.790
So Miss Powell has, just going back, I'm sorry.

02:17:00.500 --> 02:17:04.230
Title suggests that Miss Powell

02:17:04.230 --> 02:17:06.740
has responsibilities that include more

02:17:06.740 --> 02:17:11.740
than just the wildfire safety inspection program.

02:17:13.270 --> 02:17:14.600
I know this is responsive to my question

02:17:14.600 --> 02:17:15.520
and not a criticism,

02:17:15.520 --> 02:17:19.130
it's just she has multiple responsibilities

02:17:19.130 --> 02:17:21.750
that include the wildfire safety inspection program.

02:17:21.750 --> 02:17:22.583
Is that?

02:17:22.583 --> 02:17:23.416
<v ->Correct.</v>

02:17:23.416 --> 02:17:25.740
<v ->Okay, now go to find,</v>

02:17:25.740 --> 02:17:30.740
is there somebody whose sole or close to sole responsibility

02:17:32.270 --> 02:17:36.350
is that inspection program?

02:17:37.740 --> 02:17:40.440
<v ->In terms of executing it?</v>

02:17:40.440 --> 02:17:42.560
In what terms sole responsibility?

02:17:44.964 --> 02:17:47.410
<v ->Is there somebody that's in charge of that program,</v>

02:17:47.410 --> 02:17:50.230
that that's their job?

02:17:50.230 --> 02:17:54.100
<v ->Well, the responsibility rolls up to, under Miss Powell.</v>

02:17:54.100 --> 02:17:58.810
I'm assuming that asset management group lays out

02:17:58.810 --> 02:18:02.390
requirements to the program, the work,

02:18:02.390 --> 02:18:07.260
which is then executed by qualified electricians,

02:18:07.260 --> 02:18:09.930
field inspectors, and many others.

02:18:09.930 --> 02:18:12.450
So there is not a particular work group

02:18:12.450 --> 02:18:15.420
that reports up to Miss Powell

02:18:15.420 --> 02:18:17.120
that people actually go out and inspect.

02:18:17.120 --> 02:18:19.790
It's using the resources that are in the field,

02:18:19.790 --> 02:18:21.690
the men and women who are in the field

02:18:22.700 --> 02:18:24.050
and that do other things as well,

02:18:24.050 --> 02:18:28.730
will have a workload to inspect infrastructure.

02:18:28.730 --> 02:18:30.030
So it might be distributed

02:18:30.030 --> 02:18:32.040
among a few different organizations.

02:18:33.820 --> 02:18:36.780
<v ->We just looked a moment ago at page 622</v>

02:18:36.780 --> 02:18:39.960
and it showed that the organizations

02:18:39.960 --> 02:18:44.950
that worked under Miss Powell are on page 1244.

02:18:44.950 --> 02:18:46.410
Am I reading that correctly?

02:18:48.520 --> 02:18:50.560
Reading the organization chart correctly?

02:18:50.560 --> 02:18:54.620
<v ->I'm trying to find page 1244 that's being directed.</v>

02:18:57.700 --> 02:18:59.674
<v ->Let me know when you're there.</v>

02:18:59.674 --> 02:19:02.220
<v ->Okay.</v>

02:19:03.160 --> 02:19:03.993
I have it in front of me.

02:19:03.993 --> 02:19:05.400
I'm not sure if I can read it.

02:19:06.418 --> 02:19:07.251
<v ->It's small.</v>

02:19:13.690 --> 02:19:15.240
<v ->I actually can't read it, so.</v>

02:19:21.510 --> 02:19:23.620
<v ->Is there a box underneath,</v>

02:19:23.620 --> 02:19:24.750
Miss Powell's name is at the top.

02:19:24.750 --> 02:19:26.460
Is there a box underneath her name there

02:19:26.460 --> 02:19:29.270
that's wildfire safety inspection program?

02:19:29.270 --> 02:19:31.130
<v ->I can't tell from this.</v>

02:19:31.130 --> 02:19:33.370
And I actually don't have that level of detail

02:19:33.370 --> 02:19:34.840
with these organizations to be able

02:19:34.840 --> 02:19:37.270
to respond thoughtfully to that.

02:19:37.270 --> 02:19:40.500
<v ->Okay, so you can't name like program head</v>

02:19:40.500 --> 02:19:42.460
for wildfire safety (mumbles)?

02:19:43.770 --> 02:19:44.603
<v ->That's right.</v>

02:19:51.900 --> 02:19:52.733
<v ->All right, that's all my questions.</v>

02:19:52.733 --> 02:19:54.368
Thank you, Mr. Vesey.

02:19:54.368 --> 02:19:55.201
<v ->You're welcome.</v>

02:19:58.930 --> 02:20:00.270
<v Judge>Thank you, Mr. Long.</v>

02:20:03.180 --> 02:20:04.013
Off the record.

02:20:08.422 --> 02:20:11.339
(people murmuring)

02:20:17.010 --> 02:20:20.040
<v ->We're thinking it's gonna get covered.</v>

02:20:24.000 --> 02:20:24.890
<v John>I can go ahead, Your Honor.</v>

02:20:24.890 --> 02:20:26.163
I'm not confident on.

02:20:31.780 --> 02:20:32.720
<v ->Mr. Geesman.</v>

02:20:32.720 --> 02:20:33.990
<v ->Thank you, Your Honor.</v>
<v ->Oh, excuse me.</v>

02:20:33.990 --> 02:20:35.430
On the record, Mr. Geesman.

02:20:35.430 --> 02:20:37.190
<v ->Thank you, Your Honor.</v>

02:20:37.190 --> 02:20:38.950
Mr. Vesey, my name is John Geesman.

02:20:38.950 --> 02:20:42.130
I represent the Alliance for Nuclear Responsibility.

02:20:42.130 --> 02:20:44.870
Our interest in this proceeding is the impact

02:20:44.870 --> 02:20:47.350
on rate pay (mumbles).

02:20:49.970 --> 02:20:54.873
At page 5-1 in your testimony, lines 23 to 25,

02:20:56.330 --> 02:21:00.520
you identify as the first initiative in that listing as,

02:21:00.520 --> 02:21:03.570
quote, "enhancing PG&E's enterprise

02:21:03.570 --> 02:21:05.720
"and operational risk management program,

02:21:06.560 --> 02:21:10.490
"which quantitatively, systematically identifies

02:21:10.490 --> 02:21:14.470
"key risk drivers, facilitates the mitigation of risk

02:21:14.470 --> 02:21:15.670
"across the enterprise."

02:21:17.750 --> 02:21:19.340
This program evaluates risks

02:21:19.340 --> 02:21:23.030
at the Diablo Canyon Nuclear Power Plant, does it not?

02:21:23.030 --> 02:21:24.650
<v Andrew>Yes, it does.</v>

02:21:24.650 --> 02:21:29.450
<v ->And is the basic metric of that evaluation</v>

02:21:29.450 --> 02:21:31.580
potential core damage frequency?

02:21:31.580 --> 02:21:32.980
<v Andrew>Yes.</v>

02:21:32.980 --> 02:21:36.531
<v ->Can you briefly describe how core damage frequency</v>

02:21:36.531 --> 02:21:40.590
is major risk at a nuclear power plant?

02:21:41.920 --> 02:21:44.930
<v ->Core damage events can do a number of things.</v>

02:21:45.900 --> 02:21:48.530
In the worst instance, a core damage event can lead

02:21:48.530 --> 02:21:50.610
to a loss of containment,

02:21:50.610 --> 02:21:55.250
either from fuel colliding level reactor vessel,

02:21:55.250 --> 02:21:57.780
the other containment, so there's a range.

