California Gov. Gavin Newsom on Friday rejected Pacific Gas & Electric’s plan for exiting bankruptcy, saying the embattled utility’s proposal falls “woefully short” of requirements in a new wildfire liability law.
In a letter late Friday to PG&E’s president, Newsom said the plan failed to address key issues related to safety, corporate governance and capital structure, and would “not result in a reorganized company positioned to provide safe, reliable, and affordable service.”
“The state remains focused on meeting the needs of Californians including fair treatment of victims,” Newsom wrote, “not on which Wall Street financial interests fund an exit from bankruptcy.”
The move is a setback for PG&E as it pushes to emerge from Chapter 11 proceedings in the coming months and start compensating victims of a series of devastating wildfires linked to its equipment. The company needs Newsom’s approval to move forward with the plan and will likely have to make major revisions in light of the governor’s letter.
PG&E pushed back on Newsom’s criticisms Friday, telling the Sacramento Bee that the plan was “the best course forward for all stakeholders” and vowing to work “diligently in the coming days to resolve any issues that may arise.”
PG&E reaches $13.5 billion settlement with California wildfire victims
Last week, the utility announced it had reached a roughly $13.5 billion settlement to cover claims stemming from some of the most destructive fires in California’s history, including the 2018 Camp Fire, which killed 86 people and destroyed Paradise, Calif.
PG&E said the settlement, which must be approved by a judge, would put it on track to emerge from bankruptcy by June 30, a deadline set under California’s recently enacted state wildfire statute, AB 1054. The law, which passed in July, creates a fund that state utilities will use to pay for damage from future wildfires ignited by their equipment.
But Newsom said PG&E’s current restructuring plan lacks crucial accountability measures required under the law, including clearly defined safety metrics and stringent enforcement mechanisms to protect the state if the reorganized company fails to meet those metrics.
The governor said he also worried that the plan would leave PG&E in a financially precarious position “with limited ability to withstand future financial and operational head winds.”
“PG&E’s board of directors and management have a responsibility to immediately develop a feasible plan,” Newsom wrote. “Anything else is irresponsible, a breach of fiduciary duties, and a clear violation of the public trust.”
PG&E, which is California’s largest utility, filed for bankruptcy protection earlier this year, facing billions of dollars in liability stemming from wildfires that have devastated the state in recent years.
The company has faced waves of criticism over its response to the fires, which have killed dozens of people and reduced tens of thousands of homes and businesses to ash. PG&E’s decision to preemptively cut power to millions of customers during intensely dry, windy weather has infuriated residents and prompted some officials to call for a public takeover of the company.
Newsom — who has received hundreds of thousands of dollars in campaign contributions from PG&E and its employees — has become one of PG&E’s fiercest critics and has suggested that the state restructure it.
A coalition of more than two-dozen local officials, led by San Jose Mayor Sam Liccardo, have called for PG&E to be replaced by a customer-owned cooperative.