California Proposes Way for Stripping PG&E of License

(Bloomberg) -- California Governor Gavin Newsom has said he wants the option to take over bankrupt PG&E Corp. if the utility gets into trouble again. Now, the state has laid out a roadmap for how that could happen.

As part of proposed changes to PG&E’s reorganization plan, California Public Utilities Commission President Marybel Batjer suggested a process Tuesday through which the state could revoke PG&E’s operating license if the utility commits serious safety violations and doesn’t adequately address them.

Newsom said on Wednesday that he supports the commission’s proposal for additional oversight of PG&E.

“I look forward to getting to the point where we can make the case that the governance is radically changed and the financing is appropriate so this utility can get out of bankruptcy not limping,” Newsom said to reporters after his state of the state address. He didn’t mention the power company in his formal remarks.

Batjer proposed a series of escalating enforcement actions for PG&E that would be triggered by specific events, some of which would rely on operational and safety targets.

The process would allow for additional state oversight of the utility based on the severity of violations. Those could include the appointment of a chief restructuring officer, the placement of the company under receivership or the ultimate penalty of revoking the utility’s license.

PG&E needs to win the commission’s approval of its restructuring plan by June 30 in order to take advantage of a fund that would protect it from future wildfire liabilities. PG&E filed for Chapter 11 more than a year ago after its equipment was blamed for causing some of the worst fires in California history, resulting in about $30 billion in liabilities.

‘Great Responsibility’

“Investor-owned utilities have an enormous privilege in serving as a unique provider of essential services to the public — and with that privilege comes great responsibility to those they serve,” Batjer said in a statement. “I am very concerned about PG&E’s pattern of safety-related failures.”

Newsom has called for PG&E to be a completely transformed company when it exits bankruptcy. The governor said he wants the power company to replace its board of directors, shore up its financing and provide an option for the state to take over the company if it runs into deep trouble again. He’s threatened a state takeover of the utility if it fails to cave to his demands.

In its effort to win over Newsom, PG&E has promised to swap out some board members, enhance its safety focus and divide up its operations into regional units as part of a corporate overhaul designed to address concerns.

Batjer, who was appointed president by Newsom last year, also proposed that the utility replace its entire board as part of its reorganization. She suggested that the commission should have the power to adjust PG&E’s earnings based on its achievement of certain safety and operational targets.

“We welcome President Batjer’s input regarding our plan for emerging from Chapter 11 and building a re-imagined PG&E,” the utility said in a statement. “We look forward to continuing to participate in the CPUC’s open and transparent public process, and we continue to receive feedback on our Plan of Reorganization from a number of stakeholders, including the Governor’s Office.”

Parties including PG&E will have the chance to respond to the commissioner’s proposals as part of the regulator’s review of the utility’s turnaround plan. The commission will begin hearings on PG&E’s bankruptcy proposal later this month. PG&E said Tuesday that it remains on track to have its Chapter 11 plan confirmed by June 30.

--With assistance from Laura Mahoney.

To contact the reporter on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net

To contact the editors responsible for this story: Joe Ryan at jryan173@bloomberg.net, Reg Gale

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