California regulators approved PG&E Corp.’s $58 billion reorganization plan, bringing the power giant another step closer to exiting the biggest utility bankruptcy in U.S. history.
The state’s Public Utilities Commission unanimously voted in favor of PG&E’s proposal after the company agreed to revamp its board and governance structure, submit to greater regulatory oversight and create local operating units to ensure a greater focus on safety.
The changes, pushed by California Governor Gavin Newsom, are intended to dramatically overhaul California’s largest utility and prevent the type of recklessness that dragged it into bankruptcy.
PG&E filed for Chapter 11 last year after its equipment was blamed for causing some of the worst blazes in state history including the Camp fire, which destroyed the town of Paradise and killed 85 people. Earlier this month, state regulators fined the company $1.9 billion in connection with the blazes, which destroyed thousands of homes and caused an estimated $30 billion in liabilities.
As part of its bankruptcy proceeding, PG&E has agreed to settle claims totaling more than $25 billion from fire victims, insurers and local government agencies.
PG&E now only needs approval from the judge overseeing its bankruptcy in order to meet a state deadline of June 30 to qualify for a California fund to help utilities pay for future wildfire claims. Nearly all creditors voted in favor of PG&E’s proposal, including wildfire victims. Court hearings on the plan began Wednesday.
PG&E said in a statement it was on track to get its plan confirmed by the end of next month.
The commission approved PG&E’s proposal despite opposition from more than 200 local elected officials led by San Jose Mayor Sam Liccardo. The coalition, which had proposed to turn PG&E into a customer-owned cooperative, said in a letter to regulators that the utility’s plan would have it emerge as a “junk bond” company with a debt load of nearly $40 billion.
PG&E pushed back against that assertion, saying its plan will result in the issuance of investment grade bonds resulting in about $1 billion in interest costs savings.
During the hearing Thursday, commissioners listened to more than two hours of public comment with many speakers calling for a rejection of PG&E’s reorganization plan while advocating for a public takeover of the utility.
California Public Utilities Commission President Marybel Batjer said she understood the criticism leveled against the utility.
“Many people and communities are angry, frustrated and finished with PG&E,” Batjer said. “At times, I’ve felt the same.”
When considering PG&E’s reorganization, Batjer said she felt the need to impose additional accountability and force a change in leadership at a company that has consistently failed to show accountability for its safety lapses.
“I understand there will be some who disagree with or feel frustrated with the proposed decision, but today’s decision is an important milestone to achieving the completion of the bankruptcy proceeding and the compensation of the wildfire victims,” Batjer said Thursday.
As a condition for regulatory approval, PG&E agreed to a six-step enforcement process that could ultimately lead to the state revoking its license to sell electricity if its gets in trouble again.
The commission also will require an independent safety monitor to watch the utility after the term of a federal court monitor expires.
In a court hearing Thursday, the federal judge overseeing PG&E’s criminal probation blasted the utility for its resistance to stricter safety measures he recently ordered.
“If ever there was a corporation that deserved to go to prison, it is PG&E for the people it killed in California,” Judge William Alsup said.
PG&E said earlier this month that only three of its current 14 board members will remain after it exits bankruptcy. Chief Executive Officer Bill Johnson will also retire on June 30.
“We have heard the feedback in today’s decision and know we must do better as a company,” Johnson said in a statement regarding the commission’s ruling.
–With assistance from Joel Rosenblatt.
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