PD Editorial: Deal with state forces PG&E to focus on safety
The deal Gov. Gavin Newsom struck with PG&E isn't going to satisfy everyone - but it will produce unprecedented oversight and a new level of accountability for the reckless company.
If added government scrutiny - combined with admitting guilt to 84 counts of manslaughter and one of unlawfully starting the Butte County fire in 2018 - doesn't deliver safer, more responsible operations, California's largest utility could find itself under new ownership.
Concluding a deal now gives PG&E time to seek approval from a federal bankruptcy judge and the state Public Utilities Commission before a June 30 deadline.
Moreover, it buys time for PG&E to step up safety efforts before fire season arrives.
And with the negotiations completed, Newsom can stay focused on the coronavirus pandemic, which could pose an even bigger threat than PG&E to the health and safety of California residents.
If the reorganization plan is approved:
PG&E will pay $25.5 billion in damages to property owners, insurers and government agencies to offset losses and public expenses from wildfires caused by its equipment between 2015 and 2018.
A state-approved safety monitor will be embedded at PG&E to ensure that the company meets its safety goals. If PG&E doesn't meet its goals, the state PUC can revoke its license and force a sale of the company.
PG&E, which is headquartered in San Francisco, will replace half of its board of directors with California residents. The new board members will be subject to Newsom's approval.
The company won't pay dividends to stockholders for three years, providing about $4 billion for settlements and safety measures.
If PG&E meets the June 30 deadline, it will gain access to a $21 billion state fund created to expedite payments to victims of any future wildfires caused by utility equipment. If the deadline is missed, the company will be sold.
It is, as Newsom touted, “the end of business as usual for PG&E.”
It isn't the public takeover desired by some ratepayers and public officials, but it doesn't eliminate the possibility either.
We have reservations about a public takeover, not because PG&E has been a responsible corporate citizen. It hasn't. But taxpayers would have to pay billions to buy the company, and they would assume liability for damage caused by future utility-related fires.
Under AB 1054, which created the state wildfire fund, PG&E must spend billions of shareholder money on vegetation management and other prevention measures.
The agreement moves fire victims a step closer to collecting damages from PG&E, but those settlements are to be divided equally between cash and company stock. With PG&E shares tumbling along with the markets, the coronavirus outbreak has introduced a new element of uncertainty for victims. But delaying a settlement could prove even costlier.
We hope the pandemic will be a temporary threat. With climate change, the risk of catastrophic wildfires is here to stay. Under this agreement, PG&E must make safety, not profitability, its bottom line - and the state must hold the company accountable.
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