PG&E announces new bankruptcy plan. Does it go far enough for California Gov. Newsom?

Facing threats of a state takeover, PG&E Corp. on Friday unveiled a new plan for pulling out of bankruptcy that would overhaul the utility’s leadership and dedicate more executives to wildfire safety.

The plan lays out a multibillion-dollar strategy for compensating victims of the 2017 and 2018 wildfires without raising customers’ rates. But the important audience for the new deal was the California utility’s fiercest and most powerful critic: Gov. Gavin Newsom.

A month ago, Newsom rejected its first plan for compensating wildfire victims and reorganizing its operations, PG&E submitted an amended proposal in U.S. Bankruptcy Court and the California Public Utilities Commission.

PG&E’s revised proposal — which followed weeks of intensive negotiations with Newsom’s top advisers — makes some concessions to Newsom. The utility said it plans at least a partial shakeup of its board of directors and will enlist an outside, independent safety monitor to oversee company operations. Officials known as chief safety officers would be deployed throughout PG&E’s territory.

PG&E needs court approval for its bankruptcy plan by June 30 to gain admission to a new wildfire insurance fund worth $21 billion. The PUC must sign off on the plan, too, although it’s been Newsom who has been pressing the utility for dramatic changes in how it does business.

Friday’s proposal is the result of “a lot of back-channeling” with the governor’s office, said a source close to the negotiations who wasn’t authorized to comment for attribution.

In its filing with the PUC, the company said it “has taken to heart the governor’s concerns. It added that it “is open to further discussions with the Governor’s Office and other stakeholders.”

Newsom’s office had no immediate comment. As recently as Wednesday — the anniversary of the utility’s Chapter 11 bankruptcy filing — the governor reiterated his threat to engineer a state takeover if PG&E didn’t make dramatic changes.

“There’s going to be a new company, or the state of California takes it over,” Newsom said at a conference in Sacramento sponsored by the Public Policy Institute of California.

Among other things, Newsom said he was afraid the earlier plan would leave PG&E too heavily in debt and hobble its wildfire safety efforts, which includes replacing aging transmission towers, insulating exposed power lines and trimming trees more aggressively. PG&E was driven into bankruptcy by wildfires blamed on its equipment, including the worst-in-history 2018 Camp Fire in Paradise.

“They have work to do on financing,” Newsom said Wednesday. “What I don’t want is a utility that comes out of bankruptcy limping.”

Pledge to add safety experts

The company said its plan will create “a financially stable company” capable of investing in fire prevention. Its filing with the Public Utilities Commission included written testimony from the John Plaster of Barclays, one of the utility’s lenders, saying he believes the company will be able “to attract more than enough capital.”

As for company governance, PG&E on Friday said it probably wouldn’t replace its board with an entirely new slate of directors, as Newsom demanded in December.

But board chair Nora Brownell, who joined PG&E last spring, said in written testimony that most of the old PG&E board has already been replaced in the past year and “a number of the current directors will depart” when the company leaves bankruptcy. She promised that PG&E will name more directors with expertise in safety and utility operations.

PG&E has already made deals to pay its major creditor groups, including a landmark $13.5 billion agreement with lawyers representing tens of thousands of Northern California wildfire victims.

Ordinarily, those deals with creditors would be enough to ensure the company a smooth exit from Chapter 11 bankruptcy. But because it’s a regulated utility, PG&E also needs the green light from the state.

Time is running short. If the company doesn’t exit bankruptcy by June 30, it won’t be allowed to participate in a new state-run insurance pool that would partially shield California’s major utilities against liabilities from future wildfires — a critical piece of PG&E’s efforts to regain its financial viability.

The $21 billion pool is funded equally by utility shareholders and ratepayers, with the ratepayers’ share coming from extending a $1.50-a-month surcharge that was due to expire this year.

This story was originally published January 31, 2020 at 9:00 PM with the headline "PG&E announces new bankruptcy plan. Does it go far enough for California Gov. Newsom?."