Newsom Rips PG&E Plan to Exit Bankruptcy

Gov. Gavin Newsom is once again warning PG&E that its current plan for exiting bankruptcy isn’t good enough to get the state’s approval — a sign-off the utility needs in order to access a new $21 billion state insurance fund aimed at keeping it out of bankruptcy going forward.

In a court filing Wednesday, Newsom's lawyers wrote that PG&E hasn’t changed its plan since the governor first raised concerns about it in December.

“I certainly will not be supporting their current proposal,” Newsom said at an event Wednesday in San Francisco. “They've got to step up their governance. They've got to step up their safety investment.”

PG&E, the state's largest utility, filed for bankruptcy protection last January, insisting it was the only path available to survive the billions of dollars in potential liabilities from a series of deadly wildfires, some of which were likely sparked by its own power infrastructure.

Shortly after Newsom's office filed the brief, PG&E released a statement saying the company will work on a new plan aimed at assuaging the governor's concerns.

Newsom specifically objects to PG&E’s proposal to borrow billions of dollars from large banks in order to finance its exit from bankruptcy, arguing that the proposal won’t leave the company enough financial flexibility to make all its necessary safety improvements.

His office's filing warns that the state will pursue other options — including a possible public takeover of the utility — if PG&E doesn't change its plan.

“We've got to get out of bankruptcy by June of this year. And if they cannot show a detailed pathway to do so, the state of California will assert itself,” Newsom said. “We're not messing around with that. That's not an idle threat. It's not a preferred strategy, but it is a strategy we're pursuing and we're working with legislative leaders to codify that in actual legislative strategy.”

PG&E needs Newsom and state regulators to sign off on its plan to exit Chapter 11 bankruptcy protection so that the utility can access a wildfire insurance fund being created by the state that will be key to protecting the company’s finances in case of future fires.

In a statement, PG&E said it's aware of Newsom's concerns.

“While PG&E has made substantial progress in resolving victim claims and restructuring our finances, additional changes to the plan are forthcoming,” the company said in the statement. “We will continue to engage with the Governor’s office to address his concerns.”

PG&E officials also announced Wednesday that they reached an agreement with a group of company bondholders who had proposed their own reorganization plan in a bid to wrest control from current shareholders. As part of the deal, those bondholders will withdraw their competing plan.

“Reaching a resolution with the bondholder group is a positive development to move forward with our plan of reorganization,” said PG&E CEO Bill Johnson in a written statement. “This agreement helps achieve our goals of fairly compensating wildfire victims, protecting customers' bills and emerging from Chapter 11 as the utility of the future that our customers and communities expect and deserve.”