02:21:57.780 --> 02:22:00.580
Other core damaging event from swings in power could lead

02:22:00.580 --> 02:22:03.530
to shortening the life of the core and increasing the cost,

02:22:04.520 --> 02:22:07.690
through poisoning of the core through power transients.

02:22:07.690 --> 02:22:09.350
So there's a wide range of them

02:22:10.420 --> 02:22:14.210
and the specific one that is listed in our risk registry,

02:22:14.210 --> 02:22:19.210
which has a very, very low frequency of expectation,

02:22:20.180 --> 02:22:23.130
I can't tell you what specifically that one's referring to.

02:22:24.020 --> 02:22:26.440
<v ->Do calculations of core damage frequency</v>

02:22:26.440 --> 02:22:30.750
provide any insight into risks at the spent fuel pools

02:22:30.750 --> 02:22:33.070
or potential releases of radiation

02:22:33.070 --> 02:22:35.990
but not necessarily have any relationship

02:22:35.990 --> 02:22:36.990
to the reactor core?

02:22:39.661 --> 02:22:40.494
<v ->Could you just phrase that again?</v>

02:22:40.494 --> 02:22:42.310
I mean, same question, I just need to hear it.

02:22:42.310 --> 02:22:45.120
<v ->Calculations, core damage frequency.</v>

02:22:45.120 --> 02:22:46.170
<v ->I don't believe so.</v>

02:22:47.520 --> 02:22:51.440
<v ->Can you identify then how PG&E, quote,</v>

02:22:51.440 --> 02:22:54.880
"quantitatively and systematically," close quote,

02:22:54.880 --> 02:22:58.160
assesses spent fuel risk in the absence of a metric

02:22:58.160 --> 02:22:59.860
like core damage frequency?

02:22:59.860 --> 02:23:01.660
<v ->Well, I'm assuming in the process</v>

02:23:01.660 --> 02:23:05.520
of interrogating the chief nuclear officer

02:23:05.520 --> 02:23:09.240
and going through the risks, that's evaluated.

02:23:09.240 --> 02:23:12.490
And whether that makes it the ultimate risk registry or not,

02:23:12.490 --> 02:23:14.450
I'm not sure.

02:23:15.980 --> 02:23:18.019
But I assume that is the process.

02:23:18.019 --> 02:23:19.620
I have not sat through that process yet

02:23:19.620 --> 02:23:22.570
because in the cycle of events,

02:23:22.570 --> 02:23:23.770
what we call our session D

02:23:23.770 --> 02:23:26.690
where we start to identify those risks is upcoming

02:23:26.690 --> 02:23:28.290
and I have not been in that yet.

02:23:29.230 --> 02:23:32.080
But I would assume that the process is an interrogation

02:23:32.080 --> 02:23:37.080
of the chief nuclear officer and his senior staff.

02:23:38.840 --> 02:23:41.350
<v ->And that interrogation would produce</v>

02:23:41.350 --> 02:23:46.240
a quantitatively and systematically assessment?

02:23:47.890 --> 02:23:50.330
<v ->I would imagine that's where it's heading.</v>

02:23:50.330 --> 02:23:54.820
Our programs on evaluating risk continue to improve.

02:23:55.752 --> 02:23:57.360
And one of the core limitations on it

02:23:57.360 --> 02:23:59.340
and that meant core not in terms of nuclear,

02:23:59.340 --> 02:24:03.690
but one of the fundamental limitations is the quality

02:24:03.690 --> 02:24:05.270
and availability of the appropriate data,

02:24:05.270 --> 02:24:07.190
which I'm assuming is pretty rich

02:24:07.190 --> 02:24:09.020
within the nuclear organization

02:24:09.020 --> 02:24:12.550
since it's responsible to (mumbles) and the others.

02:24:12.550 --> 02:24:14.460
It probably is more sophisticated there,

02:24:14.460 --> 02:24:16.680
I just I'm not at this point being able to tell you

02:24:16.680 --> 02:24:18.230
specifically what that is.

02:24:18.230 --> 02:24:21.820
<v ->Do you know today if the assessment</v>

02:24:21.820 --> 02:24:25.240
of the spent fuel pool risk is primarily qualitative

02:24:26.081 --> 02:24:27.400
or primarily quantitative?

02:24:27.400 --> 02:24:29.600
<v ->I don't know the answer to that.</v>

02:24:29.600 --> 02:24:34.060
<v ->On page 5-2 in your testimony, lines 30 through 34,</v>

02:24:34.060 --> 02:24:35.840
you describe the utility's commitment

02:24:35.840 --> 02:24:39.610
to submit verifications of safety-related filing

02:24:39.610 --> 02:24:44.420
to the CPUC, signed by specified senior personnel

02:24:44.420 --> 02:24:46.010
in order, and I'm quoting now,

02:24:47.040 --> 02:24:49.440
"to ensure additional accountability

02:24:49.440 --> 02:24:51.350
"among senior level personnel,

02:24:52.371 --> 02:24:56.230
"as well as transparency and the public's confidence

02:24:56.230 --> 02:24:59.580
"in PG&E's commitment to safety and reliability."

02:24:59.580 --> 02:25:00.960
Close quote.

02:25:00.960 --> 02:25:03.830
Does anyone at the utility have responsibility

02:25:03.830 --> 02:25:07.690
for maintenance and minutes at the utility board meetings

02:25:07.690 --> 02:25:08.940
for meetings of the utility's

02:25:08.940 --> 02:25:10.890
Safety in Nuclear Operations Committee?

02:25:12.020 --> 02:25:13.090
<v ->I would imagine so.</v>

02:25:14.350 --> 02:25:19.350
<v ->Your Honor, can I distribute an exhibit</v>

02:25:19.360 --> 02:25:22.570
that I've asked you to mark A4NRX4?

02:25:24.280 --> 02:25:25.430
<v Judge>Yes, marking.</v>

02:25:26.660 --> 02:25:28.740
We have Alliance for Nuclear Responsibility

02:25:28.740 --> 02:25:30.960
cross-examination exhibit,

02:25:30.960 --> 02:25:33.720
and at the bottom it says AL5700-E.

02:25:35.650 --> 02:25:37.460
That's marked as A4NRX4.

02:25:54.630 --> 02:25:55.463
Off the record.

02:25:56.880 --> 02:25:58.130
Does everybody have that?

02:25:59.270 --> 02:26:00.210
Everybody happy?

02:26:01.510 --> 02:26:02.910
Okay.

02:26:02.910 --> 02:26:04.753
No, they're not happy, but they have it.

02:26:04.753 --> 02:26:05.700
Okay.

02:26:05.700 --> 02:26:06.990
On the record, Mr. Geesman.

02:26:06.990 --> 02:26:08.420
<v ->Do you have the exhibit, Mr. Vesey?</v>

02:26:08.420 --> 02:26:09.600
<v ->Yes, I do.</v>

02:26:09.600 --> 02:26:12.070
<v ->Are you aware that the commission requires PG&E</v>

02:26:12.070 --> 02:26:15.290
to supply it non-confidential versions

02:26:15.290 --> 02:26:18.120
of the minutes of all the utility board of directors

02:26:18.120 --> 02:26:20.020
and SNO committee meetings?

