Utility rounded up creditor support in bankruptcy, but still faces criticism from California’s governor
By Katherine Blunt and Peg Brickley | The Wall Street Journal
PG&E Corp. PCG 2.01% pledged to shake up its board of directors and increase its safety focus in a bid to win California’s support for its bankruptcy exit plan, but obstacles remain in appeasing Gov. Gavin Newsom.
The company, which filed for bankruptcy protection last year because of its liabilities from numerous deadly wildfires, said Friday evening that it will replace many of its current directors and expand safety positions and performance metrics after it emerges from chapter 11.
The moves represent an effort to address concerns by Mr. Newsom about PG&E’s governance and management. PG&E didn’t, however, announce changes to the plan’s capital structure, which Mr. Newsom has also criticized as inadequate to ensure the utility’s financial health.
In a statement, Chief Executive Bill Johnson said the plan will allow PG&E to emerge from bankruptcy as a “reimagined utility with an enhanced safety structure, improved operations, and a board and management team focused on providing the safe, reliable, and clean energy our customers expect and deserve.”
PG&E needs to win the governor’s support because it plans to tap a state wildfire fund as part of its financing plan to exit bankruptcy, and because its plans must be approved by state regulators. A spokesman for Mr. Newsom said he is reviewing the filing.
The announcement came as PG&E submitted its reorganization plan to both the U.S. Bankruptcy Court in San Francisco and the California Public Utilities Commission. The filings represent a milestone for PG&E, which rode out a rocky year of fights with creditors but ultimately reached deals with most of them.
It is up to the CPUC to determine whether the plan adheres to the terms of legislation that last year established a statewide fund designed to cushion utilities against liabilities tied to future wildfires sparked by their equipment. If PG&E wants to participate in the fund, it must exit bankruptcy, with regulatory approval in hand, by June 30.
PG&E says its plan qualifies it for the statewide fund, which is critical to the viability of its restructuring effort. Mr. Newsom disagrees, arguing that the plan will saddle the company with too much debt and limit its ability to invest in critical safety improvements.
The governor has threatened a state takeover of the company if it fails to address his concerns. His aides are exploring the possibility of creating a state power authority or converting the company into a customer-owned cooperative, among other options.
To address Mr. Newsom’s other concerns, PG&E on Friday said it would work to appoint numerous new directors with strong safety experience and other qualifications, with Californians making up at least half the board. It also said it would expand the roles of its chief risk officer and chief safety officer, as well as establish an independent safety oversight committee.
PG&E power lines were blamed for 2018’s Camp Fire, the deadliest wildfire in California’s history. But it was just one of 1,900 fires sparked by the utility since 2014, state investigators say. Here’s the story of PG&E’s missteps and why it ultimately filed for bankruptcy.
PG&E will begin arguing its case for regulatory approval in mid-February, with hearings before the CPUC scheduled to wrap by the end of the month. Post-trial briefs will be filed weeks into March, according to regulatory filings.
Confirmation hearings on the chapter 11 plan are scheduled to start May 27 in bankruptcy court.
The San Francisco-based utility sought bankruptcy protection just over a year ago, citing more than $30 billion in liability costs tied to more than a dozen fires in 2017 and 2018. Those fires killed more than 100 people and destroyed 26,000 buildings.
PG&E last week settled with bondholders that had been floating a rival chapter 11 plan, securing the support of its major creditors. Earlier pacts brought fire victims, insurance companies and local government bodies like the hard-hit town of Paradise over to PG&E’s side, with the utility promising cash and stock to compensate those affected by the fires.
The Utility Reform Network, a San Francisco-based ratepayer advocacy group, said it would review the company’s latest reorganization plan and assess its impact on customers, “who have already borne the brunt of PG&E’s negligence and mismanagement and are already paying top dollar for PG&E’s unsafe and unreliable service,” TURN Executive Director Mark Toney said in a statement Friday.