California to Ready ‘Backup Plan’ to Take Over PG&E

A Pacific Gas & Electric lineman works to repair a power line in fire-ravaged Paradise, Calif., on Nov. 26, 2018. (AP Photo/Rich Pedroncelli, File)

SACRAMENTO, Calif. (CN) – California will draft a plan to take over Pacific Gas and Electric’s operations if it cannot compensate fire victims and emerge from bankruptcy by June 30, 2020, Governor Gavin Newsom announced Friday.

“We are leaning in on scoping a state backup plan,” Newsom said during a press conference Friday.

Newsom declined to specify details of the proposed “backup plan,” but suggested it could include partnership with cities like San Jose and San Francisco, which have offered to buy PG&E’s assets and take over utility operations for their residents.

“It could have components that are consistent with some of those localized efforts,” Newsom said.

The governor said he was assembling a task force to work on the plan. That task force will also help kick start talks between PG&E, fire victims, bondholders, creditors and other interested parties to negotiate a deal to help bring PG&E out of bankruptcy by mid-2020.

Legislation passed this year requires PG&E emerge from bankruptcy by June 30, 2020, in order to access a $21 billion insurance fund, partially funded by ratepayers and utility contributions, that can be used to settle future wildfire claims.

Newsom said PG&E needs to act with more urgency to resolve its bankruptcy, which is why his new “strike team” has reached out to retired Bankruptcy Judge Randall Newsome, who was appointed as mediator in PG&E’s bankruptcy case.

The governor also submitted a letter to U.S. Bankruptcy Judge Dennis Montali on Friday, saying the state will “intervene to restructure” PG&E if it and other parties fail to work swiftly in reaching a consensual agreement to bring the company out of bankruptcy.

Another task for the “strike team” will be reviewing PG&E’s public safety power shutoff program, which has been the subject of fierce criticism since Oct. 9 when the utility rolled out its first widespread power outage of the year. The company was criticized for poor planning, insufficient coordination with local governments, website crashes, an overwhelmed call center and failure to set up emergency resource centers in affected communities, among other problems.

During a California Public Utility Commission (CPUC) meeting last month, PG&E CEO Bill Johnson said widespread power blackouts would probably continue for another decade until the company makes enough progress in hardening its power lines and clearing vegetation in high fire-threat areas.

Newsom summarily rejected that timeline Friday, saying his task force would work with the CPUC to ensure PG&E moves more quickly to reduce the frequency, duration and necessity for planned power outages.

“This is not the new normal, and it does not take 10 years to solve,” Newsom said.

The governor also thanked the state’s firefighters and first responders, noting that a vast majority of wildfires currently threatening the state are now substantially contained, including the Kincade Fire in Sonoma County. Now 68% contained, the Kincade Fire has burned 77,000 acres and destroyed 350 buildings. PG&E equipment is suspected as a potential cause of that fire.

The governor stressed his office would not sit idly by and hope PG&E gets it act together. He said his task force would submit updates on its plans to reform PG&E’s operations and bankruptcy process every three months.

“PG&E as we know it may or may not be able to figure this out,” Newsom said. “If they cannot, we are not going to sit around and be passive.”

In a statement Friday, PG&E said it shares the governor’s concern about reducing wildfire risk and understands it must play an important role in those efforts.

“We welcome the governor’s and the state’s engagement on these vital matters and share the same goal of fairly resolving the wildfire claims and exiting the Chapter 11 process as quickly as possible,” PG&E spokesman James Noonan said by email. “PG&E is committed to working with all stakeholders to make the necessary changes moving forward to be the company our customers and communities want and deserve.”

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