Pacific Gas and Electric (NYSE:PCG)
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By Katherine Blunt and Alejandro Lazo
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 2, 2019).
California Gov. Gavin Newsom is threatening a state takeover of PG&E Corp. unless the company exits bankruptcy and dramatically improves the safety of its electric grid before the next wildfire season.
The governor on Friday said he has demanded that PG&E executives, investors and representatives for wildfire victims appear in Sacramento next week to discuss how to expedite the company's emergence from chapter 11 by a state-imposed deadline of June 30. He said the state may intervene if the company's shareholders and bondholders don't quickly agree on a reorganization plan.
"PG&E as we know it, may or may not be able to figure this out, if they cannot we are not going to sit around and be passive," Mr. Newsom said. "The state will prepare itself as backup for a scenario where we do that job for them."
Mr. Newsom said he has assigned his cabinet secretary, Ana Matosantos, to head a team tasked with preparing a plan should the state need to intervene. Ann Patterson, Mr. Newsom's lead attorney on the matter, Alice Reynolds, his lead energy and environmental policy expert, and Rachel Wagoner, his senior legislative strategist, will aid in the effort.
All options, including a state takeover, are on the table, according to Mr. Newsom's advisers. Mr. Newsom didn't specify how the state would structure a takeover of the company, and what compensation it would offer investors. He said the team will work to scope that plan.
"It's not writing a check," he said, referring to the complexity of such a transaction.
The governor's threat comes after a fraught month for PG&E, which pre-emptively shut off the power to millions of Californians in an effort to prevent its equipment from sparking more destructive wildfires as strong winds swept its service territory. The shut-offs created widespread turmoil and drew the ire of customers, businesses and state officials.
"We share the Governor's focus on reducing wildfire risk across California and understand that PG&E must play a role in these efforts," the company said Friday. "We welcome the Governor's and the State's engagement on these vital matters and share the same goal of fairly resolving the wildfire claims and exiting the Chapter 11 process as quickly as possible."
PG&E disclosed that one of its transmission lines may have sparked the Kincade Fire in Sonoma County, despite having turned off a large section of the power grid there, as well as a series of smaller fires in the Bay Area.
The disclosures eroded PG&E's stock and bond prices on concerns that the company could face additional fire-related liability costs, and threatened to stall negotiations among investors in bankruptcy court. The company's shareholders and bondholders have proposed competing plans to pay billions of dollars in liability costs related to a series of deadly fires in 2017 and 2018.
Mr. Newsom, a Democrat, said he will compel PG&E to make massive investments in its infrastructure to improve the safety of the system and reduce the need for pre-emptive power shut-offs.
"This process needs to take shape with a deep sense of urgency," Mr. Newsom said. He added that the state cannot wait until June 30 for PG&E to restructure.
Democratic state Sen. Jerry Hill, a longtime critic of PG&E, said he supported the governor's willingness to take control of the company if it "cannot or will not transform itself."
"We'll have a future with or without PG&E," he said. "That's the message they need to hear."
Democratic state Sen. Bill Dodd, who has written two bills in the past two years aimed at financially supporting the state's utilities in the face of wildfire liabilities, said he didn't support a state takeover of PG&E.
"I still remain concerned that, at least at this time, that the liability could threaten -- if the worst happens -- it could threaten our state budget," Mr. Dodd said Friday.
Gerald Singleton, a San Diego lawyer who represents 7,000 fire victims in PG&E's bankruptcy, called the governor's move a positive step.
His clients want compensation, he said, but "they are also very concerned about the future and want to make sure that PG&E is making the necessary changes."
PG&E sought bankruptcy protection in January, citing more than $30 billion in potential liability costs tied to more than a dozen wildfires that collectively killed more than 100 people.
California lawmakers outlined a road map for PG&E to make safety investments earlier this year, as part of legislation that established a wildfire fund to help all of the state's utilities cover liability costs. To participate in the fund, which PG&E investors consider necessary for reorganization, the company must meet the state's bankruptcy deadline, spend heavily to upgrade its infrastructure and meet certain safety requirements.
Write to Katherine Blunt at Katherine.Blunt@wsj.com and Alejandro Lazo at firstname.lastname@example.org
(END) Dow Jones Newswires
November 02, 2019 02:47 ET (06:47 GMT)
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