Deal forces PG&E to put reliability and safety before profits
California finally has a governor willing to provide the oversight necessary to rein in PG&E.
Gavin Newsom, after months of negotiations, reached an agreement with the utility Friday that would require it to put safety before profits. Newsom stood firm where his predecessor, Jerry Brown, would not.
If the deal is approved by the court overseeing PG&E’s bankruptcy, Californians will be safer and have a more reliable source of power as a result.
“This is the end of business as usual for PG&E,” Newsom said in a statement. “... (We) secured a totally transformed board and leadership structure for the company, real accountability tools to ensure safety and reliability and billions more in contributions from shareholders to ensure safety upgrades are achieved.”
Friday’s agreement was followed by Monday’s announcement that PG&E will plead guilty to 84 involuntary manslaughter charges in connection with the Camp Fire of 2018 that roared through Butte County. That will speed up the court process and should allow victims to settle claims and be paid sooner.
The governor used the leverage of AB 1054 to force PG&E’s hand in the bankruptcy case. The bipartisan legislation, signed into law in 2019, gave the utility access to billions of dollars in a fund to pay future wildfire claims.
But, in order to gain access to the money, PG&E had to agree to strict safety requirements and meet a June 30 deadline for emerging from bankruptcy. The legislation required that the utility bankruptcy settlement had to “fairly compensate fire victims, be neutral to ratepayers, be consistent with the state’s climate goals and be approved by the California Public Utilities Commission in light of the company’s financial condition and past safety history.”
PG&E aggressively sought to soften the requirements, a tactic it has successfully employed in the past. But Newsom held firm, winning three significant victories for ratepayers:
• PG&E will suspend paying dividends to shareholders for three years, which equates to a contribution of $4 billion that will not fall to ratepayers. The utility will also use approximately $7.6 billion of shareholder assets to repay or support a refinancing of temporary utility debt.
• A safety monitor will be embedded at PG&E who will actively engage in the utility company’s efforts to meet its safety goals. PG&E had wanted to select the monitor, but Newsom insisted that the utility pick from three nominees chosen by the governor. In addition, if PG&E fails to meet its safety goals, the PUC can revoke its license and force a state takeover.
• A new PG&E board of directors will be chosen that must be approved by the governor. Another provision requires that the new board comprise a majority of current California residents. The selection of a new board will likely mean substantial changes to PG&E’s executive team, with a greater emphasis on safety and reliability.
The threats of drought and climate change will add to the risk from wildfires in the months and years ahead. But Newsom’s firm hand represents a significant step forward in forcing PG&E to — finally — put safety and reliability before profits.