Gov. Newsom rejects PG&E’s plans to exit bankruptcy, pay wildfire victims
In a stunning rebuke to PG&E Corp., Gov. Gavin Newsom late Friday rejected the utility’s plan to pay Northern California wildfire victims and exit bankruptcy.
In a letter to PG&E Chief Executive Bill Johnson, the governor declared that the company’s proposal doesn’t go far enough to make it “positioned to provide safe, reliable and affordable service.”
“The resolution of this bankruptcy must yield a radically restructured and transformed utility that is responsible and accountable,” he wrote. Among other things, he demanded an entirely new slate of directors who are subject to state approval, and a structure that would allow PG&E’s operating license to be transferred “to the state or a third-party when circumstances warrant.”
Just a week ago, PG&E announced what it believed was a breakthrough that would ease its way out of bankruptcy: a $13.5 billion settlement agreement with lawyers for more than 70,000 wildfire victims.
But the utility wasn’t home free after all. It still needed Newsom’s approval of its bankruptcy plan. Now it will have to overhaul the proposal, and quickly.
According to AB 1054, which creates a $21 billion insurance pool to help utilities pay for damages from future wildfires, PG&E needs to exit Chapter 11 by June 30 in order to participate in the fund..
AB 1054 says PG&E’s bankruptcy plan, besides compensating fire victims, must include a ramped-up program for preventing new fires, as well as other changes in how it does business. Newsom said PG&E’s proposals “do not comply with AB 1054.”
Responding to Newsom’s rejection, PG&E insisted its plan “is the best course forward for all stakeholders. We’ve welcomed feedback from all stakeholders ... and will continue to work diligently in the coming days to resolve any issues that may arise.”
Newsom had been demanding a massive overhaul of PG&E following a series of deliberate “public safety power shut-offs” in October, in which the utility blacked out hundreds of thousands of Northern California homes during severe windstorms and still couldn’t prevent the Kincade fire, the largest in Sonoma County history, from igniting. Though the official cause of the fire has yet to be determined, the utility reported a malfunctioning transmission tower near the blaze’s origin.
When Johnson argued it might take a decade to harden PG&E’s grid to the point that deliberate blackouts would no longer be needed, Newsom reacted with fury: “It doesn’t take a decade to fix this damn thing,” he said in late October.
He promised to force the utility to “do something radically different,” and teased out the possibility of a state takeover.
Newsom cited the October fire and blackouts in his letter to the CEO.
“PG&E’s recent management of the public safety power shut-offs did not restore public confidence,” he wrote. “For too long, PG&E has been mismanaged, failed to make adequate investments in fire safety and fire prevention, and neglected critical infrastructure.”
But PG&E’s $13.5 billion agreement with wildfire victims, announced Dec. 6, altered the landscape considerably. PG&E now had a powerful and sympathetic ally — the roughly 70,000 victims of the 2015 Butte Fire, the 2017 North Bay fires and last year’s Camp fire, which destroyed most of Paradise and killed 85 people.
The deal includes settlements with victims of the Ghost Ship disaster in Oakland and the 2017 Tubbs fire, which destroyed 4,651 homes and killed 22 people in Sonoma County, even though state investigators cleared PG&E in the Tubbs fire.