California Gov. Gavin Newsom announced Friday he is rejecting a $13.5 billion settlement that Pacific Gas & Electric made just last week with wildfires victims from 2017 and 2018. Thousands of people lost homes and businesses in the Camp Fire, and the wine country fires in Sonoma and Napa, which forced the giant utility into bankruptcy.
“PG&E’s board of directors and management have a responsibility to immediately develop a feasible plan,” the governor said. “Anything else is irresponsible, a breach of fiduciary duties, and a clear violation of the public trust.”
Newsom’s letter to PG&E CEO William D. Johnson may appear at first blush to be a setback leading up to the June 30 deadline for the utility to emerge from bankruptcy protection.
However, as California Globe reported last week, PIMCO and Elliott Management proposed a $35 billion plan earlier in the year, to facilitate PG&E’s emergence from bankruptcy within the year, according to sources familiar with the the company and case.
Any settlement proposal requires the approval of U.S. Bankruptcy Judge Dennis Montali. In October, the bankruptcy judge ruled that a bondholder plan will be considered alongside the company’s own proposed Chapter 11 restructuring plan. “The ruling is being received as a major legal setback for PG&E and its shareholders,” 24/7 Wall Street reported.
With Gov. Newsom’s criticism of PG&E’s proposal of its ability to provide safe, reliable, and affordable service, an upcoming February hearing will provide an official tally of losses for PG&E, and could flush out the proposed settlement deals.
Sources familiar with the bondholders say their offer of a buyout could also put to rest anticipated ratepayer increases as a way of a bailout.
However, the company still needs much more money. They can raise new equity through bondholder proposals, or PG&E can finance the debt, or still yet, ratepayers and taxpayers can provide the source of additional funding.
“The San Francisco-based company needs to pull a deal off to be able to draw from a special fund created by the Democratic governor and state lawmakers to help insulate utilities if their equipment sparks other catastrophic fires,” AP reported. However, just because the Legislature passed a bill with their conditions, everything really rests on the bankruptcy judge’s decision.
AP also editorialized, “The risks have escalated during the past few years amid dry, windy conditions that have become more severe in a changing climate,” when in fact Cal Fire determined that the fires were caused by PG&E’s faulty lines, as well as the failure to remove the buildup of dead trees and dry brush on public lands.