02:26:20.020 --> 02:26:21.210
<v ->I will accept that.</v>

02:26:22.700 --> 02:26:25.020
<v ->Looking at the cross-examination exhibit</v>

02:26:25.020 --> 02:26:26.810
which has been handed to you,

02:26:26.810 --> 02:26:28.120
which is several pages taken

02:26:28.120 --> 02:26:33.120
from PG&E's November 27th, 2019 advice letter 5700-E,

02:26:36.340 --> 02:26:39.430
this is the first quarterly report PG&E submitted

02:26:39.430 --> 02:26:41.780
after the commission started requiring submittal

02:26:41.780 --> 02:26:44.330
of non-confidential versions of the minutes, right?

02:26:45.600 --> 02:26:46.990
<v ->Yes.</v>

02:26:46.990 --> 02:26:48.870
<v ->Turning to the last page</v>

02:26:48.870 --> 02:26:52.580
in cross-examination exhibit A4NRX4,

02:26:52.580 --> 02:26:54.740
I'm going to read the first sentence

02:26:54.740 --> 02:26:57.480
below the heading BOD and Safety

02:26:57.480 --> 02:26:59.340
in Nuclear Committee Meeting Minutes.

02:27:00.250 --> 02:27:03.040
And am I correct, BOD stands for Board of Directors?

02:27:03.040 --> 02:27:03.873
<v ->Yes.</v>

02:27:05.512 --> 02:27:09.400
<v ->The sentence reads, "There are no new responsive documents</v>

02:27:09.400 --> 02:27:13.220
"for BODs or Safety in Nuclear Oversight committee meetings

02:27:13.220 --> 02:27:18.220
"held on or after June 13th, 2019,

02:27:18.500 --> 02:27:21.540
"for ends the effective date of D190608."

02:27:23.404 --> 02:27:24.350
Did I read that correctly?

02:27:24.350 --> 02:27:25.470
<v ->Yes.</v>

02:27:25.470 --> 02:27:28.610
<v ->So I take it that no new minutes were submitted</v>

02:27:28.610 --> 02:27:30.570
in the first quarterly report, correct?

02:27:31.720 --> 02:27:34.770
<v ->I would assume that's the case.</v>

02:27:34.770 --> 02:27:35.940
That's what it says,

02:27:35.940 --> 02:27:39.040
just reading or scanning the two paragraphs underneath that,

02:27:39.040 --> 02:27:44.040
which talk about the timing and confidentiality aside,

02:27:44.740 --> 02:27:46.180
the approval of those minutes.

02:27:46.180 --> 02:27:48.630
And the last paragraph, it says "Given this time,

02:27:48.630 --> 02:27:51.750
"PG&E intends to include these quarterly reports,

02:27:51.750 --> 02:27:53.320
"non-confidential versions."

02:27:55.200 --> 02:27:56.033
On there.

02:27:57.390 --> 02:28:00.280
So I'm reading that, I'm just seeing this one page

02:28:00.280 --> 02:28:01.860
but I'm assuming there were timing issues

02:28:01.860 --> 02:28:02.990
to get approvement.

02:28:04.070 --> 02:28:05.210
I can't talk to that.

02:28:05.210 --> 02:28:07.898
That's done by the office of the corporate secretary

02:28:07.898 --> 02:28:10.840
and that process, but that's what it says.

02:28:10.840 --> 02:28:12.370
<v ->When you say corporate secretary,</v>

02:28:12.370 --> 02:28:16.330
you're referring to the utility corporate secretary?

02:28:16.330 --> 02:28:18.720
<v ->There's a corporate secretary corporation</v>

02:28:18.720 --> 02:28:22.580
that has also additional individuals

02:28:22.580 --> 02:28:25.650
who provide support to the various board committees.

02:28:25.650 --> 02:28:28.060
I'm assuming there'll be somebody

02:28:28.060 --> 02:28:29.730
from the corporate secretary's office

02:28:29.730 --> 02:28:31.730
not in the board meetings

02:28:31.730 --> 02:28:34.030
but in the Safety in Nuclear Oversight Committee,

02:28:34.030 --> 02:28:36.326
they would have responsibility for codifying

02:28:36.326 --> 02:28:39.730
and finalizing those minutes once approved

02:28:39.730 --> 02:28:41.340
by those committees.

02:28:41.340 --> 02:28:42.690
<v ->So when you say corporate secretary,</v>

02:28:42.690 --> 02:28:44.230
you mean at the holding company?

02:28:44.230 --> 02:28:45.374
<v ->Yes.</v>

02:28:45.374 --> 02:28:46.207
<v ->Okay.</v>

02:28:47.320 --> 02:28:50.620
I take it there were, though, utility board of director

02:28:50.620 --> 02:28:53.780
and SNO committee meetings between June 13th

02:28:53.780 --> 02:28:55.900
and the date of this first quarterly report?

02:28:55.900 --> 02:28:57.420
<v ->Yes.</v>

02:28:57.420 --> 02:28:59.160
<v ->As CEO of the utility,</v>

02:28:59.160 --> 02:29:02.010
how long do you think it should take to finalize minutes?

02:29:03.950 --> 02:29:04.783
<v ->Well.</v>

02:29:07.768 --> 02:29:09.800
I don't really have a basis for that,

02:29:09.800 --> 02:29:11.750
but you would expect them to be timely.

02:29:12.771 --> 02:29:14.360
<v ->In light of PG&E's past challenges</v>

02:29:14.360 --> 02:29:16.110
with safety-related record keeping,

02:29:17.168 --> 02:29:19.120
do you consider the first set quarterly report

02:29:19.120 --> 02:29:20.760
to be a satisfactory response

02:29:20.760 --> 02:29:22.960
to the commission's compliance requirements?

02:29:23.900 --> 02:29:26.950
<v ->Well, I haven't reviewed it recently.</v>

02:29:28.260 --> 02:29:29.520
I sit in all those meetings

02:29:29.520 --> 02:29:31.900
and I think they adequately reflect the content

02:29:31.900 --> 02:29:32.800
of those meetings.

02:29:34.847 --> 02:29:39.090
<v ->You testify at page 5-4, lines 13 through 14,</v>

02:29:39.090 --> 02:29:41.290
that you are intent on steering the utility,

02:29:41.290 --> 02:29:44.240
and I'm quoting, "in new and positive directions

02:29:44.240 --> 02:29:47.800
"centered around customer and workforce welfare."

02:29:47.800 --> 02:29:49.320
Close quote.

02:29:49.320 --> 02:29:52.400
Were you here this morning for Mr. Johnson's testimony?

02:29:52.400 --> 02:29:53.233
<v ->Yes.</v>

02:29:53.233 --> 02:29:54.800
<v ->You recall what he said to me</v>

02:29:54.800 --> 02:29:56.250
in terms of customer welfare?

02:29:58.170 --> 02:30:00.630
<v ->If you can repeat it, I'd appreciate it.</v>

02:30:00.630 --> 02:30:04.580
<v ->Well, what I derived from his statement was</v>

02:30:04.580 --> 02:30:07.150
that it was based on how many complaints

02:30:07.150 --> 02:30:09.220
the company got from customers.

02:30:09.220 --> 02:30:11.340
<v ->If I may, this may be a longer answer</v>

02:30:11.340 --> 02:30:12.730
than you were expecting,

02:30:12.730 --> 02:30:14.390
because I do remember the conversation,

02:30:14.390 --> 02:30:16.840
it may have been during your questions or others

02:30:16.840 --> 02:30:21.720
about the definition of customer welfare.

02:30:21.720 --> 02:30:25.260
Customer welfare is a relatively new term that we use

02:30:25.260 --> 02:30:26.380
and I'll give you the history of it

02:30:26.380 --> 02:30:27.820
and I'll try to go to the question

02:30:27.820 --> 02:30:29.220
that you asked specifically.

