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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
-----------------------------------------------------
Date of Report
(Date of earliest event reported)
June 24, 1998
CALIFORNIA INFRASTUCTURE AND ECONOMIC DEVELOPMENT BANK
SPECIAL PURPOSE TRUST PG&E-1
(Issuer of the Certificates)
PG&E FUNDING LLC
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
Delaware 333-30715 94-3274751
- --------------------------- -------------------------------------- ----------------------------------------------
(State of incorporation) (Commission File Number) (IRS Employer Identification No.)
245 Market Street, Room 424
San Francisco, California 94105
- ---------------------------------------------------------- --------------------------------
(Address of principal executive offices) (Zip Code)
(415) 972-5467
------------------------------------
(Registrant's telephone number,
including area code)
N/A
------------------------------------------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
</TABLE>
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ITEM 5. OTHER EVENTS.
As previously discussed under the caption "RECENT DEVELOPMENTS--Voter
Initiative" in the Prospectus Supplement dated November 25, 1997 (the
"Prospectus Supplement") for the California Infrastructure and Economic
Development Bank Special Purpose Trust PG&E-1, Rate Reduction Certificates,
Series 1997-1 (the "Certificates"), certain California groups had previously
submitted to the California State Attorney General a proposed ballot initiative
(the "Voter Initiative") relating to the Certificates, which were issued in
December 1997.
On June 24, 1998, the California Secretary of State officially
certified the Voter Initiative (Proposed Initiative No. SA 97 RF 0064) for the
November 3, 1998 statewide election, based on the required submission of
petitions containing a sufficient number of valid signatures.
The Voter Initiative seeks to amend or repeal Assembly Bill 1890,
Chapter 854, California Statutes of 1996 (as amended, the "Statute") in
various respects, including requiring utilities to provide a 10% reduction
in electricity rates charged to residential and small commercial customers in
addition to the 10% rate reduction that was effective as of January 1, 1998.
Among other things, the Voter Initiative would prohibit the collection of the
separate nonbypassable charges payable by residential and small commercial
customers (the "FTA Charges") by a utility for the payment of rate reduction
bonds, such as the Certificates, or if such a prohibition were found to be
unenforceable by a court of competent jurisdiction, require the utility to
offset any such FTA Charge by crediting back to the customer the amount of
such charge. In addition, the Voter Initiative states that "any underwriter or
bond purchaser who purchases rate reduction bonds after November 15, 1997 . .
. shall be deemed to have notice of the [Voter Initiative]."
On May 22, 1998, a group known as "Californians for Affordable and
Reliable Electric Services" ("CARES") filed a petition in the Third District
Court of Appeal (Californians for Affordable and Reliable Electric Service v.
Bill Jones, et al.) to invalidate the Voter Initiative on the grounds that it
represents an unconstitutional impairment of contract rights, and that it is an
unconstitutional attempt to implement actions by statute that only can be done
through a state constitutional amendment. Supporters of CARES include the
California State Chamber of Commerce, the state's investors owned utilities
(including Pacific Gas and Electric Company), and a wide range of business,
environmental, and consumer groups. On July 2nd, the Court denied the
CARES petition. CARES has stated that it intends to appeal the Court's decision.
No assurances can be given as to whether the Voter Initiative will be excluded
from the November 1998 election.
As stated in the Prospectus Supplement under the caption "RECENT
DEVELOPMENTS--Voter Initiative" and in the Prospectus dated November 25, 1997
for the Certificates under the caption "RISK FACTORS--Unusual Nature of the
Transition Property--Possible State Amendment or Repeal of the Statute and
Related Litigation," in connection with the issuance of the Certificates
Brown & Wood LLP provided an opinion that, under applicable United States and
State of California constitutional principles relating to the impairment of
contracts, the State of California could not repeal or amend the Statute (by way
of legislative process or California voter initiative) if such repeal or
amendment would substantially impair the rights of the Certificateholders,
absent a demonstration by the State of California of a "great public calamity"
that justifies a contractual impairment. There have been numerous cases in which
legislative or popular concerns with the burden of taxation or governmental
charges have led to adoption of legislation reducing or eliminating taxes or
charges which supported bonds or other contractual obligations entered into by
public instrumentalities. However, such concerns have not been considered by the
courts to provide sufficient justification for a substantial impairment of the
security for such bonds or obligations provided by the taxes or governmental
charges involved. Brown & Wood LLP opined further in connection with the
issuance of the Certificates that knowledge of the pendency of a proposed voter
initiative by prospective Certificateholders should not diminish the protection
afforded by the contracts clause of the United States Constitution (and, by
analogy, the Constitution of the State of California). The
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opinions of Brown & Wood LLP were based upon analogous case law; none of
such cases addresses these particular circumstances directly. The opinions of
Brown & Wood LLP have not been reissued since the Certificates were issued and
do not constitute a guarantee of the outcome of any particular litigation.
