SAN FRANCISCO (CN) – Pacific Gas and Electric must offer to sell itself to the state of California or another buyer if it fails to win approval of its bankruptcy plan by June 30 under a deal reached with Governor Gavin Newsom on Friday.
“This is the end of business as usual for PG&E,” Newsom said in a statement Friday.
The company filed a motion in bankruptcy court seeking approval of a contingency process forged through negotiations with the governor’s office. The contingency process would enable California to embed an “operational observer” inside PG&E to review the company’s progress in reducing fire risk and improving safety.
This observer will have authority to sit in on board of directors’ meetings and executive-level discussions related to safety and performance. The observer will also have the power to “conduct field visits, interviews and inspections, review documentation related to safety performance, and undertake any other tasks reasonably required in furtherance of its duties.”
If PG&E’s bankruptcy plan is not approved by June 30 or if the plan fails to become effective by Sept. 30, the company would be required to appoint a chief transition officer to oversee the sale of PG&E’s assets. A sale committee made up PG&E board members would also be created to oversee the transition.
The plan requires PG&E to appoint the state’s chosen operational observer as chief transition officer, or if that is not possible, to appoint someone from a state-approved list of candidates.
In exchange for that concession, the governor agreed not to object to PG&E’s bankruptcy plan or argue that it fails to comply with state law as long as the California Public Utilities Commission approves it.
The governor’s office credited its involvement in the bankruptcy case as spurring substantial changes to PG&E’s bankruptcy plan that will make the company safer and more financially stable.
The company has agreed not to pay dividends to shareholders for the next three years, preserving a potential $4 billion. PG&E also agreed to use $7.6 billion in shareholder assets to repay or refinance its debt, and it restructured bonds to save $1.4 billion.
As part of the deal, PG&E will also submit to enhanced oversight from the CPUC, which will gain new enforcement tools to make sure PG&E complies with its public safety commitments. A spate of new enforcement powers, including the ability to revoke PG&E’s operating license if it causes another major fire, was proposed by CPUC President Marybel Batjer last month. Under the deal reached Friday, PG&E agreed to be subject to those severe penalties, which would include giving California the power to take control of the company.
“Because of these new tools, the state will have the legal authority to continue demanding total transformation even after the company emerges bankruptcy – and we aren’t taking our foot off the gas,” Newsom said in a statement.
The governor also filed a notice in bankruptcy court Friday stating he will not oppose PG&E’s newly revised bankruptcy plan as long as the CPUC approves it.
“We appreciate the governor’s statements in the bankruptcy court,” PG&E CEO Bill Johnson said in a statement. “We now look to the California Public Utilities Commission to approve the plan through its established regulatory process, so that we can exit Chapter 11, pay wildfire victims fairly and as soon as possible, and participate in the state’s wildfire fund.”
PG&E declared bankruptcy on Jan. 29, 2019, as its finances buckled under the weight of a potential $30 billion or more in wildfire-related liabilities amid claims that its negligent maintenance of power equipment and vegetation caused 19 wildfires in 2017 and 2018 that killed more than 100 people.
PG&E has agreed to pay $25.5 billion in settlements to fire victims, insurers and government entities for wildfires sparked by its equipment. The company was also hit with a record $2.14 billion fine by the CPUC last month for its role in sparking wildfires in 2017 and 2018.