The California Public Utilities Commission has approved Pacific Gas and Electric Company’s proposed reorganization plan after seeking Chapter 11 bankruptcy protection following the disastrous and costly wildfires in 2017 and 2018. The plan still must be approved by U.S. Bankruptcy Court.
“The PG&E that emerges from bankruptcy must be a re-born utility with safety as its top priority,” said CPUC Commissioner Clifford Rechtschaffen. “Its future depends on it.”
PG&E’s aging power system was blamed for almost two dozen wildfires over the past decade, leading to massive liabilities and mounting lawsuits for the investor-owned utility. Ultimately the utility is expected to pay nearly $29 billion in penalties and compensation to wildfire victims.
The U.S. Bankruptcy Court in San Francisco has scheduled closing arguments on the reorganization plan for next week. PG&E needs court approval by June 30 to take advantage of a wildfire insurance fund established by the state Legislature last year. The fund was designed to allow for prompt payment to future victims of wildfires, while benefiting ratepayers by reducing financing costs for utilities that invest safety and other infrastructure improvements.
The plan approved by the CPUC requires that PG&E make significant changes to its board of directors. PG&E recently announced that only three of its 14 current directors would remain once it emerges from bankruptcy protection.
The plan also requires the utility to submit to greater CPUC oversight with PG&E’s operating permit subject to ongoing review focused on its safety performance. In addition, the plan requires PG&E to establish local operating regions with the goal of changing the utility’s management culture to better reflect the diverse values and needs of its customers.
“PG&E needs to transform into a well-run company that has at its core the safety, caring, and knowledge of its customers,” said CPUC President Marybel Batjer. “This will take leadership with a vision and discipline to transform the company into a model of good corporate citizenship, where Main Street is far more important than Wall Street.”
CPUC said the plan would result is a “modest” reduction in ratepayer costs by replacing nearly $12 billion of existing long-term debt with lower interest rates, offset by PG&E’s associated financing fees.
“In order to ensure safe and resilient natural gas and electric service, PG&E will require greater investments into infrastructure, maintenance, and workforce development,” said CPUC Commissioner Martha Guzman Aceves. “But we must also keep service affordable for Californians. This decision, coupled with pending legislative action, provides the tools for replacing PG&E if they cannot maintain safe service at an affordable rate.”
The PG&E plan as approved by the CPUC is available at: bit.ly.