02:30:30.650 --> 02:30:32.850
When I landed here in August,

02:30:32.850 --> 02:30:35.790
I was immediately in the fire season

02:30:35.790 --> 02:30:37.700
and my focus was twofold.

02:30:37.700 --> 02:30:40.380
One was to make sure that whatever program we had

02:30:40.380 --> 02:30:44.030
to prevent catastrophic wildfires were being prosecuted

02:30:44.030 --> 02:30:45.400
as effectively as possible.

02:30:45.400 --> 02:30:47.500
The other was to provide some level of stability

02:30:47.500 --> 02:30:50.020
over the organization with all the leadership changes

02:30:50.020 --> 02:30:52.980
that we had so that we could actually keep the lights on

02:30:52.980 --> 02:30:53.910
and the gas flowing

02:30:53.910 --> 02:30:57.120
and the power generators operating safely.

02:30:57.120 --> 02:31:02.120
One of my learnings early on into the conduct of PSPS was

02:31:02.730 --> 02:31:05.840
that we had defined our objective too narrowly.

02:31:05.840 --> 02:31:10.130
We had defined it as preventing a catastrophic wildfire.

02:31:10.130 --> 02:31:12.170
As a result, and as we heard loudly

02:31:12.170 --> 02:31:14.680
and as we reacted to today,

02:31:14.680 --> 02:31:18.410
we recognize that there was considerable risk shifted

02:31:18.410 --> 02:31:20.850
to our customers and that we had to think

02:31:20.850 --> 02:31:23.210
about our objective measure differently.

02:31:23.210 --> 02:31:25.780
So broadly speaking, customer welfare started

02:31:25.780 --> 02:31:28.410
by saying that it is our objective

02:31:28.410 --> 02:31:29.980
to maximize customer welfare,

02:31:29.980 --> 02:31:32.730
defined as the protection of their property,

02:31:32.730 --> 02:31:36.460
their lives, and the continuity of service.

02:31:36.460 --> 02:31:37.940
So that's where that came from.

02:31:37.940 --> 02:31:42.550
Now, you're talking specifically to a measure that we use

02:31:42.550 --> 02:31:45.180
to try to make sure that we're providing the right service

02:31:45.180 --> 02:31:46.590
to our customers.

02:31:46.590 --> 02:31:50.630
We historically, I understand, had a measure

02:31:50.630 --> 02:31:54.860
that was directed at customer satisfaction

02:31:54.860 --> 02:31:57.210
in a benchmarkable way through JB Power

02:31:57.210 --> 02:31:58.390
or somebody similar.

02:31:59.360 --> 02:32:03.550
I understand that in the last year, between 2018 and 2019,

02:32:03.550 --> 02:32:06.740
that was changed because the fundamentals were

02:32:06.740 --> 02:32:08.150
that it wouldn't be a good measure,

02:32:08.150 --> 02:32:12.100
given all the disruption that we had with the PSPSs

02:32:12.943 --> 02:32:15.570
and that we had to think of a different measure.

02:32:15.570 --> 02:32:18.110
One of the measures that hopefully we'll go back to

02:32:18.110 --> 02:32:20.250
is something much more like a net promoter score,

02:32:20.250 --> 02:32:21.440
that it literally measures

02:32:21.440 --> 02:32:23.720
the customer's experience with us.

02:32:23.720 --> 02:32:25.150
That's where we're going.

02:32:25.150 --> 02:32:26.850
The measure that we have

02:32:26.850 --> 02:32:30.070
which is the number of complaints in 1,000 customers

02:32:30.070 --> 02:32:33.040
that go to the commission I don't think is satisfactory.

02:32:33.040 --> 02:32:35.500
It was sort of something that we had and we used

02:32:35.500 --> 02:32:37.660
because I could remember using that in 1986

02:32:37.660 --> 02:32:39.790
and I could tell you what my number was and I can tell you

02:32:39.790 --> 02:32:41.970
that the world has changed a lot since then.

02:32:41.970 --> 02:32:43.370
So yes, that's our current measure.

02:32:43.370 --> 02:32:45.250
I don't think even Mr. Johnson or I

02:32:45.250 --> 02:32:47.330
or others would believe it's the best,

02:32:47.330 --> 02:32:49.400
but it was a transition until we could figure out

02:32:49.400 --> 02:32:50.350
and get back to something

02:32:50.350 --> 02:32:53.880
which more directly measures the customer experience.

02:32:53.880 --> 02:32:55.860
<v ->Okay, that's very helpful.</v>

02:32:55.860 --> 02:33:00.650
In the same paragraph on page 5-4, lines 18 through 22,

02:33:01.593 --> 02:33:02.660
you say that you strongly believe

02:33:02.660 --> 02:33:06.360
the utility's future success depends on focusing on,

02:33:06.360 --> 02:33:09.170
among other things, affordability.

02:33:09.170 --> 02:33:10.003
<v ->That's correct.</v>

02:33:10.003 --> 02:33:11.610
<v ->Do you recall what Mr. Johnson told me</v>

02:33:11.610 --> 02:33:12.770
about affordability?

02:33:12.770 --> 02:33:14.040
The way he used the word?

02:33:14.040 --> 02:33:15.370
<v ->But you can remind me.</v>

02:33:15.370 --> 02:33:19.050
<v ->Well, again, it seemed like a qualitative label</v>

02:33:20.870 --> 02:33:25.510
as it relates to its use as a PG&E goal objective.

02:33:26.990 --> 02:33:29.540
Do you have, I'm sorry, did I--

02:33:29.540 --> 02:33:30.941
<v ->No, I was just breathing, sorry.</v>

02:33:30.941 --> 02:33:33.024
(laughs)

02:33:36.250 --> 02:33:39.860
<v ->Is there any quantitative performance metric</v>

02:33:39.860 --> 02:33:43.840
that you as the CEO of the utility intend to apply

02:33:43.840 --> 02:33:46.610
determining whether PG&E is successful

02:33:46.610 --> 02:33:49.280
in this affordability objective?

02:33:49.280 --> 02:33:50.890
<v ->Yes, yes.</v>

02:33:50.890 --> 02:33:52.370
So that's the answer specific to the question

02:33:52.370 --> 02:33:54.660
but I need to give you some thought there.

02:33:54.660 --> 02:33:56.070
There are two things.

02:33:56.070 --> 02:34:00.040
We typically within the utility organization,

02:34:01.510 --> 02:34:04.850
the driver for affordability comes down to effectiveness

02:34:04.850 --> 02:34:07.860
and productivity because everything that will go from there

02:34:07.860 --> 02:34:10.680
to affordability, which I'll get to in a moment,

02:34:10.680 --> 02:34:12.810
depends on our cost structure

02:34:12.810 --> 02:34:15.760
and making sure that we're as sufficient as possible, okay?

02:34:16.930 --> 02:34:20.580
The issue to me of affordability is a little bit different.

02:34:20.580 --> 02:34:23.080
I, before coming to PG&E,

02:34:23.080 --> 02:34:26.560
I spent five years in the competitive retail energy business

02:34:26.560 --> 02:34:30.340
in Australia and affordability was a big issue.

02:34:30.340 --> 02:34:31.240
We thought about it different.

02:34:31.240 --> 02:34:33.830
Because affordability is a uniquely different thing

02:34:33.830 --> 02:34:35.760
to different customers.

02:34:35.760 --> 02:34:37.790
Affordability isn't one thing

02:34:37.790 --> 02:34:39.530
and affordability is directly related

02:34:39.530 --> 02:34:42.610
to social and economic inclusion

02:34:42.610 --> 02:34:46.500
based on how much of your wallet share is focused at energy.

