California Governor Gavin Newsom threatened a state takeover of PG&E Corp. unless the beleaguered utility giant makes a swift exit from bankruptcy and improves its operations to reduce the risk of wildfires.
“We are gaming out a backup plan if Pacific Gas and Electric is unable to secure its own fate and future,” Newsom said in a media briefing Friday.
Newsom again blasted PG&E for its handling of a series of intentional mass blackouts intended to keep power lines from igniting fires during high winds. He said in a statement that the shutoffs highlighted PG&E’s “culture of ineptitude — a behemoth that was slow to act and resistant to change.”
The swiftest way to transform the company is to get it out of bankruptcy quickly, he added. As a result, Newsom said he would hold a meeting next week with PG&E executives, shareholders, wildfire victims and creditors in an effort to “accelerate a consensual resolution” to the bankruptcy.
“If the parties fail to reach an agreement quickly to begin this process of transformation, the state will not hesitate to step in and restructure the utility,” he said in the statement.
“We share the governor’s focus on reducing wildfire risk across California and understand that PG&E must play a role in these efforts,” the San Francisco-based utility said in a statement. “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.”
Some of Wall Street’s biggest names are battling in court for control of the utility, which filed for Chapter 11 in January in the face of $30 billion of estimated liabilities from wildfires blamed on its equipment.
A group of bondholders led by billionaire Paul Singer’s Elliott Management Corp. and Pacific Investment Management Co. recently won court approval to pitch their reorganization plan alongside that of PG&E and its shareholders. The bondholders have aligned with wildfire victims with a plan that sets aside billions more for individual fire claims and would virtually wipe out existing shareholders. U.S. Bankruptcy Judge Dennis Montali recently ordered the principal parties in the case into mediation, a request made by PG&E.
Newsom said that he was appointing his cabinet secretary, Ana Matosantos, to serve as the state’s “Energy Czar.” She will head up a team of advisers that will develop the backup plan for PG&E should the state need to take action.
He added that the team will evaluate several possible scenarios — including a state-operated utility or a “privately managed” government entity.
Newsom said PG&E could be structured like the state’s independent grid operator, which is a non-profit corporation set up to manage the flow of power across the state. He has also tasked his team to craft a blueprint to transform the company’s culture and operations that will be presented in the coming weeks.
The governor’s office wants the utility to become more nimble in its decision making, focus more on its regional operations and create a structure that is more responsive to customers, his advisers said. The utility will need to improve operations and speed up investments that allow it to limit the scope of future shutoffs.
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