If the Voter Initiative is included on the ballot and approved by the
electorate, costly and time consuming litigation will ensue. Any such litigation
may adversely affect the secondary market for the Certificates, including the
price and liquidity of the Certificates. Further, the collection of the FTA
Charges necessary to pay the Certificates while the litigation is pending could
be precluded if an immediate stay is not granted, or even if a stay is granted,
there may be terms and conditions imposed in connection with the stay that may
adversely affect Certificateholders. The failure to pay interest on the
Certificates when due could give rise to an event of default permitting
acceleration of the maturity of the Certificates.
Finally, if the Voter Initiative is ultimately upheld against legal
challenge, the primary source for payments on the Certificates would become
unavailable, and Certificateholders could incur a loss on their investment.
ITEM 7. EXHIBITS
23.1 Consent of Brown & Wood LLP (incorporated by reference to Exhibits 99.7
and 99.8 to the Registration Statement of PG&E Funding LLC No. 333-
30715)
99.1 Proposed Initiative No. SA 97 RF 0064
99.2 Opinions of Brown & Wood LLP (incorporated by reference to Exhibits
99.7 and 99.8 to the Registration Statement of PG&E Funding LLC No.
333-30715)
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PG&E FUNDING LLC
(Registrant)
Date: July 2, 1998 By: /s/ Gabriel B. Togneri
------------------------------------
Name: Gabriel B. Togneri
Title: Treasurer
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
23.1 Consent of Brown & Wood LLP (incorporated by reference to
Exhibits 99.7 and 99.8 included in the Registration
Statement of PGE Funding LLC No. 333-30715)
99.1 Proposed Initiative No. SA 97 RF 0064
99.2 Opinions of Brown & Wood LLP (incorporated by reference to
Exhibits 99.7 and 99.8 included in the Registration
Statement of PGE Funding LLC No. 333-30715)
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EXHIBIT 99.1
THE UTILITY RATE REDUCTION AND REFORM ACT
SECTION 1. FINDINGS AND DECLARATIONS
The people of California find and declare as follows:
The cost and dependability of California's electric utility service are
threatened by a new law that was intended to reduce regulation of electric
utility companies in this state.
Any change in the way electricity is sold should benefit all electric utility
customers, including residential and small business customers, and should result
in a fair and competitive marketplace.
Instead of creating a fully competitive market for electricity, the new law
unfairly favors existing electric utility monopolies by forcing customers to pay
rates more than 40 percent higher than the market price in order to bail out
utilities for their past bad investments.
As a result of this $28 billion bailout for electric utility companies, the
average California household will pay more than $250 more per year for
electricity than they would in a fully competitive market.
Residential and small business customers should not be required to bear the
costs of bonds used by utility companies to pay for past bad investments.
It is against public policy for residential and small business customers to be
required to pay for the imprudent and uneconomic decisions of electric utility
companies to invest in nuclear power plants which the public did not want and
which threaten the health and safety of this state.
Under the new law, deregulation of electric utility companies may result in
marketing abuses that harm residential and small business customers. Such
abuses may include the selling of information about these customers to other
companies for profit.
Therefore, the People of California declare that it is necessary to protect
residential and small business customers from unfair and unjustified taxes and
surcharges that will force them to subsidize electric utility companies. It is
also necessary to ensure that residential and small business customers directly
benefit from deregulation of electric utility companies.
SECTION 2. PURPOSE
The purpose of this chapter is to:
(1) Reduce residential and small commercial electricity rates by 20 percent to
assure that these customers receive a direct benefit from the transition to
the competitive marketplace for electricity.
(2) Prohibit taxes, surcharges, bond payments or any other assessment from
being added to electricity bills to pay off utility companies' past bad
investments in nuclear power plants and other generation-related costs.
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(3) Prohibit bonds from being used to force residential and small business
customers to pay for past bad investments by electric utility companies.
