Prospects of PG&E Takeover in 2020

The Camp Fire rages in November in Butte County.

The June 30, 2020, deadline for Pacific Gas & Electric to emerge from bankruptcy if the giant utility wants to be eligible for a $21 billion wildfire relief fund set up by Gov. Gavin Newsom and the Legislature earlier this year may end up an unofficial deadline of another sort: for the parties interested in taking over all or part of PG&E to put forward their best plans to win over Newsom, the Legislature, Wall Street and the public.

That’s because Newsom’s announcement of his opposition to PG&E’s plan to come out of bankruptcy contains such fundamental objections that it is hard to see a possible compromise. While the governor cannot single-handedly prevent the plan from being approved by regulators and a U.S. bankruptcy judge, his opinion is sure to carry weight. Without his support, PG&E’s path out of bankruptcy is sharply complicated.

Newsom described PG&E’s proposal as being “woefully short” of the commitments needs to ensure the scandal-plagued utility is able “to provide safe, reliable and affordable service to its customers.” His critique included what seemed akin to one of the “poison pills” that the corporate world uses to make sure deals are rejected: a demand that the utility replace every member of its board of directors.

The governor’s position appears encouraging to the coalition of Northern California cities that announced in early November that they were working together to craft a plan take over PG&E operations. Those cities: San Jose, Oakland, Berkeley, Sacramento, Hayward, Sunnyvale, Richmond, Redwood City, Petaluma, Sonoma, Windsor, Cotati, Elk Grove, Clovis, Chico, Redding, Davis, Santa Cruz, Scotts Valley and San Luis Obispo. Supervisors from San Mateo, Santa Cruz, Marin, Yolo and San Benito counties also endorsed the effort. The coalition includes local governments with about one-third of PG&E’s 16 million customers in the utility’s 70,000-square-mile service area.

Cities push for power provider run like credit union

San Jose Mayor Sam Liccardo – de facto leader of the coalition – told the San Francisco Chronicle that he envisioned a electricity supplier run more like a nonprofit credit union than a government-run utility. Backers cited the Georgia Electric Membership Corp., a 501(c)(6) nonprofit that distributes energy from three power providers to 41 not-for-profit local utilities with a total of 4.4 million customers.

But another approach has the strong backing of one of the richest cities in America: San Francisco. Mayor London Breed has long been on record as saying local power infrastructure should be under local control and in September joined with City Attorney Dennis Herrera to offer PG&E $2.5 billion to buy local power lines. 

The measure was quickly rejected by PG&E and appears to have little support beyond city limits. In October, the editorial page of the San Francisco Chronicle called the plan unlikely to be approved by state regulators for a basic reason: Utilities use big-city profits to keep power affordable in rural communities, and any break-up of PG&E means “the state would almost certainly have to help provide power to rural areas — likely at taxpayer expense.”

Newsom has not explained his view of what a PG&E takeover might look like, but he appears to agree with the Chronicle about the need to keep intact the basic framework of a large utility. 

Gov. Newsom wants Warren Buffett to buy utility

In October, he made headlines when he said he hoped that Warren Buffett’s Berkshire Hathaway holding group considered buying the utility.

“We would love to see that interest materialize, in a more proactive, public effort,” Newsom told Bloomberg News.

While Buffett has shown no public interest in the idea of acquiring a controlling interest in California’s largest power utility, several hedge funds have been plain with their interest in taking over PG&E for nearly a year. They have drawn little support from lawmakers because of the perception they would be as indifferent to safety as the owners they hope to replace.

PG&E entered into bankruptcy in January, citing potential liabilities of $30 billion because of massive recent wildfires in recent years that have often been blamed on the utility’s poorly maintained infrastructure. 

The utility believed it had crossed a huge hurdle to emerging from bankruptcy on Dec. 6 when it announced a $13.5 billion settlement of damage claims from four of the largest blazes, sending its stock price higher. Seven days later, Newsom announced his opposition to the utility’s overall plan to emerge from bankruptcy, sending the stock price down to near 52-week lows.

