California governor dismisses PG&E’s restructuring proposal

Bloomberg

California Governor Gavin Newsom rejected PG&E Corp’s proposed restructuring plan, dealing a major blow to the power giant as it tries to exit the biggest utility bankruptcy in US history.
Newsom said in a letter to PG&E Chief Executive Officer Bill Johnson that the utility’s restructuring plan falls “woefully short” of the state’s requirements. The governor said any reorganisation of the San Francisco-based power company would require a better financing plan, an entirely new board with a majority from California and the option of a government takeover should PG&E fail to meet safety performance metrics.
PG&E’s bankruptcy punctuates “more than two decades of mismanagement, misconduct, and failed efforts to improve its safety culture,” Newsom said in his letter. And its plan to reorganize does not “result in a reorganised company positioned to provide safe, reliable and affordable service to its customers,” he said.
Newsom’s support is crucial to PG&E’s restructuring. The company declared bankruptcy in January after its equipment was blamed for starting catastrophic wildfires in 2017 and 2018, including the deadliest blaze in California history.
The fires saddled the utility with an estimated $30 billion in liabilities, and it has spent months trying to cobble together a viable restructuring plan as shareholders and bondholders fight for control of it.
PG&E, which has until Tuesday to respond and make changes, said that it believes its current plan meets state requirements and “is the best course forward for all stakeholders.”
The San Francisco-based company said it will “work diligently in the coming days to resolve any issues that may arise.”
Deal with Victims
The rejection is a major setback for PG&E just a week after it reached a $13.5 billion settlement to pay victims affected by the fires its equipment caused. A deal with victims had emerged as the company’s largest obstacle in planning a reorganization.
Based on a provision in that settlement, the governor had to find that PG&E’s plan complied with state legislation passed in July. The law required PG&E to settle past fire liabilities and resolve its bankruptcy by June if it wants to participate in a newly established wildfire insurance fund and avoid future damages tied to catastrophic fires.