PG&E Public Utility ‘Backstop’ Bill Passes Senate, Awaits Newsom’s Signature

June 30, 2020

PG&E Public Utility ‘Backstop’ Bill Passes Senate, Awaits Newsom’s Signature - (California Globe - June 30)

On Monday, the Senate passed a bill that would turn PG&E into a non-profit, public utility should the company fail to emerge from bankruptcy.

A possible state takeover of PG&E

Senate Bill 350, authored by Senator Jerry Hill (D-San Mateo), was passed in a timely manner due to PG&E’s looming deadline to get out of bankruptcy by June 30th. While PG&E is widely expected to get out of bankruptcy in time and there is a three month block to definitely emerge from bankruptcy, SB 350 acts as sort of a backup plan in case that fails.

Should PG&E not get out of bankruptcy or fail to adhere by updated safety policies by September 30th, the California Public Utilities Commission (CPUC) would have a court would appoint a receiver to take all PG&E property and temporarily run utilities under the bill. PG&E, upon agreeance by the Governor, would then be turned into a non-profit, state run company called Golden State Energy. The initial board would be chosen by Governor Gavin Newsom and the legislature, with all future boards having 6 members being chosen by customers.

SB 350 would also then mandate “sufficient pay” for all operations and require a revenue model to stay efficient. The new Golden State Energy would also be given special permission by the bill to issue debt to buy property.

Lawmakers for and against state takeover.

PG&E, supported by many lawmakers and other utility companies, heavily opposed SB 350 from being passed, noting that they were close to coming out of bankruptcy.

“We intend to implement our Plan, become a new and transformed company that is positioned to meet our commitments to California and our customers and, ultimately, render this legislation unnecessary,” noted PG&E in a statement.

Many Senators agreed on Monday during the Senate vote, with many pointing out the negatives that come with a state takeover and the state running a large utility operation.

“We have one of the largest unrestricted net deficits and I’m just really concerned about whether we’re capable of actually running an operation of this substance,” said Senator John Moorlach (R-Costa Mesa).

However, the Senate ultimately passed the bill Monday 30-8. Many Senators mentioned PG&E’s negligent behavior in not updating power lines and other equipment, causing many wildfires in the late 2010’s, including the deadly 2018 Camp Fire that killed dozens of people that PG&E recently pleaded guilty to. In addition to billions of dollars of property damage and destruction, PG& was also faulted for continuous blackouts last year, harming millions of people in the process of attempting wildfire protection.

“PG&E failed us,” said Senator Hill on Monday. “And we all know that the state cannot afford for PG&E to fail us again without having a backstop in place.”

Senator Scott Wiener (D-San Francisco) also agreed, noting that SB 350 was very close to one of his own bills earlier in the year.

“I think this is the next best approach. To say we’ll give you the one more chance, but then you will become a public benefit corporation if you don’t get it together,” added Senator Wiener.

PG&E close to getting out of bankruptcy for good, but not out of the woods yet

Industry experts were generally mixed to SB 350.

“CPUC just gave the green-light for PG&E to get out,” explained Washington-based energy expert Dr. Zachary Lang. “I see SB 350 as a warning more than a real action. It gives PG&E real consequences should it fail to improve safety and reshape itself.

And what it asks is not impossible. In fact, to adhere by everything they agreed to with CPUC, it’s quite reasonable. No one wants another Camp Fire to happen. No one wants to be negligent like that. And I’m sure the company doesn’t want to pay out billions like candy like it just did.

We’ll cross the takeover bridge when we get there, but right now PG&E is on track and is showing vast improvements. CPUC wouldn’t have gave them a go if there wasn’t a clear plan in place. They’re known as one of the toughest state regulators in the country, so if you passed CPUC, you should be on par with at least Con Ed (Consolidated Edison of New York).”

SB 350 is expected to be signed soon by Governor Newsom. PG&E remains close to emerging from bankruptcy.