Gov. Gavin Newsom announced Friday that he has reached a deal with PG&E that will dramatically transform the disgraced utility and potentially end a bankruptcy ushered in by the company’s wildfire-linked liabilities.
“This is the end of business as usual for PG&E,” Newsom said in a prepared release.
It’s also possible that PG&E could be auctioned off and sold to the state of California if the company’s bankruptcy doesn’t conclude by June 30.
The governor noted that his office and other key players had to prod PG&E to undertake badly needed reforms and provide assistance to fire victims in the wake of a string of catastrophic and lethal wildfires in Northern California that were caused by the utility.
“Through California’s unprecedented intervention in the bankruptcy, 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,” Newsom said.
PG&E filed for a $51.69 billion bankruptcy in January 2019, saying that its finances had buckled beneath a towering mountain of debts and wildfire-linked liabilities.
But numerous critics, including the governor, noted that PG&E’s financial quagmire was caused in large measure by its own blunders, including failed efforts to adequately maintain its aging and deteriorating electricity system.
PG&E’s maintenance mishaps began to be exposed a decade ago following a lethal explosion in San Bruno that was caused by a combination of the utility’s flawed record-keeping and shoddy maintenance, along with coddling by an inattentive state Public Utilities Commission.
“We appreciate the governor’s statements in the Bankruptcy Court,” PG&E Chief Executive Officer William Johnson said in a prepared release. “We now look to the California Public Utilities Commission to approve the bankruptcy plan through its established regulatory process.”
However, if the PUC and the federal bankruptcy court don’t approve PG&E’s plan to reorganize its finances and conclude the company’s Chapter 11 proceeding, the company could be sold.
“In the unlikely event the reorganization plan is not confirmed, or PG&E does not exit Chapter 11 in a timely manner, an orderly process for a sale of the business to the state or another party will be commenced,” PG&E said.
Among the key changes in the latest plan that now has the endorsement of the governor:
— PG&E will cancel dividend payments to shareholders for roughly three years, which will amount to an equity contribution of $4 billion.
— The utility has committed to about $7.6 billion of shareholder assets to repay or support a refinancing of temporary utility debt.
— Savings of about $1.4 billion will be used to benefit ratepayers after certain bonds are restructured.
In addition, oversight and regulatory tools will be put into place. Among these oversight provisions:
— An independent monitor, selected by the state, to provide insight on PG&E progress with safety goals ahead of the company’s emergence from bankruptcy.
— A governance structure that prioritizes safety within the organization, particularly among the executives and PG&E’s board.
— New enforcement and oversight tools for the PUC.
— A process to speed up payments of the claims from wildfire victims.
— Mechanisms to ensure PG&E undertakes necessary wildfire mitigation and safety investments.
“The governor has been consistent in his dedication to the creation of a new PG&E, and this agreement achieves that,” said state Sen. Jerry Hill, a long-time and harsh critic of PG&E. “The governor kept his commitment to creation of a safe PG&E.”
A consumer group, The Utility Reform Network, gave its backing to the settlement.
“It’s an important step forward to holding PG&E accountable,” said Mark Toney, TURN executive director. “There are consequences if PG&E does not live up to its promises,”
However, TURN is concerned about some issues that weren’t addressed by the settlement.
“We want the PUC to prohibit PG&E from seeking ratepayer recovery to help for any of the wildfires from 2015, 2017, and 2018,” Toney said.
The state of California will continue to carefully scrutinize PG&E now that it will be easier to hold the utility accountable, Newsom vowed.
“Because of these new tools, the state will have the legal authority to continue demanding total transformation even after the company emerges from bankruptcy,” the governor said. “We aren’t taking our foot off the gas.”