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
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.
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
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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