CA Governor Grandstanding On PG&E Takeover Threat

AB 1054 was about saving the utility investors and stopping downgrades, but not stopping fires.

The California mega-utility Pacific Gas & Electric filed for Chapter 11 Bankruptcy reorganization January 29, 2019. So it’s curious how Governor Gavin Newsom continues to publicly threaten that if PG&E doesn’t do what he wants, the state may just take over the utility.

Last week Governor Gavin Newsom told the company in a meeting, if PG&E didn’t work to get itself out of bankruptcy, that the state might take over the entire company as early as June, California Globe reported.

But the state cannot just take over the private utility without Bankruptcy court approval – that talk is all chest thumping and bravado.

PG&E filed its Chapter 11 Plan of Reorganization in Bankruptcy Court September 9, 2019, which lays out how the company will satisfy its pre-Chapter 11 obligations to creditors and other stakeholders.

Adding to the confusion, under a proposed bill by Senator Scott Wiener (D-San Francisco), PG&E would become a state-owned public utility through the state of California.

“We are looking at legislation to force PG&E to become a public utility, but that’s still in the early planning stages and we haven’t settled on the exact details yet,” Senator Wiener told Bloomberg News on Tuesday. “[I plan to introduce] some sort of legislation forcing them to become a public utility.”

Senator Wiener announced he will introduce a new bill by February and has said that it’s “desirable” to give the public control of PG&E.

But there is still much legal wrangling to be done under the authority of the Bankruptcy Court.

Not So Fast…

California Globe spoke with San Diego Attorney Maria Severson, who together with her law partner Michael Aguirre, are suing PG&E, and have provided a proposal to the governor for breaking up the utility.

The lawsuit filed in the Federal District Court in California shows that three Investor Owned Utilities in California, Pacific Gas and Electric, San Diego Gas and Electric, and Southern California Edison, argued to the U.S. Supreme Court that their tens of billions in wildfire liabilities should be paid for by utility customers – despite that Cal Fire repeatedly found electric utility safety violations to be the cause of the wildfires which led to the tens of billions in liabilities. When the Supreme Court refused to hear their case, the Legislature offered its bailout in AB 1054 by Assemblyman Chris Holden (D-Pasadena), passed lightening-fast in late June, to authorize the bailout of these investor owned utility companies from financial and legal consequences, despite their culpability in the wildfires.

Severson and Aguirre discovered the Governor’s Office met multiple times prior to passage of AB 1054 with labor interests (IBEW) and PG&E’s Board of Directors to cut a deal to bail out PG&E, through California Public Records Act requests. They also found that the Governor’s Office claimed there were documents not disclosed to the attorneys, due to various exemptions to the PRA (i.e. deliberative process). There are very likely more meetings that were scheduled and which occurred out of public view.

Gov. Gavin Newsom signed AB 1054 on July 12, the same day he appointed his new California Public Utilities Commissioner Marybel Batjer, who was tasked with making sure AB 1054’s bailout of the utilities was implemented.

Attorneys Severson and Aguirre also filed CPRA requests with the Government Operations Agency (GovOps) regarding Marybel Batjer’s work on Gov. Newsom’s Wildfire Strike Force. GovOps repeatedly delayed producing records, thus causing Severson and Aguirre to file a CPRA lawsuit for the information.

Batjer no doubt had a key role in formulating the scheme that is AB 1054, the attorneys explained. The lawsuit emphasizes that because Batjer is now the CPUC President, whatever Batjer did on the Strike Force will necessarily be reflected in what she does as the California Public Utilities Commissioner President.

AB 1054 also put into statute that PG&E has to exit bankruptcy by June 30, 2020 – which is why you keep hearing Gov. Newsom use that as his drop-dead date. It is unclear whether that arbitrary deadline date imposted by state legislation would trump Federal Bankruptcy Court proceedings.

“AB 1054 was about saving the utility investors, and stopping downgrades, but not stopping fires,” Severson said.

Severson said AB 1054 should have served as a last chance warning against further utility disasters. “Instead, AB 1054 became a bailout of the investor owned utilities, both financially and legally, from the consequences of their continued intransigence against prioritizing safety.”

“AB 1054 provides for an endless amount of bonds to be issued and an endless amount of rate increases to meet the revenue requirement of the DWR charge fund so that the bonds to capitalize the wildfire fund are paid off, which in turn pays for whatever wildfire liabilities are incurred by the IOUs.”

“Worse, AB 1054 redefined both the burden of proof and the legal standard by which an electric utility could be found imprudent,” Severson said. “It is now nearly impossible for utility customers to prevent an investor owned utility from passing uninsured wildfire liabilities onto them.”

“Under AB 1054, electric utility customers and California taxpayers will continuously subsidize the IOUs’ (Investor Owned Utilities) liabilities from causing catastrophic wildfires. The statute authorizes the California Department of Water Resources (DWR) to issue as many bonds as necessary to capitalize a fund to pay IOU liabilities – an unlawful gift of public funds to the IOUs – while the California Public Utilities Commission (CPUC) is empowered to order any electricity rate increases necessary for the bonds to be paid off. 5. In other words, IOU customers can now be made responsible for paying back potentially limitless IOU wildfire liabilities without due process, while IOUs continue to reap a guaranteed profit for their shareholders and investors.”

If the media is truly interested in investigating collusion, this is a pretty good place to start.

AB 1054 will be a permanent burden to California taxpayers, and violates the due process rights of electric utility customers, the lawsuit explains.

Yet, California’s utility regulators, the PUC, “paid little attention to the condition of PG&E’s transmission system and have largely left it up to the company to decide what to upgrade and when,” the lawsuit says.

California Globe reported:

AB 1054 removed all “twelve factor tests” specific to circumstances relating to a wildfire ignition by which the CPUC would determine if an electric utility had acted prudently. This had previously been codified into law under the 2018 Senate Bill 901, by Sen. Bill Dodd (D-Napa). “This new law is the most comprehensive wildfire prevention and safety package the state has passed in decades,” Sen. Dodd said when the governor signed SB 901. “It will help prevent further loss of life and property while ensuring ratepayers aren’t left holding the bag.”

After fighting to get SB 901 passed in 2018, Dodd voted to pass AB 1054, and was one of the lawmakers who received a contribution from the utility companies, as the lawsuit shows.

This shifted the initial burden of proof onto the utility customers.

“AB 1054 violates Plaintiffs’ due process rights in two ways. First, it impermissibly shifts the burden to ratepayers to show prudency by the utilities when their operations cause wildfires. Second, it violated due process by continuing a surcharge for an additional 15 years and the issuance of bonds that was originally established in and around 2001 and was set to end in 2021. Enactment of AB 1054 denied Plaintiffs due process as they were not provided a forum to challenge the extended surcharge in a CPUC proceeding.”

Severson asked, “Who’s going to bail out the ratepayers for fired caused by the utilities?”

Severson said while the other side is trying to get her lawsuit dismissed, opposition to the dismissal is due later in November.

California Globe will be there.