PG&E, Newsom at odds over bankruptcy plan
Utility tells judge it will emerge as an investor-owned company by deadline amid state takeover threat.
SAN FRANCISCO >> Pacific Gas & Electric attorneys on Wednesday assured a federal judge the utility will emerge from bankruptcy by its June deadline, even as California Gov. Gavin Newsom vowed to follow through on his threat to have the state take over the nation’s largest utility.
The contradictory scenarios unfolded during a PG&E court hearing in San Francisco and an event in Sacramento, where the Democratic governor reiterated his staunch opposition to PG&E’s current plan for climbing out of a financial hole because of its liability for catastrophic wildfires in 2017 and 2018.
PG&E’s bankruptcy plan requires support from the governor and the state’s chief regulator, giving Newsom unusual leverage as the utility seeks to qualify for a wildfire insurance fund state lawmakers approved last year.
“PG&E, that company no longer exists,” Newsom said. “There’s going to be a new company, or the state of California takes it over, and that new company is going to be transformed.”
If PG&E overhauls its board and management in an effort to remain a publicly traded company, Newsom said it could become a utility that makes “every one of us proud and can be a model for the rest of the nation if we do our job.”
Any attempt to buy PG&E would be expensive. The company’s market value has fluctuated between $5 billion and $40 billion since mid-2017 and its current value is $8 billion. Newsom said the state is still “gaming out” how much a takeover bid would cost taxpayers.
PG&E attorney Stephen Karotkin told U.S. Bankruptcy Judge Dennis Montali the company is in constructive talks with Newsom in an effort to win the governor’s backing. Signaling PG&E’s confidence, Karotkin laid out a timetable that would allow voting to begin in May on a complex plan that includes a $13.5 billion pool for wildfire victims.
In addition to Newsom’s demand that PG&E replace its entire 14-member board of directors, including current CEO Bill Johnson, Newsom said other radical changes are required, including $40 to $50 billion in capital improvements to its outdated electrical grid.
“We are hopeful that PG&E can tighten up the financing plan, work on the governance issues, and we can get to where we need to go,” Newsom said.
Otherwise, he said he has “laid out in detailed terms” with legislative leaders the necessity of having a plan to turn the utility into a publicly owned nonprofit before the June 30 deadline.
The escalating friction between Newsom and PG&E aired out exactly one year after the company sought bankruptcy protection as a refuge from more than $50 billion in claimed losses from fires in a sprawling service territory that provides power to about 16 million people.
PG&E has reached $25.5 billion in settlements to resolve those claims. The San Francisco company also recently reached a deal with a group of bondholders that were pushing for an alternate bankruptcy plan that would have left a crack open for a state takeover. But the bondholders will scrap their competing plan if Montali approves the settlement with PG&E.
Despite all that progress, nagging questions still hang over PG&E’s biggest and most emotionally charged settlement — the deal setting up a $13.5 billion trust to cover uninsured and underinsured wildfire losses. Besides the victims’ property losses, the settlement also is supposed to pay for pain and suffering of people who lost family members, pets and were left homeless.