California governor says PG&E can’t tap wildfire bond fund

California Gov. Gavin Newsom told Pacific Gas & Electric Co. in a bankruptcy case filing that it has not met the requirements to participate in a $21 billion bond fund to help utilities deal with wildfire liabilities and a potential state takeover remains on the table.

The governor’s Thursday filing came just after PG&E announced an agreement with a group of bondholders that had filed an alternative bankruptcy exit plan. The deal requires the bondholders to drop their alternative proposal in exchange for PG&E paying them more money. The utility simultaneously announced that it was raising money through a financing that would save its customers roughly $1 billion.

Bloomberg News

"Over the last several months, we made significant progress in our Chapter 11 cases. We have settled with all pre-petition wildfire victims' groups — individuals, insurance companies and public entities — and we've now reached an agreement with the bondholder group,” PG&E's president and chief executive officer, Bill Johnson, said in a statement. “We remain focused on working with key stakeholders, including elected officials and our state regulator, on how PG&E will look, act, and be held accountable as we emerge from Chapter 11.”

Newsom’s filing referenced a letter he had sent to the company December 13 that emphasized the current restructuring plans did not meet the requirements of Assembly Bill 1054, the bill that establishes the bond fund. The bill’s three objectives, according to the filing, are that wildfire victims must be treated fairly; the utility’s customers must have access to safe, reliable and affordable service; and the state must continue to make progress on its climate change goals.

As PG&E “continues to refuse to implement the changes to the debtors’ plan necessary to effect the required transformation and satisfy AB 1054, the governor is pursuing strategies to protect California’s interest through further intervention, including a state takeover,” according to the filing.

The seed money for the $21 billion bond fund comes from up to $10.5 billion in Department of Water Resources bonds to be matched with $10.5 billion from the utilities. It would act as a line of credit for utilities to cover wildfire damages and limit the financial obligations of ratepayers.

PG&E faces an estimated $50 billion in liabilities after investigators found that its equipment sparked some of the state’s most devastating northern California fires over the past several years. It filed Chapter 11 bankruptcy a year ago.

PG&E and its shareholders are “well aware that the debtors plan must comply with AB 1054 for the emerging utility to have access to the fund provided in the statute,” Newsom's filing states. “Absent AB 1054, the debtors appear to lack a path to a feasible plan.

“It seems clear that rather than amend the debtors plan to incorporate the necessary changes, the debtors instead intend to try to leverage the Chapter 11 process to force the California Public Utilities Commission to approve — and the state of California to accept — a sub-optimal plan,” the filing states.

The governor urged the judge not to accept the exit financing commitments saying it would only further “embolden the debtor’s strategy.”

The filing says the proposed $1 billion financing would “leave the reorganized entity with insufficient financial flexibility to make billions of dollars in critically needed safety investments.”