(4) Provide for fair and public review of California Public Utilities
Commission decisions related to electricity price and services.
(5) Protect the privacy of utility customers and provide the information
consumers need to obtain low cost and high quality electric service.
SECTION 3. THE FOLLOWING SECTIONS ARE ADDED TO THE PUBLIC UTILITIES CODE:
ELECTRIC UTILITY RATE REDUCTION
Section 368.1
(a) No later than January 1, 1999, electricity rates for residential and small
commercial customers shall be reduced so that these customers receive rate
reductions of at least 20 percent on their total electricity bill as
compared to the rate schedules in effect for these customers on June 10,
1996.
(b) The rate reductions described in subsection (a) shall be achieved through
cutting payments to electric corporations for their nuclear and other
uneconomic generation costs as described in Section 367.1 and 367.2.
(c) No utility tax, bond payment, surcharge, or any other assessment in any
form shall be levied against any electric utility customer to pay for the
rate reductions described in subsections (a) and (b).
PROHIBITION AGAINST UTILITY TAXES, BOND PAYMENTS, SURCHARGES OR ANY OTHER
ASSESSMENTS TO PAY FOR NUCLEAR POWER PLANTS
Section 367.1
(a) Effective immediately, costs for nuclear generation plants and related
assets and obligations shall not be paid for by electric utility customers,
except to the extent that such costs are recovered by the sale of
electricity at competitive market prices as reflected in independent Power
Exchange revenues or in contracts with the Independent System Operator.
(b) No utility tax, bond payments, surcharge, or any other assessment in any
form shall be levied against any electric utility customer for the recovery
of nuclear costs described in subsection (a).
(c) This section shall not apply to reasonable nuclear decommissioning costs as
referenced in Section 379 of the Public Utilities Code.
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LIMITATION ON UTILITY TAXES, BOND PAYMENTS, SURCHARGES, AND ANY OTHER
ASSESSMENTS TO PAY FOR ELECTRIC UTILITY COMPANY INVESTMENTS IN NON-NUCLEAR
GENERATION ASSETS
Section 367.2
(a) Effective immediately, costs for non-nuclear generation plants and related
assets and obligations shall not be recovered from electric utility
customers under the cost recovery mechanism provided for by sections 367
through 376 of the Public Utilities Code except to the extent that such
costs are recovered by the sale of electricity at competitive market rates
from independent Power Exchange revenues or from contracts with the
Independent System Operator, unless the electric utility first demonstrates
to the satisfaction of the Commission at a public hearing that failure to
recover such costs would deprive it of the opportunity to earn a fair rate
of return.
(b) This section shall not apply to costs associated with renewable non-nuclear
electricity generation facilities described in Section 381(c)(3), or to
costs associated with power purchases from qualifying facilities pursuant
to the Public Utility Regulatory Policies Act of 1978 and related
commission decisions.
PROHIBITION AGAINST UTILITY TAXES, BOND PAYMENTS, SURCHARGES, AND ANY OTHER
ASSESSMENTS TO PAY FOR SECURITIZATION BONDS
Section 840.1
Notwithstanding current Sections 840 through 847 of the Public Utilities Code:
(a) No electric corporation, affiliate of an electric corporation or any other
financing entity shall assess or collect any utility tax, bond payment,
surcharge, or any other assessment authorized by a Public Utilities
Commission financing order issued pursuant to Sections 840 through 847 of
the Public Utilities Code for the purpose of paying principle, interest or
any other costs of any bonds authorized by those sections.
(b) The Public Utilities Commission shall not issue any financing order
pursuant to Sections 840 through 847 after the effective date of this
measure.
(c) Any electric corporation, affiliate of an electric corporation or any other
financing entity which is subject to a financing order issued under Section
841 that is determined by a court of competent jurisdiction to be
enforceable despite subsection (a) of this section, shall offset any
utility tax, bond payment, surcharge, or other assessment described in
subsection (a) collected from any customer with an equal credit to be
applied concurrently with the collection of the utility tax, bond payment,
surcharge or other assessment.
Section 841.1
Any underwriter or bond purchaser who purchases rate reduction bonds after
November 24, 1997 issued pursuant to current Sections 840 through 847 shall be
deemed to have notice of the provisions of Section 367.1, 367.2, 368.1, and
840.1.
