PG&E vows stricter safety, regional focus
PG&E Corp. intends to abide by tougher safety standards, break up its operations into new regional divisions and replace members of its board when it emerges from bankruptcy protection, the company said Friday.
The plans, outlined in a filing to state regulators, are intended to help the parent company and utility subsidiary Pacific Gas and Electric Co. speedily resolve their bankruptcy case while improving their operations in response to catastrophic wildfires their power lines started.
PG&E said in a statement that it would commit to “enhanced safety metrics and stricter regulatory oversight with escalating enforcement mechanisms.” Gov. Gavin Newsom had called for such changes in a December letter to PG&E’s chief executive — and also suggested the company create a path to allow for a state takeover in certain circumstances.
But PG&E did not appear to fully embrace the most dramatic option sought by Newsom: a path for the state government or another entity
to take control of the company’s core business if it fails to meet safety standards. In his December letter, Newsom said PG&E should agree to a “streamlined process” through which its operating assets could be transferred to the state or someone else “when circumstances warrant.”
The company said in its filing that regulators “may intervene if PG&E falls short” of safety metrics and vowed to help “construct a process for early identification of shortcomings and prompt implementation of corrective actions.”
PG&E’s filing offered its most substantive response yet to public criticism from Newsom, who said in his previous letter that the company’s last bankruptcy exit plan fell “woefully short” of state requirements. Newsom has threatened a state takeover of PG&E multiple times, including Wednesday.
A spokesman for Newsom directed The Chronicle to the governor’s comments on Wednesday, when he said, “There’s going to be a new company or the state of California will take it over.” He said California needs a PG&E that is “transformatively different than the one we currently have.”
“I have no interest in the existing management and the existing board,” Newsom said at an event with the Public Policy Institute of California in Sacramento. “It has to be a completely transformed company.”
PG&E told the California Public Utilities Commission that it would later seek permission to use customer rates to pay for $7 billion in wildfire claim costs associated with its bankruptcy reorganization. But the company said its tax benefits would keep the impact on customers’ bills neutral. A state law PG&E is trying to comply with requires the company’s bankruptcy exit plan to have no net impact on rates.
The proposed changes reflect PG&E’s clearest vision so far for what the company wants to look like after the conclusion of its massive bankruptcy. The case began more than one year ago following a series of deadly and destructive wildfires the company caused, including the 2018 Camp Fire in Butte County.
CEO Bill Johnson said in a statement that the changes would allow PG&E to emerge from bankruptcy as a “reimagined utility with an enhanced safety structure, improved operations, and a board and management team focused on providing the safe, reliable, and clean energy our customers expect and deserve.”
After resolving the bankruptcy, PG&E said it wants to “regionalize the company’s operations and its infrastructure to enhance the company’s focus on local communities and customers.” Each region would be led by a PG&E officer reporting directly to the CEO, and would also have its own dedicated safety officer, the company said in its filing with the utilities commission.
PG&E said it would also bring in new board members with “the necessary expertise and skills to oversee the company postemergence.” The company already replaced almost all of its board of directors after it filed for bankruptcy protection last year, but now plans to do so once again.
Other changes outlined by PG&E include adjustments to executive compensation that would “further tie it to safety performance,” according to the statement. PG&E also intends to expand two executive roles, chief risk and safety officers, who will report to Johnson.
Additionally, a panel of experts from outside PG&E will regularly conduct “independent review of the company’s operations, including safety and regulatory compliance, safety leadership, and operational performance,” the company said.
PG&E has also amended its bankruptcy exit plan to incorporate a settlement it reached with bondholders who tried to take control of the company. If the settlement is approved in court, bondholders will withdraw their competing exit plan.
The deal, which U.S. Bankruptcy Judge Dennis Montali will consider at a hearing next week, will save customers about $1 billion because PG&E will be able to refinance debt on more favorable terms, according to the company.
PG&E’s latest round of proposed changes come after it cleared several major milestones in its yearold bankruptcy case. The company has won court approval of a $13.5 billion settlement deal with wildfire victims’ attorneys and a separate $11 billion settlement deal with insurance companies. PG&E previously settled with a group of local governments for $1 billion.
The company is trying to resolve its bankruptcy case by June 30 so it can access a new fund that will shield it from the costs of any future major wildfires.