02:34:46.500 --> 02:34:49.570
So what I am hopeful, one of the measures we will evolve

02:34:49.570 --> 02:34:53.670
on emergence as part of a suite of measures on performance

02:34:53.670 --> 02:34:56.180
will be share of wallet for various customers.

02:34:56.180 --> 02:34:59.440
And that will inform then the kind of programming

02:34:59.440 --> 02:35:01.780
and outcomes we would want with the commission

02:35:01.780 --> 02:35:03.270
as we think about various offerings

02:35:03.270 --> 02:35:05.510
which meet various classes of customers.

02:35:05.510 --> 02:35:09.690
So affordability to me has to do more with pricing

02:35:09.690 --> 02:35:11.340
and it's different with different customers

02:35:11.340 --> 02:35:13.690
because affordability is different across the board.

02:35:13.690 --> 02:35:15.050
And it's a critical issue

02:35:15.050 --> 02:35:18.730
and we think about it more as economic and social inclusion

02:35:18.730 --> 02:35:20.720
than just being able to pay your bill.

02:35:21.640 --> 02:35:24.840
<v ->But if I look at it as a share of wallet,</v>

02:35:26.040 --> 02:35:29.390
aren't I perpetuating the old PG&E paradigm

02:35:29.390 --> 02:35:32.220
that our rates are high but our bills are low,

02:35:32.220 --> 02:35:34.520
which effectively gives the company credit

02:35:34.520 --> 02:35:35.720
for a temperate climate?

02:35:36.660 --> 02:35:38.610
<v ->Well, I don't know about the history,</v>

02:35:38.610 --> 02:35:40.590
but I will say as one measure

02:35:40.590 --> 02:35:43.260
to make sure that you can understand the amount

02:35:43.260 --> 02:35:46.010
of disposable income of customers will pay for energy

02:35:46.010 --> 02:35:47.070
is an important measure

02:35:47.070 --> 02:35:48.410
because what they're paying for energy,

02:35:48.410 --> 02:35:49.730
they're not paying for something else

02:35:49.730 --> 02:35:51.320
and that's why I said I believe it's an issue

02:35:51.320 --> 02:35:53.440
of economic and social inclusion.

02:35:53.440 --> 02:35:54.470
It's one measure.

02:35:54.470 --> 02:35:57.170
It's not the only and it's not the sole measure,

02:35:57.170 --> 02:36:00.250
and so I don't think it's the continuation of a paradigm

02:36:00.250 --> 02:36:01.880
because I will tell you that having been

02:36:01.880 --> 02:36:03.820
in this industry for 42 years,

02:36:03.820 --> 02:36:06.500
I find very few regulated businesses

02:36:06.500 --> 02:36:08.890
that have any measure of share of wallet

02:36:08.890 --> 02:36:10.300
or economic inclusion.

02:36:11.660 --> 02:36:16.330
And there are special programs for low income customers

02:36:16.330 --> 02:36:18.940
but we have to think about that a little bit more broadly

02:36:18.940 --> 02:36:20.280
and I think that's how we start,

02:36:20.280 --> 02:36:22.110
by gathering that data and that information

02:36:22.110 --> 02:36:23.450
around our customers.

02:36:23.450 --> 02:36:25.640
Which is why getting closer to our customers

02:36:25.640 --> 02:36:27.280
and more intimate with our customers is a way

02:36:27.280 --> 02:36:28.260
to understand this.

02:36:29.220 --> 02:36:30.920
And if you'd allow me just another 30 seconds,

02:36:30.920 --> 02:36:32.880
I think there's a fundamental paradigm shift

02:36:32.880 --> 02:36:34.520
about the way we think about this business.

02:36:34.520 --> 02:36:36.320
Now, I will say now today,

02:36:36.320 --> 02:36:39.970
PG&E is at sort of the leading edge of that.

02:36:39.970 --> 02:36:42.840
Now we may have been brought here in ways we didn't like

02:36:42.840 --> 02:36:45.730
but coming out of bankruptcy, emerging,

02:36:45.730 --> 02:36:48.400
we have to start to embrace some of these changes.

02:36:48.400 --> 02:36:50.370
And the way we think about our customers,

02:36:50.370 --> 02:36:52.320
whether they are access,

02:36:57.782 --> 02:37:00.720
with fundamental needs customers,

02:37:00.720 --> 02:37:02.990
whether they are small business customers,

02:37:02.990 --> 02:37:05.190
whether they are large industrial users,

02:37:05.190 --> 02:37:07.770
we now start to have the ability to get much more granular

02:37:07.770 --> 02:37:09.160
in the way we provide service

02:37:09.160 --> 02:37:11.510
and it changes the way we think about our customers

02:37:11.510 --> 02:37:13.170
and the way we deliver service.

02:37:13.170 --> 02:37:14.830
And that's a broad systemic change

02:37:14.830 --> 02:37:16.730
but we have to start by getting the right measures

02:37:16.730 --> 02:37:18.470
in place to understand that.

02:37:18.470 --> 02:37:20.290
And I do think that affordability is one

02:37:20.290 --> 02:37:21.730
of those key elements.

02:37:21.730 --> 02:37:24.130
But today, immediately in front of me

02:37:24.130 --> 02:37:26.620
and my operating organization, that has to do

02:37:26.620 --> 02:37:28.310
with making sure that we're operating

02:37:28.310 --> 02:37:32.160
as efficiently as possible and not incurring costs

02:37:32.160 --> 02:37:33.430
that then have to be translated

02:37:33.430 --> 02:37:35.230
when in recovery with our customers.

02:37:37.080 --> 02:37:40.680
<v ->So if I were your regulator or one of your investors</v>

02:37:42.200 --> 02:37:45.330
and I wanted to benchmark your affordability

02:37:45.330 --> 02:37:50.330
against other utility providers around the country,

02:37:51.240 --> 02:37:53.260
and I frankly was alarmed by the fact

02:37:53.260 --> 02:37:55.520
that ABC Television last week reported

02:37:55.520 --> 02:37:58.060
that you were two times the national average

02:37:58.060 --> 02:38:00.000
in terms of electricity rates,

02:38:00.000 --> 02:38:01.800
wouldn't I be right to be concerned?

02:38:02.710 --> 02:38:04.980
<v ->About being two times the national average?</v>

02:38:04.980 --> 02:38:08.530
<v ->About how effectively you're pursuing affordability.</v>

02:38:08.530 --> 02:38:11.260
<v ->Well, look, I think we have the right</v>

02:38:11.260 --> 02:38:13.840
to be concerned about affordability in general.

02:38:13.840 --> 02:38:16.547
There are some costs that are structural in this business

02:38:16.547 --> 02:38:21.040
that, as Mr. Johnson said in his testimony, are the result

02:38:21.040 --> 02:38:24.410
of carefully deliberated public policy outcomes

02:38:24.410 --> 02:38:25.760
and that's true.

02:38:25.760 --> 02:38:27.270
But in the pursuit of our business,

02:38:27.270 --> 02:38:29.810
it's a question about how we invest our capital

02:38:29.810 --> 02:38:34.810
and how we execute our work.

02:38:34.960 --> 02:38:39.370
So I think the fact the prices are high is one element.

