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PG&E agrees to deal with California governor on bankruptcy demands

by Dale Kasler, Sacramento Bee |

Pacific Gas and Electric Corp. and California Gov. Gavin Newsom have made a deal on overhauling PG&E’s operations, removing one of the last remaining obstacles to the utility’s efforts to exit bankruptcy. Newsom’s office announced Friday that PG&E will commit billions of dollars in additional spending to prevent wildfires, meeting one of his critical demands.

In a filing in U.S. Bankruptcy Court, PG&E also agreed to a process that could have the entire company put up for sale if it doesn’t pull out of bankruptcy by June 30, a deadline set by the Legislature.

“This is the end of business as usual for PG&E,” the governor said in a prepared statement. “We secured a totally transformed board and leadership structure for the company, real accountability tools to ensure safety and reliability and billions more in contributions from shareholders to ensure safety upgrades are achieved.”

The governor said, “The state will have the legal authority to continue demanding total transformation even after the company emerges (from) bankruptcy – and we aren’t taking our foot off the gas.”

The deal with Newsom, while vital to PG&E’s efforts to end its Chapter 11 bankruptcy case, doesn’t mean the company is home free.

About 80,000 Northern Californians, victims of major wildfires that were blamed on PG&E’s equipment, still have to approve a $13.5 billion settlement offered by the utility. Although lawyers representing most of those victims have agreed to the payout, the victims themselves will get to vote on the settlement later this spring. Some victims have filed objections to the settlement in U.S. Bankruptcy Court.

Still, finding peace with Newsom advances PG&E’s cause significantly. PG&E has to exit bankruptcy by June 30 to become eligible for a $21 billion state-run insurance pool that partially shields utilities from liabilities from future big fires. Because it’s a state-regulated utility, PG&E needs the state’s OK on its bankruptcy plan.

The governor rejected PG&E’s first reorganization plan in December, saying it didn’t go far enough to overhaul the company’s operations and corporate leadership, and left the utility too deeply in debt to be able to improve its safety.

Newsom became irate with PG&E last October after the company imposed blackouts during high windstorms that plunged millions of Northern Californians into the dark – and still couldn’t prevent the Kincade Fire in Sonoma County.

The company filed a second bankruptcy plan a month later, committing to an overhaul of its board of directors and the hiring of regional safety officers throughout its vast service territory. Newsom told reporters the plan showed progress, but he still didn’t embrace it.

The governor’s office said Friday that Newsom “removes his objections” to PG&E’s reorganization effort.

In its Bankruptcy Court filing, PG&E agreed to hold off on resuming the payment of shareholder dividends for three years. That will free up $4 billion to strengthen the company’s finances, according to Newsom’s office. The company made other concessions to Newsom to reduce its debt load as it emerges from bankruptcy.

PG&E filed for bankruptcy in January 2019, two months after the Camp Fire killed 85 people and destroyed most of the town of Paradise. State investigators cited a faulty transmission tower as the cause. The Camp Fire followed the devastating wine country fires of 2017, most of which were blamed on PG&E’s equipment.