By Katherine Blunt and Alejandro Lazo
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (November 2, 2019).
California Gov. Gavin Newsom is threatening a state takeover of
PG&E Corp. unless the company exits bankruptcy and dramatically
improves the safety of its electric grid before the next wildfire
season.
The governor on Friday said he has demanded that PG&E
executives, investors and representatives for wildfire victims
appear in Sacramento next week to discuss how to expedite the
company's emergence from chapter 11 by a state-imposed deadline of
June 30. He said the state may intervene if the company's
shareholders and bondholders don't quickly agree on a
reorganization plan.
"PG&E as we know it, may or may not be able to figure this
out, if they cannot we are not going to sit around and be passive,"
Mr. Newsom said. "The state will prepare itself as backup for a
scenario where we do that job for them."
Mr. Newsom said he has assigned his cabinet secretary, Ana
Matosantos, to head a team tasked with preparing a plan should the
state need to intervene. Ann Patterson, Mr. Newsom's lead attorney
on the matter, Alice Reynolds, his lead energy and environmental
policy expert, and Rachel Wagoner, his senior legislative
strategist, will aid in the effort.
All options, including a state takeover, are on the table,
according to Mr. Newsom's advisers. Mr. Newsom didn't specify how
the state would structure a takeover of the company, and what
compensation it would offer investors. He said the team will work
to scope that plan.
"It's not writing a check," he said, referring to the complexity
of such a transaction.
The governor's threat comes after a fraught month for PG&E,
which pre-emptively shut off the power to millions of Californians
in an effort to prevent its equipment from sparking more
destructive wildfires as strong winds swept its service territory.
The shut-offs created widespread turmoil and drew the ire of
customers, businesses and state officials.
"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 company said Friday. "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 disclosed that one of its transmission lines may have
sparked the Kincade Fire in Sonoma County, despite having turned
off a large section of the power grid there, as well as a series of
smaller fires in the Bay Area.
The disclosures eroded PG&E's stock and bond prices on
concerns that the company could face additional fire-related
liability costs, and threatened to stall negotiations among
investors in bankruptcy court. The company's shareholders and
bondholders have proposed competing plans to pay billions of
dollars in liability costs related to a series of deadly fires in
2017 and 2018.
Mr. Newsom, a Democrat, said he will compel PG&E to make
massive investments in its infrastructure to improve the safety of
the system and reduce the need for pre-emptive power shut-offs.
"This process needs to take shape with a deep sense of urgency,"
Mr. Newsom said. He added that the state cannot wait until June 30
for PG&E to restructure.
Democratic state Sen. Jerry Hill, a longtime critic of PG&E,
said he supported the governor's willingness to take control of the
company if it "cannot or will not transform itself."
"We'll have a future with or without PG&E," he said. "That's
the message they need to hear."
Democratic state Sen. Bill Dodd, who has written two bills in
the past two years aimed at financially supporting the state's
utilities in the face of wildfire liabilities, said he didn't
support a state takeover of PG&E.
"I still remain concerned that, at least at this time, that the
liability could threaten -- if the worst happens -- it could
threaten our state budget," Mr. Dodd said Friday.
Gerald Singleton, a San Diego lawyer who represents 7,000 fire
victims in PG&E's bankruptcy, called the governor's move a
positive step.
His clients want compensation, he said, but "they are also very
concerned about the future and want to make sure that PG&E is
making the necessary changes."
PG&E sought bankruptcy protection in January, citing more
than $30 billion in potential liability costs tied to more than a
dozen wildfires that collectively killed more than 100 people.
California lawmakers outlined a road map for PG&E to make
safety investments earlier this year, as part of legislation that
established a wildfire fund to help all of the state's utilities
cover liability costs. To participate in the fund, which PG&E
investors consider necessary for reorganization, the company must
meet the state's bankruptcy deadline, spend heavily to upgrade its
infrastructure and meet certain safety requirements.
Write to Katherine Blunt at Katherine.Blunt@wsj.com and
Alejandro Lazo at alejandro.lazo@wsj.com
(END) Dow Jones Newswires
November 02, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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