State lawmakers are shelving a bill that would have given PG&E the ability to issue billions of dollars in tax-exempt bonds, money the company said it would use to pay victims of the 2017 and 2018 wildfires.
Last-Minute Push to Pass PG&E Tax-Free Bond Plan Fails for Now
PG&E is facing billions of dollars in potential liabilities over its role in a series of deadly wildfires. (Josh Edelson/AFP/Getty Images)
What You Need to Know About PG&E
The news that lawmakers will not take up the bill before their legislative session ends next week sent PG&E shares plummeting to their lowest level since the company declared its intent to enter into bankruptcy protection in January.
AB 235 was one of a menu of options that PG&E is pushing as a way to maintain control of the company as a fight plays out in bankruptcy court and in Sacramento between warring investors.
CEO Bill Johnson met with lawmakers in Sacramento late last month to personally lobby for the measure, which critics howled would have protected shareholders at the expense of ratepayers.
Assemblyman Chad Mayes (R-Yucca Valley), the bill’s sponsor, announced on Twitter Friday morning that with the end of the legislative session approaching next week, there wasn't "sufficient time left for proper debate."
But he vowed to revisit the legislation in January.
Wildfire Survivors Disagree About Plan
The controversial bill, however, has created a rift among wildfire survivors, who disagreed about whether the bonds were a good idea.
Lawyers representing some wildfire survivors met with PG&E officials Friday to hammer out the framework for a settlement that would resolve their claims.
“We told PG&E ‘no one trusts you’ and that they needed to have an agreement for victims. We were prepared to negotiate,” said Patrick McCallum, a lobbyist and 2017 Tubbs Fire survivor who heads the group Up From The Ashes.
McCallum said he had been prepared to consider throwing the group’s support behind PG&E’s effort to issue tax-exempt bonds.
But other wildfire survivors said any such deal would be a devil’s bargain.
“Wildfire survivors have been used amongst a lot of stakeholders to try to get short-term dollars,” said Will Abrams, who also lost his home in the Tubbs Fire but said he feared the proposal won’t solve PG&E’s underlying safety issues.
“I, for one, feel uncomfortable taking dollars today at the expense of safety and security for my kids and my communities and the future wildfire survivors who will be left in a worse state,” he said.
Both Abrams and McCallum expressed concern about PG&E’s decision to earlier this week appeal a decision by bankruptcy judge Dennis Montali, which is allowing victims of the Tubbs Fire — which CalFire determined was not caused by PG&E — to pursue lawsuits against the company outside of bankruptcy court.
In a statement, PG&E told KQED Friday that AB 235 would have ensured that wildfire victims were paid quickly and at shareholders' expense, without increasing customers’ bills.
“We’re pleased to see policymakers acknowledge the merits of this proposal and look forward to lawmakers considering it in January as a balanced approach that prioritizes and protects both wildfire victims and customers,” PG&E spokesman James Noonan said.
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Wall Street vs. Wall Street
On Monday, PG&E is expected to file its proposal for how to restructure the company by next year — a requirement to exit bankruptcy.
But shareholders and debt holders are jockeying for control of the company.
The company and other proponents of AB 235 said that bill, if passed and signed by Gov. Gavin Newsom this year, would have allowed PG&E to exit bankruptcy with the cost shouldered by shareholders, not ratepayers.
But Jared Ellias, who teaches bankruptcy law at UC Hastings, called that claim simplistic, saying shareholders, ratepayers and taxpayers would all bear the risk if PG&E left Chapter 11 bankruptcy protection with new debt. He raised the prospect that could increase the odds that PG&E enters into bankruptcy protection again.
“Traditionally, companies tend to use bankruptcy law to discharge debt and to come out of bankruptcy with a lot of flexibility to deal with what the future has to hold. If you look at how PG&E is planning to use bankruptcy law, they're not doing very much of that,” Ellias said.
Meanwhile, bondholders — who hold the company's debt — are looking for $20 billion in cash and debt financing for a deal that would pay fire claims while allowing them to wipe out shareholders’ equity, and leave them with the vast majority of PG&E shares. The bondholders group is being led by New York-based Elliott Management, which did not return KQED’s request for comment.