SAN FRANCISCO (CN) – California Governor Gavin Newsom on Friday rejected Pacific Gas and Electric's $13.5 billion settlement with wildfire victims, marking a major setback in the utility’s attempt to emerge from bankruptcy by June 30 in order to gain access to a $20 billion state-sponsored insurance fund for future wildfires.
Newsom announced the decision late Friday in a five-page letter to PG&E CEO William D. Johnson, according to the Associated Press, which reported Newsom said the settlement did not achieve the goal of providing safe and reliable power to its customers and that the company must address decades of mismanagement.
“PG&E’s board of directors and management have a responsibility to immediately develop a feasible plan,” Newsom said. “Anything else is irresponsible, a breach of fiduciary duties, and a clear violation of the public trust.”
PG&E's $13.5 billion settlement with wildfire victims announced last week would have included $5.4 billion in immediate cash, $650 million to be released in January 2021, and $700 million to be released in January 2022. The remaining $6.75 billion would have come in the form of stock in the reorganized PG&E corporation, with a guarantee that a trust fund for fire victims will own no less than 20.9% of the restructured company.
In July, lawmakers passed Assembly Bill 1054, establishing an insurance fund partially funded by ratepayers and private utilities. The law requires PG&E to comply with certain conditions in order to access the $20 billion fund. Those requirements include exiting bankruptcy by the end of June 2020 with a plan that fully resolves wildfire victims' claims, does not increase utility rates and includes a detailed, long-term strategy for safety improvements.
The plan would have been largely funded by current PG&E investors and would have allowed existing shareholders to retain control of the company.
“Under our settlement with individual wildfire victims, it must be determined whether our restructuring plan meets the requirements of Assembly Bill 1054,” PG&E said in a statement late Friday. “We believe it does and is the best course forward for all stakeholders. We’ve welcomed feedback from all stakeholders throughout these proceedings and will continue to work diligently in the coming days to resolve any issues that may arise.”
The company said it is “committed to getting victims paid, continuing to implement changes across our business to improve our operations for the long term and emerging from Chapter 11 as a financially sound utility.”
“In the meantime, we remain focused on delivering safe electric and gas service to 16 million people in Northern and Central California and working hard every day to reduce the ever-growing threat of catastrophic wildfires,” the company added.
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