02:38:39.370 --> 02:38:43.230
And the way we translate that into our tariffs,

02:38:43.230 --> 02:38:44.900
the way we continue to prosecute our work,

02:38:44.900 --> 02:38:46.440
the way we're much more cautious

02:38:46.440 --> 02:38:48.910
about how we pursue remedies,

02:38:48.910 --> 02:38:52.260
knowing that our cost level is high,

02:38:52.260 --> 02:38:53.480
that impacts the way we think

02:38:53.480 --> 02:38:55.200
and the way we make decisions,

02:38:55.200 --> 02:38:57.200
and how we have to find more effective ways of doing,

02:38:57.200 --> 02:38:58.900
whether that's through process improvements

02:38:58.900 --> 02:39:00.810
or technology improvements.

02:39:00.810 --> 02:39:03.430
<v ->In pursuing the cost reduction steps</v>

02:39:03.430 --> 02:39:04.760
that you've initiated

02:39:04.760 --> 02:39:07.860
to try and achieve greater efficiencies,

02:39:07.860 --> 02:39:11.840
have those extended to reviewing utility-owned generation

02:39:11.840 --> 02:39:13.340
for cost-related retirement?

02:39:15.840 --> 02:39:18.680
<v ->So we haven't started that review yet</v>

02:39:18.680 --> 02:39:20.900
because as I said, one of my major focuses

02:39:20.900 --> 02:39:22.630
in coming in was not to cause disruption

02:39:22.630 --> 02:39:24.280
but to get through fire season safely

02:39:24.280 --> 02:39:26.400
and then start to develop hypotheses

02:39:26.400 --> 02:39:28.160
about the changes coming.

02:39:28.160 --> 02:39:32.190
But I would say that a very rigorous cost review

02:39:32.190 --> 02:39:35.430
would be part of everybody's responsibility

02:39:35.430 --> 02:39:36.510
of all my direct reports

02:39:36.510 --> 02:39:37.990
on the operating side of the business.

02:39:37.990 --> 02:39:40.330
Nobody's would be excluded from that.

02:39:40.330 --> 02:39:42.730
<v ->Has the utility reviewed the cost effectiveness</v>

02:39:42.730 --> 02:39:44.660
for its customers of continuing

02:39:44.660 --> 02:39:47.590
to operate the Diablo Canyon Nuclear Power Plant?

02:39:47.590 --> 02:39:49.620
<v ->I haven't been involved in such an effort.</v>

02:39:49.620 --> 02:39:53.100
I'm not aware of one, so I cannot answer that question.

02:39:53.100 --> 02:39:56.370
<v ->At page 5-20, lines 30 through 33,</v>

02:39:57.337 --> 02:39:58.730
you state that PG&E's embrace

02:39:58.730 --> 02:40:03.730
of the ISO, PAS, and CEATI standards, and I'm quoting,

02:40:06.330 --> 02:40:08.900
"reflects its dedication to a philosophy

02:40:08.900 --> 02:40:12.470
"of continual improvement in the areas of safety,

02:40:12.470 --> 02:40:15.810
"reliability, and cost performance

02:40:15.810 --> 02:40:17.810
"across the enterprise as a whole."

02:40:17.810 --> 02:40:19.010
Close quote.

02:40:19.010 --> 02:40:22.610
Could you please describe how these standards apply to

02:40:22.610 --> 02:40:24.580
and made your cost performance?

02:40:25.430 --> 02:40:28.390
<v ->Yeah, so the standards themselves don't,</v>

02:40:28.390 --> 02:40:30.040
so let me just sort of back up there.

02:40:30.040 --> 02:40:35.040
So the ISO 55,000 series, which contains three standards,

02:40:37.340 --> 02:40:41.110
55,000 and then one and two basically set up a framework

02:40:41.110 --> 02:40:43.040
for effective management of assets.

02:40:43.040 --> 02:40:45.050
And it tells you what you need to think about.

02:40:45.050 --> 02:40:47.950
So in the simplest terms, to get to your answer,

02:40:47.950 --> 02:40:50.590
the first thing you do once you understand the condition

02:40:50.590 --> 02:40:52.480
of all your assets and what you're trying to manage

02:40:52.480 --> 02:40:54.880
and you develop an objective function, right?

02:40:55.980 --> 02:40:58.830
In that objective function, I am assuming

02:40:58.830 --> 02:41:01.200
you would place your cost criteria as well

02:41:01.200 --> 02:41:04.550
to make sure that you understand the value you're delivering

02:41:04.550 --> 02:41:07.470
out of your assets for the cost of putting them in.

02:41:07.470 --> 02:41:11.300
And so what paths 55,000 should do,

02:41:11.300 --> 02:41:13.370
if you implement it correctly,

02:41:13.370 --> 02:41:15.860
because in and of itself it's just paper.

02:41:15.860 --> 02:41:17.570
So if you implement it correctly

02:41:17.570 --> 02:41:20.780
and you correctly define the objective function,

02:41:20.780 --> 02:41:22.250
then the answer is it should be in there

02:41:22.250 --> 02:41:24.400
and you should be getting the greatest value outcome

02:41:24.400 --> 02:41:26.670
from the operating of your assets for the cost,

02:41:26.670 --> 02:41:29.420
the capital, and expense that you're putting into them.

02:41:31.369 --> 02:41:32.510
<v ->My last question, Mr. Vesey.</v>

02:41:32.510 --> 02:41:37.340
At page 5-30, lines 23 through 25,

02:41:38.538 --> 02:41:41.340
you say that prior to emergence from bankruptcy,

02:41:41.340 --> 02:41:46.340
PG&E will propose to the PUC a set of operational metrics

02:41:46.800 --> 02:41:49.970
for PUC review and approval.

02:41:49.970 --> 02:41:53.110
Will these operational metrics include cost performance?

02:41:56.850 --> 02:41:58.860
<v ->The set is not complete yet.</v>

02:41:58.860 --> 02:42:01.130
There will be factors that imply the results

02:42:01.130 --> 02:42:02.660
of cost performance.

02:42:03.730 --> 02:42:07.000
My general sense is that without cost performance,

02:42:07.000 --> 02:42:09.410
it would be a deficient set of metrics.

02:42:10.690 --> 02:42:12.470
It's not completed yet

02:42:12.470 --> 02:42:15.720
and to be more thoughtful, you know, in the work

02:42:15.720 --> 02:42:19.920
with the assigned commissioner ruling,

02:42:19.920 --> 02:42:21.470
hopefully we can get into more detail

02:42:21.470 --> 02:42:24.530
and provide a better set of what we plan to do.

02:42:24.530 --> 02:42:25.363
<v ->Thanks very much.</v>

02:42:25.363 --> 02:42:26.950
I'm sorry to have talked so fast

02:42:26.950 --> 02:42:28.610
but I appreciate your candor.

02:42:28.610 --> 02:42:30.500
Your Honor, I'm completed.

02:42:30.500 --> 02:42:31.750
<v ->Thank you, Mr. Geesman.</v>

02:42:33.450 --> 02:42:36.220
Let's see, I'm gonna go off the record

02:42:36.220 --> 02:42:40.400
and we can talk about some scheduling and housekeeping.

02:42:42.700 --> 02:42:43.760
So off the record.

02:42:44.790 --> 02:42:48.307
Okay, so we have more cross I think for Mr. Vesey.

02:42:50.520 --> 02:42:52.950
There's a small amount from CLECA,

02:42:52.950 --> 02:42:54.930
Center for Accessible Technology,

02:42:56.020 --> 02:42:59.870
Small Business Utility Advocates, and Mr. Abrams.

02:42:59.870 --> 02:43:01.350
Is that correct?

02:43:01.350 --> 02:43:02.360
<v ->Yes, Your Honor.</v>
<v ->Yes, Your Honor.</v>

02:43:02.360 --> 02:43:03.240
<v ->Okay.</v>

02:43:03.240 --> 02:43:07.900
So okay, so I'm thinking what we probably do is start up

02:43:07.900 --> 02:43:12.467
with Mr. Vesey again in the morning again at 10:00 a.m.