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PUBLIC PARTICIPATION AND JUDICIAL REVIEW FOR CONSUMER PROTECTION AND ELECTRIC
COMPANY ACCOUNTABILITY
Section 1701.5
(a) Any action or proceeding of the Public Utilities Commission pursuant to
Section 367.1, 367.2, 368.1 and 840.1 of the Public Utilities Code shall
require a public hearing where evidence is taken by and discretion is
vested in the Public Utilities Commission.
(b) Any change to the amount of above-market costs for non-nuclear generation
plants and related assets and obligations being recovered from utility
customers shall only be made after the electrical corporation has provided
notice to the public pursuant to Section 454 of the Public Utilities Code.
(c) Any action or proceeding to attack, review, set aside, void or annul a
determination, finding, or decision of the Public Utilities Commission
relating to electric restructuring under Chapter 2.3 of Part I of Division
1 of the Public Utilities Code and financing of transition costs as
described in Article 5.5 of Chapter 4 of Part 1 of Division 1 of the Public
Utilities Code shall be in accordance with the provisions of Section 1094.5
of the Code of Civil Procedure. In any such action the writ of mandate
shall lie from the court of appeals to the Public Utilities Commission.
The court shall not exercise its independent judgement but shall only
determine whether the determination, finding or decision of the Public
Utilities Commission is supported by substantial evidence in light of the
whole record.
ELECTRIC UTILITY CUSTOMER PRIVACY PROTECTION
Section 394.1
The confidentiality of residential and small commercial customer information
shall be fully protected as provided by law. No entity providing electricity
services including an electric corporation shall provide information about a
residential or small commercial customer to any third party without the express
written consent of the customer.
ELECTRIC UTILITY CUSTOMER INFORMATION
Section 393
The Public Utilities Commission shall require each electric utility or electric
service provider to provide such information or materials with each utility bill
issued to residential and small commercial customers as the Commission
determines to be necessary to assist consumers in obtaining low cost, high
quality electric service options, including electric service options that reduce
environmental impacts such as those that rely on renewable energy sources and to
protect consumers' interest in all matters concerning safe and dependable
delivery of electric service.
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DEFINITIONS
Section 330.1 Definitions of Charges
(a) "Utility tax," "bond payments," "surcharge," "assessment" or "involuntary
payment" mean any charge that serves to permit an electric corporation to
recover the value of uneconomic assets from ratepayers, and includes but is
not limited to a "fixed transition amount" as defined by Section 840(d),
and the "competition transition charge" that is the nonbypassable charge
referred to in Sections 367 to 376, inclusive.
(b) For purposes of Sections 330.1, 367.1, 367.2, 368.1, 393 and 840.1, the
terms "electric utility," "electric utility company," and "electric
corporation" have the same meaning as the term "electrical corporation" as
defined in Section 218 of the Public Utilities Code.
REPEAL OF EXISTING LAW
Sections 367(a), 368(d), 368(h) of the Public Utilities Code are repealed.
SECTION 4. INITIATIVE INTEGRITY
(a) This act shall be broadly construed and applied in order to fully promote
its underlying purposes, and to be consistent with the United States
Constitution and the Constitution of the State of California. If any
provision of this initiative conflicts directly or indirectly with any
other provisions of law, including but not limited to the cost recovery
mechanism provided for by Sections 367 through 376 of the Public Utilities
Code, or any other statute previously enacted by the Legislature, it is the
intent of the voters that those other provisions shall be null and void to
the extent that they are inconsistent with this initiative and are hereby
repealed.
(b) No provision of this act may be amended by the Legislature except to
further the purpose of that provision by a statute passed in each house by
roll call vote entered in the journal, two thirds of the membership
concurring, or by a statute that becomes effective only when approved by
the electorate. No amendment by the Legislature shall be deemed to further
the purposes of this act unless it furthers the purpose of the specific
provision of this act that is being amended. In any judicial action with
respect to any legislative amendment, the court shall exercise its
independent judgment as to whether or not the amendment satisfies the
requirements of this subsection.
(c) If any provision of this act or the application thereof to any person or
circumstances is held invalid, that invalidity shall not effect other
provisions or applications of the act that can be given effect in the
absence of the invalid provision or application. To this end, the
provisions of this act are severable.
(d) It is the will of the People that any legal challenges to the validity of
any provision of this act be acted upon by the courts upon an expedited
basis.
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