Pacific Gas and Electric (NYSE:PCG)
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3 Months : From Oct 2019 to Jan 2020
By Rebecca Smith
The mayors of Oakland, Sacramento and more than a dozen other California municipalities are joining San Jose in a campaign to buy out the investor-owned PG&E Corp. and turn it into a giant customer-owned cooperative.
The idea, first floated last month by San Jose Mayor Sam Liccardo, is winning support from mayors and county commissioners who represent approximately one-quarter of the population served by PG&E's utility subsidiary, Pacific Gas & Electric Co.
The coalition plans to deliver a letter Tuesday to the California Public Utilities Commission and Gov. Gavin Newsom asking that such an option receive fair and full consideration before the state approves any bankruptcy reorganization plan. The company filed for chapter 11 protection in January, citing an estimated $30 billion in wildfire liabilities.
PG&E has adamantly opposed the sale of any part of its system. Chief Executive Bill Johnson last month rejected an offer by San Francisco to buy the portion of PG&E's electric network that is within city limits for $2.5 billion.
Sacramento Mayor Darrell Steinberg said in an interview that his city, which has its own electric utility but relies on PG&E for gas service, has to start considering alternatives.
"I'm signing on in solidarity with my fellow mayors whose constituents are suffering under PG&E," said Mr. Steinberg, a Democrat who formerly led the state senate. He added that his city enjoys "the benefit of electricity being a public commodity and overseen by people who are accountable to the public."
Stockton Mayor Michael Tubbs said that his constituents worry about power shut-offs by PG&E whenever "the wind picks up." He said that creating a customer-owned utility "allows us to put people ahead of profits, safety ahead of dividends and local control ahead of corporate rule."
Last week, Mr. Newsom named Ana Matosantos, his cabinet secretary, as the state's new "energy czar." He instructed her to try to broker a deal between PG&E's shareholders and bondholders -- who are fighting for control of the company -- to enable the company to exit bankruptcy by the middle of next year. If the sides cannot find agreement, California may intervene and pursue other options, including a state takeover of PG&E, Mr. Newsom said.
The Democratic governor is scheduled to meet with representatives for the different stakeholders in the bankruptcy case Tuesday morning, according to people familiar with the matter.
Mr. Liccardo, San Jose's mayor, said that public officials in the coalition feel that the existing bankruptcy reorganization plans are unlikely to produce a utility strong enough to fulfill the state's need for reliable, affordable service.
"The governor has opened a door for us, by getting directly involved," Mr. Liccardo said. "That means we have an opportunity to see a reorganized utility emerge that doesn't just fulfill the legal requirements under bankruptcy law but could address the larger public need for a more responsive utility."
Under the coalition's buyout proposal, bonds worth as much as $50 billion would be sold to finance a buyout of the big utility, whose territory spreads across 70,000 square miles of Northern and Central California. Customers would repay bonded indebtedness through their monthly energy bills.
A customer-owned utility would set its own rates but would be subject to safety rules set by federal and state officials. Profits from utility operations would be reinvested in the utility's gas-and-electric networks, not paid out to shareholders as dividends. The utility paid out roughly $7 billion in dividends in the past decade, Mr. Liccardo said, whereas "a model that aligns financial interests with the public interest of our communities is deeply desired by all of us."
In a draft of their letter reviewed by The Wall Street Journal, coalition members said they are not pursuing public ownership because of "mere anger or angst" at PGE's power shut-offs but because they think the utility has to be "re-imagined."
The coalition wrote that the bankruptcy proceeding has resulted in a clash between Wall Street investor groups that has produced a "spectacle, without regard for what will be left behind when the financial players inevitably leave the scene."
"We face the need for a completely re-engineered and reconstructed system to adapt to the realities of climate change and poorly maintained infrastructure," the letter to the CPUC and Gov. Newsom states. "PG&E cannot meet these challenges if it stumbles out of bankruptcy, barely able to raise capital, and suffering prohibitive costs."
In addition to San Jose, Oakland and Sacramento, Mr. Liccardo said the coalition has garnered support from mayors representing Berkeley, Cotati, Elk Grove, Hayward, Petaluma, Richmond, Santa Cruz, Scotts Valley, Sonoma, Stockton, Sunnyvale and Windsor. He said commissioners from Marin, Santa Cruz, San Benito and Yolo counties also are supporters.
Write to Rebecca Smith at email@example.com
(END) Dow Jones Newswires
November 05, 2019 07:14 ET (12:14 GMT)
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