02:43:14.230 --> 02:43:18.180
And then Mr. Wells would be the next witness,

02:43:18.180 --> 02:43:19.550
is that correct?

02:43:19.550 --> 02:43:21.550
<v Man>Yeah, so--</v>

02:43:21.550 --> 02:43:23.690
<v ->And then I know Miss Sheriff,</v>

02:43:23.690 --> 02:43:26.840
I know you had a scheduling constraint for witness Ya,

02:43:26.840 --> 02:43:27.830
is that correct?

02:43:27.830 --> 02:43:29.290
<v Nora>Yes, Your Honor, and I've spoken</v>

02:43:29.290 --> 02:43:32.140
with the three parties who have cross-examination estimates

02:43:32.140 --> 02:43:36.550
for Miss Ya and two have agreed to have her go on Monday.

02:43:36.550 --> 02:43:38.535
PG&E is checking with its team

02:43:38.535 --> 02:43:41.362
and I assume will get back to me on that.

02:43:41.362 --> 02:43:42.955
<v Man>We'll make sure.</v>

02:43:42.955 --> 02:43:46.520
<v ->Okay, so I don't have to worry about trying to fit in.</v>

02:43:46.520 --> 02:43:48.370
<v Nora>Fit her in on Friday, no, Your Honor.</v>

02:43:48.370 --> 02:43:53.370
<v ->Okay, so then we do Vesey and then Wells.</v>

02:43:54.350 --> 02:43:58.533
Looks like there's a fair amount of time

02:44:02.560 --> 02:44:03.990
for Wells reserved.

02:44:08.790 --> 02:44:10.340
Mr. Bloom, do you know if you're gonna have cross

02:44:10.340 --> 02:44:11.840
for Mr. Wells?

02:44:11.840 --> 02:44:13.540
<v Bloom>We will know in the morning, Your Honor.</v>

02:44:13.540 --> 02:44:17.070
<v ->Okay.</v>

02:44:17.070 --> 02:44:19.590
Maybe just, is there anything else we need to address?

02:44:19.590 --> 02:44:21.370
<v Man>I'm just wondering, so just drilling down</v>

02:44:21.370 --> 02:44:25.080
a little bit more on Mr. Vesey, cognizant of his schedule,

02:44:25.080 --> 02:44:29.050
I think there's about four hours reserved?

02:44:29.920 --> 02:44:30.863
<v ->I have about,</v>

02:44:35.604 --> 02:44:39.960
looks like about two hours reserved for that.

02:44:39.960 --> 02:44:41.300
<v Man>Yeah, would there be a way</v>

02:44:41.300 --> 02:44:44.200
of potentially pressing that a bit?

02:44:45.382 --> 02:44:46.970
Wanna make sure he gets on and off

02:44:46.970 --> 02:44:49.330
(mumbles) if we can tomorrow.

02:44:51.740 --> 02:44:54.200
<v ->Mr. Abrams, you have an hour for Mr. Vesey.</v>

02:44:56.490 --> 02:44:57.890
Can you trim that down some?

02:45:00.190 --> 02:45:02.389
<v Will>I will make an effort to do so.</v>

02:45:02.389 --> 02:45:03.260
<v ->Okay.</v>

02:45:03.260 --> 02:45:06.440
And just a reminder, want to make sure

02:45:06.440 --> 02:45:10.350
that it stays focused on what we're doing here

02:45:10.350 --> 02:45:12.480
and not issues that would be more appropriate

02:45:12.480 --> 02:45:14.410
in the bankruptcy court.

02:45:14.410 --> 02:45:16.990
The other estimates are pretty short.

02:45:16.990 --> 02:45:20.970
Mr. Strauss is the next longest with 30 minutes.

02:45:24.296 --> 02:45:29.296
So I will recommend that parties try and be efficient

02:45:29.440 --> 02:45:31.090
and if someone else has asked the questions

02:45:31.090 --> 02:45:36.090
to cover your points, try not to go over them again.

02:45:36.360 --> 02:45:38.310
<v Man>Your Honor, can I seek a clarification on that</v>

02:45:38.310 --> 02:45:41.090
with respect to Mr. Abrams' questioning?

02:45:42.260 --> 02:45:43.930
Can he ask the same questions

02:45:43.930 --> 02:45:46.070
that he's asked to Bill Johnson, to Andy Vesey,

02:45:46.070 --> 02:45:47.740
and to multiple witnesses or?

02:45:49.430 --> 02:45:51.540
At some point, asking the same questions over

02:45:51.540 --> 02:45:53.420
and over again becomes duplicative.

02:45:53.420 --> 02:45:56.900
<v ->Yeah, I mean, well,</v>

02:45:56.900 --> 02:45:59.320
the more times the same questions get asked,

02:45:59.320 --> 02:46:01.650
the less patience I'm going to have with that.

02:46:02.530 --> 02:46:03.950
You know, I can understand

02:46:03.950 --> 02:46:06.530
that Mr. Vesey has a different role than Mr. Johnson

02:46:06.530 --> 02:46:10.090
and so I think it's reasonable to give him some leeway

02:46:10.090 --> 02:46:14.500
to explore Mr. Vesey's position on it.

02:46:15.590 --> 02:46:20.590
But certainly it may not need to be in the same depth.

02:46:22.135 --> 02:46:23.650
And also I want to acknowledge,

02:46:23.650 --> 02:46:26.200
I thought Mr. Abrams' questions today were much more focused

02:46:26.200 --> 02:46:29.870
and I appreciate that, so thank you, Mr. Abrams.

02:46:31.750 --> 02:46:36.090
So we'll evaluate that as we go along.

02:46:36.090 --> 02:46:38.370
Any housekeeping things that we need to deal with?

02:46:38.370 --> 02:46:39.810
Mr. Weissmarr?

02:46:39.810 --> 02:46:40.643
<v ->Thank you.</v>

02:46:40.643 --> 02:46:41.500
Just a question.

02:46:41.500 --> 02:46:44.030
So there was a, sorry.

02:46:44.030 --> 02:46:47.780
There was a discussion with Mr. Johnson

02:46:47.780 --> 02:46:50.410
about a passage in his testimony

02:46:50.410 --> 02:46:53.980
that contained an inaccuracy in its description

02:46:53.980 --> 02:46:57.320
of the parties to a closed settlement.

02:46:58.610 --> 02:47:00.040
I corrected that.

02:47:00.040 --> 02:47:03.460
My question is, like us to submit an errata page

02:47:05.186 --> 02:47:06.466
for that testimony?

02:47:06.466 --> 02:47:08.754
<v ->I don't think that's necessary.</v>

02:47:08.754 --> 02:47:10.950
I think the clarification correction

02:47:10.950 --> 02:47:12.510
on the record is adequate.

02:47:12.510 --> 02:47:13.343
<v ->Thank you.</v>

02:47:15.150 --> 02:47:16.630
<v ->Mr. Brown?</v>

02:47:16.630 --> 02:47:18.670
<v ->Your Honor, yesterday there was a question</v>

02:47:19.542 --> 02:47:22.070
by one of the counsels regarding timing on transcripts

02:47:24.746 --> 02:47:25.579
and I think you were going to endeavor

02:47:27.282 --> 02:47:28.832
to inquire after the recording.

02:47:29.920 --> 02:47:33.350
<v ->My understanding is that the reporters are endeavoring</v>

02:47:33.350 --> 02:47:37.020
to get the transcripts out as quickly as they can.

