California Governor Gavin Newsom (D) pressed PG&E Corp. Chief Executive Officer Bill Johnson to reach a swift resolution to the company’s bankruptcy or face a potential state takeover in the face of a backlash from the utility’s mass blackouts designed to prevent its power lines from sparking wildfires, Bloomberg News reported. Newsom yesterday met Johnson behind closed doors and reiterated “the state’s frustration with PG&E and strongly urged the parties to get a resolution that ensures what we saw over the last month never happens again,” said a spokesman for the governor’s office, referring to the power shutoffs. Representatives of PG&E shareholders, bondholders, wildfire victims and other creditors also attended. The governor wants the utility to settle the chapter 11 proceedings before June 30 or the state will “intervene,” the spokesman said. Frustrated with PG&E, Newsom is trying to take on a bigger role in the largest U.S. utility bankruptcy in history, which will shape how power is delivered in the world’s fifth-largest economy. Some of Wall Street’s biggest names are jostling for control of the utility, including a group of bondholders led by billionaire Paul Singer’s Elliott Management Corp. The bondholders have aligned with wildfire victims to offer a reorganization plan that would largely wipe out existing PG&E shareholders including Seth Klarman’s Baupost Group LLC. Read more.
In related news, more than two dozen California mayors and county leaders are calling for a customer-owned power company to replace Pacific Gas & Electric, the New York Times reported. In a letter delivered yesterday to the California Public Utilities Commission, the local officials embraced a proposal by Mayor Sam Liccardo of San Jose to create a cooperative that would use their collective resources to take over the utility. PG&E, which filed for bankruptcy protection in January after accumulating an estimated $30 billion in liabilities from wildfires caused by its equipment, is widely expected to emerge with a different structure. Any bankruptcy plan requiring a rate increase is subject to approval by the utilities commission. “The commission must do more than approve a plan — any plan — merely so that the bankruptcy can be concluded,” the government officials stated in the letter. “This situation requires a full and comprehensive effort to chart a sustainable course for the future of PG&E, one that will serve the interests of its customers, and position the company to meet the challenges we will face from a changing climate.” PG&E said it was aware of proposals to change the utility to a customer-owned or public power utility but said that it expected to emerge from bankruptcy as a strong and effective company. Read more.