6 comments

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  1. ronaldsteinptsadvancecom
    ronaldsteinptsadvancecom 26 December, 2019, 17:24

    Is Governor Newsom going senile, hoping for an 89-year-old Buffet to buy PG&E? He also has failed to recognize that forest management is more important than utility ownership as it doesn’t matter who owns the utility if no one is going to manage and reduce the “fuel” that’s just laying around for the next spark from a homeless campfire, lightning strike or utility spark.

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  2. Orca
    Orca 26 December, 2019, 20:18

    Of course Newsom wants this. State “ownership” of as much as possible. The European model. gosh….it’s worked out so swell there! Unf***ingbelievable.

    Reply this comment
  3. edryan221
    edryan221 27 December, 2019, 11:39

    Peter Navarro Mayor of LA 2022. Los Angeles needs leadership that can solve problems and create opportunity. Peter Navarro can run for Mayor of Los Angeles in 2022 when the seat opens up thanks to term limits. In Los Angeles, problems include homelessness, shortage of affordable housing and reforming a rogue Police Department as seen via the “LAPD Crimebuster Vigilante Scandal”. Peter Navarro is now President Trump’s top economic advisor on trade and LA, and he is an author of several books. Peter Navarro would make a great Mayor of LA, he is intelligent and leadership experience as shown to President Trump and America as he navigates through the mine field of China trade policy. Peter Navarro lived and worked in the LA basin as a Professor of Business at University California, Irvine. As Mayor of Los Angeles he has the courage to do what Los Angeles Mayor Garcetti won’t do, stand up to LAPD Chief Moore and stop the LAPD from corrupting the Los Angeles court system with the regular use of false and misleading police reports to fill the jails with homeless, whose only crime was fending off LAPD vigilant harassment. In peter Navarro’s LA you won’t see streets filled with homeless where things become so crazy the LAPD uses vigilante residents to do violent crimes onto the homeless. Peter Navarro will know how to solve the homeless problem so the homeless will be properly housed. Navarro will stand up to the corruption California Attorney General Becerra who cover-ups LAPD scandals. Becerra has refused to do his job and investigate the LACAN and WRAP formal complaint about how members of the LAPD Command structure belonged to the vigilante Crime-buster group used to terrorize homeless and do violent crimes onto targeted individuals. Mayor Garcetti stays silent on Crime-buster vigilantes showing no leadership courage. Peter Navarro has courage and shows it as he leads the fight against Communist to stop years of unfair trade practices by China. Both he and President know that China is a totalitarian system where people live under a corrupt “Police State”, and are denied basic freedoms like using the internet, or even fair pay for labor. Today in Hong Kong the Chines now use violent police with guns to stop freedom protest. So, yes Peter Navarro has courage, showing it as he leads President Trump towards trade policies. He knows that American Trade Policy can help Chinese people who don’t want to be enslaved by Chinese Communist. President Trump calls Navarro “ My tough guy on China” because he is fighting for fairness. The Chinese Government is really a government of “Corrupt Oligarchs” who are criminal thugs getting rich off slave like labor. As Mayor of Los Angeles Peter Navarro can be “LA’s tough guy” against LAPD Crime-buster vigilante corruption. Navarro has experience with the federal government. He will have the guts to demand the LAPD Crime-buster Vigilantes be dealt with by the Los Angeles Federal Prosecutor if necessary. The corruption now facing people in Los Angeles is great as California as Attorney Becerra allows LAPD involvement in Hate Crimes attacks on targeted homeless. As California State Assembly and Governor Newsom stay silent on the LAPD Crime-buster Scandal and LA homeless are denied the status Hate Crime protection. Los Angeles City Attorney Office allows LA Neighborhood Prosecutors to be members of the LAPD Crime-buster Vigilante group that does “Hate Crimes”. The prosecutors work with the vigilantes and they prosecuted the same homeless victims abused by LAPD Vigilantes. As President Trumps “Tough Man on Point” Peter Navarro now fights Chinese corruption in trade with America. Bottom line, Peter Navarro has the political courage and the “know how” to make a great Mayor of LA in 2022.