02:47:38.040 --> 02:47:40.740
Understanding the nature of this proceeding.

02:47:40.740 --> 02:47:43.320
I was informed that the transcripts for yesterday

02:47:43.320 --> 02:47:47.310
would be out prior to end of day today.

02:47:47.310 --> 02:47:49.140
I have not been checking emails,

02:47:49.140 --> 02:47:50.200
I don't know if that's happened,

02:47:50.200 --> 02:47:52.610
but that was the reporters' intent.

02:47:54.330 --> 02:47:55.163
It's in the process.

02:47:55.163 --> 02:47:56.280
Yeah, I think there's also,

02:47:56.280 --> 02:47:58.550
because it ends up getting filed with docket,

02:47:58.550 --> 02:48:01.080
it's not solely up to the reporters,

02:48:01.080 --> 02:48:03.650
so they're in the process of trying to get those out

02:48:03.650 --> 02:48:05.550
as quickly as possible.

02:48:05.550 --> 02:48:06.383
<v ->Thank you, Your Honor.</v>

02:48:06.383 --> 02:48:07.880
And just to confirm my understanding,

02:48:07.880 --> 02:48:10.860
as long as the utility has ordered the transcript,

02:48:10.860 --> 02:48:13.710
everybody on the service list gets a copy of it, correct?

02:48:15.260 --> 02:48:18.960
<v Judge>I'm not sure that, yeah, I think that is.</v>

02:48:18.960 --> 02:48:20.670
I'm getting a nod from the reporters,

02:48:20.670 --> 02:48:21.620
so I think that's correct.

02:48:21.620 --> 02:48:23.590
<v ->Okay, thank you.</v>

02:48:23.590 --> 02:48:24.760
Right, it's lovely.

02:48:28.270 --> 02:48:30.120
<v ->Anything else we need?</v>

02:48:30.120 --> 02:48:31.770
<v ->Just in the interest of full disclosure, Your Honor,</v>

02:48:31.770 --> 02:48:35.050
I think I mentioned that Mr. Wells was really hoping

02:48:35.050 --> 02:48:36.940
he goes on and off tomorrow.

02:48:36.940 --> 02:48:37.980
He had travel plans.

02:48:39.360 --> 02:48:43.060
We're trying to see if we can change his travel plans

02:48:43.060 --> 02:48:46.660
so that he could be available potentially on Friday

02:48:46.660 --> 02:48:48.220
but I can't promise that.

02:48:48.220 --> 02:48:51.088
So don't finish with him tomorrow.

02:48:51.088 --> 02:48:53.119
<v ->Yeah, there is a lot of cross for, well,</v>

02:48:53.119 --> 02:48:55.130
I guess, okay, here's a question for you.

02:48:55.130 --> 02:48:57.900
Would you rather start with Mr. Wells

02:48:57.900 --> 02:49:01.840
and run Mr. Wells and then have Mr. Vesey come back

02:49:01.840 --> 02:49:04.580
either tomorrow afternoon or?

02:49:04.580 --> 02:49:05.870
Well, there's more cross for Mr. Vesey,

02:49:05.870 --> 02:49:08.770
so Mr. Vesey's gonna be back at some point.

02:49:08.770 --> 02:49:11.790
I am fine with giving Mr. Vesey a date certain

02:49:11.790 --> 02:49:13.790
and time certain if you want to do that.

02:49:16.340 --> 02:49:19.310
Or he can trail Mr. Wells.

02:49:19.310 --> 02:49:23.170
So if we want to give him a date certain later in the week,

02:49:23.170 --> 02:49:24.560
we can do that.

02:49:24.560 --> 02:49:25.990
I don't care.

02:49:25.990 --> 02:49:29.090
<v ->Your Honor, I would ask if Mr. Vesey is going</v>

02:49:29.090 --> 02:49:31.540
to be given a date certain of Friday

02:49:31.540 --> 02:49:35.010
that I be allowed to do my cross-examination Friday morning

02:49:35.010 --> 02:49:37.190
because I do have to leave Friday afternoon.

02:49:37.190 --> 02:49:38.490
<v Judge>Yeah, I mean, if he's coming back Friday,</v>

02:49:38.490 --> 02:49:39.470
I don't care the order.

02:49:39.470 --> 02:49:40.770
<v ->No, we're not gonna, no.</v>

02:49:41.710 --> 02:49:46.150
He's gonna come back tomorrow and then (mumbles).

02:49:46.150 --> 02:49:48.080
<v Judge>Okay, so Vesey first and then Wells</v>

02:49:48.080 --> 02:49:49.872
and you wanna get Wells done.

02:49:49.872 --> 02:49:52.508
<v ->If we could get Wells done tomorrow, that would be ideal.</v>

02:49:52.508 --> 02:49:53.720
If we can't, we're gonna try

02:49:54.792 --> 02:49:56.437
to make him available on Friday.

02:49:56.437 --> 02:49:57.735
If he can't be available on Friday,

02:49:57.735 --> 02:49:58.630
we're gonna have to figure out.

02:49:58.630 --> 02:49:59.840
<v Judge>We can also bring him back.</v>

02:49:59.840 --> 02:50:01.030
So if we don't get him done--

02:50:01.030 --> 02:50:01.863
<v ->That's the backup.</v>

02:50:01.863 --> 02:50:04.750
<v Judge>Okay, so we will start with Vesey, then Wells,</v>

02:50:04.750 --> 02:50:06.660
and if we don't finish Wells,

02:50:06.660 --> 02:50:07.880
there'll be another time to finish that.

02:50:07.880 --> 02:50:09.820
<v ->We'll know by tomorrow morning.</v>

02:50:09.820 --> 02:50:10.653
<v Judge>Okay.</v>

02:50:11.530 --> 02:50:12.730
<v ->And then I'll say after Wells,</v>

02:50:12.730 --> 02:50:14.530
the next witness in order (mumbles).

02:50:18.750 --> 02:50:19.583
<v ->Okay.</v>

02:50:20.840 --> 02:50:22.040
Mr. Bloom, did you have something?

02:50:22.040 --> 02:50:25.390
<v ->Yeah, I assumed different hearings would go on Friday</v>

02:50:25.390 --> 02:50:27.400
and a different schedule from nine to one,

02:50:27.400 --> 02:50:28.470
but they assume we're just gonna do

02:50:28.470 --> 02:50:31.370
a normal full day Friday?

02:50:31.370 --> 02:50:32.820
<v Judge>Unless things start speeding up,</v>

02:50:32.820 --> 02:50:34.370
I'm gonna do a full day Friday.

02:50:35.870 --> 02:50:37.780
If things start speeding up, I'd consider it.

02:50:37.780 --> 02:50:39.200
But at this rate, no.

02:50:40.170 --> 02:50:42.650
(laughs)

02:50:42.650 --> 02:50:43.670
On the record.

02:50:43.670 --> 02:50:47.420
So we will resume with Mr. Vesey in the morning,

02:50:47.420 --> 02:50:49.160
starting at 10:00 a.m.

02:50:49.160 --> 02:50:51.900
Mr. Vesey will be followed by Mr. Wells

02:50:51.900 --> 02:50:54.060
and to the extent possible

02:50:54.060 --> 02:50:58.430
or at such point as possible, Miss Burnell.

02:50:58.430 --> 02:51:00.220
With that, we are adjourned for the day.

02:51:00.220 --> 02:51:01.370
Thank you.

02:51:01.370 --> 02:51:02.450
<v ->Thank you, Your Honor.</v>

02:51:02.450 --> 02:51:05.810
<v ->Thank you, Your Honor.</v>