A year after it filed for Chapter 11 bankruptcy reorganization, San Francisco-based Pacific Gas and Electric Co. is close to emerging from court protection. But the giant company, facing huge liabilities from utility-caused wildfires that scorched its territory and killed at least 85, still has a major obstacle to overcome: California Gov. Gavin Newsom.
The good news for PG&E is that the company has reached a deal with a group of Wall Street hedge fund bondholders, which had been proposing to oust the PG&E board. The fire victim’s representatives initially rejected PG&E’s $8.5 billion payout offer, insisting on $13.5 billion. PG&E ultimate caved, opening an exit to the reorganization play, agreeing to a total compensation plan to pay $25.5 billion ($12 billion in equity and $34 billion in debt) to victims, insurers, and government agencies.
But Newsom, an opponent of the utility company since his days as San Francisco mayor, last week said the deal was inadequate. Newsom wants PG&E to replace its entire 14-member board of directors, including firing CEO Bill Johnson, who took the scorched reins in April 2019, after retiring as CEO of the Tennessee Valley Authority.
Newsom isn’t directly a party to the bankruptcy litigation. He says he’s skeptical about the company’s plans to pay its commitments with debt financing. Newsom has a hammer he can wield over the reorganization. He controls a $21 billion state wildfire fund that PG&E needs to tap to meet its financial commitments. The California Public Utilities Commission, which Newsom controls, must approve access to the fund. The CPUC has slammed PG&E’s investments in grid safety and launched an investigation into the company’s
Newsom has also repeated a threat to socialize PG&E, turning it into a state-owned public power system. It isn’t clear how he would be able to finance the purchase of the company. Legal experts tell The Quad Report that he couldn’t accomplish that by some sort of condemnation order without a multi-year course of litigation and an uncertain outcome.
PG&E needs to get court approval to exit Chapter 11 bankruptcy by June to get access to the $21 billion pot of state money. The company quickly responded to Newsom’s complaints, saying “additional changes to the plan are forthcoming.”
— Kennedy Maize