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  4. Sean
    Sean 27 December, 2019, 12:11

    The government might be careful what they wish for. There is a lot of talk about the $30 billion in losses to PG&E due to liability damages from failed infrastructure that was poorly maintained. The current market capitalization is only $5.6 billion based on the latest stock price. Then there the matter of rebuilding old infrastructure that will cost $1 billion per year and like take decades to complete. I suspect the hedge funds know that they can break up PG&E to sell in pieces for a much higher price than the market capitalization of the entire company but there will be some pieces, operating at a loss, that will have to be picked up by a buyer of last resort like the state. Even so, high energy costs are a feature not a bug to the state legislature and after cutting off water to agriculture, raising wages, electricity and fuel prices, they’ll finally be able to de-populate the Central and Imperial valleys.

    Reply this comment
  5. edryan221
    edryan221 11 February, 2020, 16:20

    Los Angeles DA Stop Latino justice Corruption. Prosecute LAPD Responsible For False Gang Affiliation Scandal. Los Angeles DA Lacey Uses False LAPD Police Reports to Incarcerate Latinos by Ed Ryan Mayor LA 2022
    BUT IN LOS ANGELES, THE RACIST,RICH POWER PLAYER TREAT ORDINARY PEOPLE OF LOS ANGELES LIKE SCUM. IN THEIR RACIST GREEDY MINDS THEY BELIEVE THAT LA PEOPLE OF COLOR WHO ARE NOT RICH, DON’T DESERVE CLEAN COURTS AND CLEAN POLICE. RECENT LAPD FRAUD EXPOSED SHOWS HOW BY LAPD IS STIGMATIZING LATINO TEENS WITH THE MARK OF “CAIN” BY TAGGING THEM “GANG AFFILIATED” WITHOUT ANY EVIDENCE TO DO SO. THE REAL CORRUPTION ION THIS MATTER IS DONE BY THE LA DISTRICT ATTORNEY WHEN SHE PROSECUTES A LATINO VICTIM OF THIS “GANG” SCAM FOR CRIMES, DOWN THE ROAD. LA JUDGE REQUIRED TO INCREASE (DOUBLE OR TRIPLE) JAIL TIME BECAUSE OF GANG AFFILIATION. NOW THE LAPD AND LA DA LIES SAYING THE POLICE WHO RANDOMLY LABELED TEENS AS GANG AFFILIATED DID SO TO KEEP NUMBERS UP. NO, THEY DID SO TO MAKE SURE LA PEOPLE OF COLOR GO TO JAIL FOR A LONG TIME. GANG AFFILIATION LABEL “ENHANCES” FUTURE CRIMES THAT LAPD CRIMEBUSTER VIGILANTES ILLEGALLY INSTIGATE. THIS IS KEPT FROM THE PEOPLE OF LA BY CORRUPT POLITICIANS AND POLICE WHO DO CRIMES OF “PAY FOR PLAY.

    Reply this comment
  6. Phineas Worthington
    Phineas Worthington 27 February, 2020, 04:34

    Its great to read some real, informative reporting on this ongoing PG and E bankruptcy issue. Thanks for the great article. Keep up the good work.

    I think we all know that the small town and Sacramento politicians are agitating for some form of government takeover of the legal monopoly we call PG and E. All the while no one even dares to suggest less government and freer energy markets, it’s disheartening.

    Reply this comment

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Chris Reed

Chris Reed

Chris Reed is a regular contributor to Cal Watchdog. Reed is an editorial writer for U-T San Diego. Before joining the U-T in July 2005, he was the opinion-page columns editor and wrote the featured weekly Unspin column for The Orange County Register. Reed was on the national board of the Association of Opinion Page Editors from 2003-2005. From 2000 to 2005, Reed made more than 100 appearances as a featured news analyst on Los Angeles-area National Public Radio affiliate KPCC-FM. From 1990 to 1998, Reed was an editor, metro columnist and film critic at the Inland Valley Daily Bulletin in Ontario. Reed has a political science degree from the University of Hawaii (Hilo campus), where he edited the student newspaper, the Vulcan News, his senior year. He is on Twitter: @chrisreed99.

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