Bankruptcy Deadline May Not Save PG&E from State Takeover
Reeling from multiple massive state wildfires that its actions likely triggered, Pacific Gas & Electric, or PG&E, filed for Chapter 11 bankruptcy this time last year.
The investor-owned utility faces a June 30, 2020 deadline to come up with a plan to come out of bankruptcy, address the estimated $25 billion in settlements, and win state approval. As the utility makes progress toward refinancing, PG&E is fighting with every level of government to stop a state takeover.
Two years removed from the Bay Area Tubbs Fire and barely one year after the Camp Fire in Butte County, PG&E is playing an exhaustive game of regulatory and financial whack-a-mole. And the Public Safety Power Shutoffs used to stop the threat of wildfires by turning off power in Northern California during high winds didn’t do much to earn the trust of customers.
The first and perhaps toughest hurdle it must surpass is California’s skeptical Governor, Gavin Newsom. At a January Pubic Policy Institute of California luncheon, Newsom continued his hardline talking points on holding PG&E accountable and threatening a state takeover. “If they can’t do it, we have no choice but to do it for them,” quipped the governor.
Newsom also reminded PG&E that he really doesn’t like the people in charge, saying, “I have no interest in the existing management and board and the company must be completely transformed.”
The governor wasn’t bluffing about his dislike of PG&E. Late last year, Newsom made a public plea to Warren Buffet and Berkshire Hathaway to takeover PG&E. Cabinet Secretary Ana Matosantos is now serving as California’s energy czar, working with energy advisors and legal counsel to undergo a Newsom-esque crusade to “game out every option and prepare a plan should the state need to intervene.” Newsom has been clear that, “All options are on the table.”
PG&E won’t catch a break from state and local elected officials either. Earlier this month, Sen. Scott Weiner introduced legislation that will force the state to buy PG&E and turn it into the Northern California Energy District. How much would PG&E cost taxpayers?
Between $75-85 billion, depending on who values the company. Coughing up almost half of the state budget is as unorthodox as it gets, but lawmakers are emboldened by the falling stock of PG&E, even if they’re proposing legislation to score political points. Interestingly, PG&E workers from the International Brotherhood of Electrical Workers disrupted Weiner’s press conference announcing the bill. Nothing says contention in California like unions heckling a Democrat lawmaker in San Francisco.
If PG&E can put the brakes on state legislation, it must contend with local leaders like San Francisco Mayor London Breed. Breed wants to buy its service territory from PG&E and have the city manage it. PG&E turned down a $2.5 billion offer last year from the city. The fact that the very city where PG&E is headquartered wants to buy it shows you where that relationship stands.
And San Francisco isn’t alone in their push to takeover PG&E. More than a dozen mayors from Northern California started a campaign announcing their intent to buy PG&E and turn it into a customer-owned cooperative. Mayors from Sacramento, Oakland, San Jose, and other cities want the California Public Utility Commission and the governor to consider the offer, according to the Wall Street Journal.
Another wrinkle for PG&E may be the rise of 2020 Democrat Presidential Contender Bernie Sanders. The Vermont Senator and newly minted presidential front-runner is bringing his Medicare for All policy idea to energy markets. Sanders has proposed a federal takeover of electricity production to transition the United States off of fossil fuel energy by 2030, according to Politico. Politico’s Gavin Bade went on to characterize Sanders $16 trillion climate change plan as a “public option” for green energy.
Silicon Valley Congressman Ro Khanna is in favor of such a proposal, saying that a there should be a public takeover of PG&E.
It’s too early to tell what will happen to PG&E. Certainly, there’s no guarantee that turning the fledgling utility into one run by a state-appointed board members will guide the company into any better shape.
If June 30 comes and goes without a deal, PG&E’s could find itself in an epic battle between lawmakers, unions, and locals – all fighting over the pieces.
Efforts by Newsom and others to push for a government takeover of PG&E should be viewed with skepticism. Kicking the current leadership aside is good public relations, but big government seizing control of the state’s largest utility is easier said than done. Politicians are always quick to wave the magic wand of government, but case studies like the DMV should tell us otherwise.
For many, the grass is looking greener on the other side of the private versus public utility debate. Whatever happens this summer, let’s hope those in charge prioritize the interests of customers, taxpayers, and public safety first.
Evan Harris is the media relations and outreach director for PRI.