California governor rejects PG&E's bankruptcy plan

The utility last week agreed to pay $13.5 billion to wildfire claimants.
Image: Camp Fire
The Camp Fire in Paradise, California, in 2018.Justin Sullivan / Getty Images file

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By Dennis Romero

California Gov. Gavin Newsom late Friday rejected the bankruptcy exit plan submitted by the state's largest utility, saying in a letter to Pacific Gas & Electric that it lacked required "major changes in governance."

Facing billions of dollars in possible liabilities for California's wildfires, several of which state officials blamed on PG&E equipment, the utility in January filed for bankruptcy and announced last week a possible final round of settlements with wildfire claimants worth $13.5 billion.

But Newsom reminded PG&E that the state controls a $21 billion fund crucial to PG&E's survival, an insurance pool that will help cover future wildfire liabilities for utilities. But PG&E must be out of bankruptcy by June 30 to participate.

"PG&E's current plan is not feasible without access to the wildfire fund," Newsom warned.

The governor said the plan doesn't comply with the fund's requirements, including "stringent governance and management requirements, enforcement mechanisms, and a capital structure that allows the company to make critical safety investments."

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He argued the proposal's shortcomings have not been helped by the utility's preventative blackouts earlier this fall that impacted millions of customers.

Though designed to ensure that power equipment wouldn't cause wildfires during dry, windy weather, the blackouts "caused extreme uncertainty and harm for Californians who rely on power for their health care and for their livelihoods," Newsom wrote to CEO Bill Johnson.

"For too long," he wrote, "PG&E has been mismanaged, failed to make adequate investments in fire safety and fire prevention, and neglected critical infrastructure. PG&E has simply violated the public trust."

Newsom is calling for "a radically restructured and transformed utility" including an all-new board of directors, clear safety metrics, a process for transferring the utility's "license" to the state "when circumstances warrant," and "escalating enforcement" if PG&E falters on safety, management or business.

PG&E did not immediately respond to a request for comment.

Johnson said in a statement last week that PG&E "has heard those calls for change, and we realize we need to do even more to be a different company now and in the future."

The proposed $13.5 billion settlement was separate from a $1 billion deal with cities, counties and other public entities and from an $11 billion agreement with insurers and others that covers claims for the 2017 and 2018 wildfires.

The latest deal would cover claims stemming from the 2015 Butte fire in Amador and Calaveras counties that caused two deaths and destroyed 877 buildings; the 2016 Ghost Ship fire in Oakland that consumed an artists' live-work collective and killed 36 partygoers; the 2017 Tubbs fire in the Wine Country that killed 22 people and destroyed 5,600 structures; and the Camp fire, centered in Paradise, that destroyed 18,800 structures and killed 85 people, making it the state's deadliest.

The California Department of Forestry and Fire Protection said in May that PG&E's transmission lines caused the Camp fire.