PG&E seems to have sought Newsom’s approval in a political gambit that didn’t work in its favor.
California Gov. Gavin Newsom has rejected a proposed settlement by Pacific Gas & Electric Corp. (PG&E), which is blamed for starting several massive wildfires.
National Public Radio notes that Newsom didn’t have to weigh in on the settlement. But PG&E asked for his input, believing its plan—which included a multi-billion dollar payout and management restructuring—would let it exit bankruptcy and stall a hostile take-over organized by some of the company’s bond-holders.
But on Friday, Newsom prepared and sent his response. Called a “stunning rebuke” by NPR, Newsom suggested that PG&E’s plan doesn’t position it “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,” Newsom wrote, suggesting that the company replace each of its directors. Newsom further propose that PG&E’s management should be held more accountable to the state, with its operating license transferable to California or “a third-party when circumstances warrant.”
Newsom also criticized PG&E’s new financing plan, which the governor said relies too heavily on borrowed money and doesn’t ensure an ability “to make billions of dollars in safety investments.”
““The state remains focused on meeting the needs of Californians including fair treatment of victims – not on which Wall Street interests fund an exit from bankruptcy,” Newsom said.
According to NPR, Pacific Gas & Electric had just announced what the company’s leadership thought was a breakthrough settlement: $13.5 billion for attorneys representing more than 70,000 wildfire victims.
But now that Newsom’s weighed in, PG&E has a relatively short timeframe to alter its offer. A bill passed by the state assembly—AB1054—has created a $21 billion insurance pool for future wildfires—and legislators are now saying that PG&E has to pay in.
Along with compensating victims and paying into AB1054’s insurance fund, the bill also requires a revised plan for preventing future wildfires. Newsom says that PG&E’s plan to exit bankruptcy, at least in its present state, doesn’t comply with AB1054.
“For too long, PG&E has been mismanaged, failed to make adequate investments in fire safety and fire prevention, and neglected critical infrastructure,” Newsom wrote.
“In my judgment, the amended plan and the restructuring transactions do not result in a reorganized company […] as required by AB1054,” he added.
The Los Angeles Times reiterates that Newsom’s participation isn’t required by AB1054. But PG&E elected to consult the governor in something of a political gamble, hoping the pressure of paying back wildfire victims could sway Newsom.
“The company is kind of saying, ‘You’re going to have to sign off on this,’” said bankruptcy attorney and UC-Hastings law professor Jared Ellias. “’We’re not going to let you have the benefit of distance from what we’re doing. If you say no, this thing could crash and burn, and you’re going to own the wreckage.”
Newsom, adds the Times, has tasked cabinet secretary Ana Matosantos to lead a task force entrusted with developing a state-backed restructuring proposal.