CA Gov. Newsom rejects PG&E reorganization plan, suggests new governance

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In a letter to PG&E CEO William Johnson, California Gov. Gavin Newsom publicly rejected PG&E’s amended Plan of Reorganization on Friday, which was set to pull the company out of bankruptcy by June 2020 and compensate wildfire victims.

PG&E filed for bankruptcy in January and reached a settlement of about $13.5 billion Dec. 6 to resolve all remaining wildfire claims, including compensation for victims of fires attributed to PG&E. Although the company claims the reformed plan is compliant with AB 1054, titled “Public utilities: wildfires and employee protection,” Newsom decided that the plan is not compliant.

“In my judgement, the Amended Plan and the restructuring transactions do not result in a reorganized company positioned to provide safe, reliable, and affordable service to its customers, as required by AB 1054,” Newsom wrote in his letter.

Newsom also argued for new governance and enforcement mechanisms within the company, suggesting an entirely new board of directors, which he said he felt should be majority Californians, with some having qualifications in extensive safety experience. He recommended the California Public Utilities Commission, or CPUC, approve the board.

“For too long, PG&E has been mismanaged, failed to make adequate investments in fire safety and fire prevention, and neglected critical infrastructure,” Newsom wrote in his letter. “PG&E has simply violated the public trust.”

A poll released by UC Berkeley’s Institute of Governmental Studies on Dec. 10 found a majority of registered California voters favor changing the way PG&E operates, with 73% of voters supporting decisions on power outages being made jointly between utility companies and state regulators.

Twenty-two California mayors, including Berkeley Mayor Jesse Arreguín, signed San Jose Mayor Sam Liccardo’s proposal to turn PG&E into a customer-owned cooperative to prioritize safety and affordability in November.

“I am very supportive of the courageous decision Governor Newsom took to reject PG&E’s organizational plan. Nothing short of a major restructuring of PG&E will be sufficient to address the serious safety and deferred maintenance issues that pose a risk to the safety of customers throughout California,” Arreguín said in an email. “It is time to make PG&E a publicly owned utility.”

PG&E’s press release from Dec. 12 regarding the plan stated it will “continue to meet the state’s climate and clean energy goals,” but does not specify how that would occur. Since Newsom’s rejection, PG&E has publicly said they reaffirm their plan and will work with stakeholders to resolve issues.

The Daily Californian reached out to PG&E for comment but did not receive a response as of press time.

Newsom wrote in the letter the CPUC will need to determine whether PG&E’s future plan stays aligned with the state’s climate goals in order for the company to access California’s wildfire fund established by AB 1054.

“An important consideration here is who will do the best job of promoting distributed generation and renewable energy for the future of California,” said David Wooley, a campus visiting professor of public policy. “There’s some skepticism that PG&E can or would do that, and so it seems to me that the governor’s intervention is helpful from the standpoint of making sure that we have an electric utility manager who’s going to pursue the clean energy alternatives, particularly at the local level.”

Olivia Buccieri is the lead business and economy reporter. Contact her at [email protected] and follow her on Twitter at @obuccieri_dc‏.