Mayors of One-Third of PG&E Customers Call for Utility Takeover

(Bloomberg) -- Government leaders representing nearly a third of PG&E Corp.’s customers in Northern California now support a proposal to turn the bankrupt power giant into a customer-owned cooperative.

Mayors of Oakland, Sacramento and 20 other cities urged state regulators in a letter to consider the idea, first floated by San Jose last month. They say the fight over the company’s reorganization is “a pitched battle between Wall Street titans” that ignores PG&E’s customers. Supervisors of five California counties also endorsed the co-op idea.

“We’ve got a substantial number of local leaders who want to see PG&E reorganized into something that will be both more responsive and more responsible,” San Jose Mayor Sam Liccardo said in an interview Tuesday.

The coalition, however, has yet to unveil a detailed plan for how it would work. Transforming PG&E into a co-op would likely require incorporating a new entity that could issue debt so PG&E’s liabilities wouldn’t end up on cities’ books, Liccardo said. Forming a cooperative of this size would be unprecedented.

“We’re in fairly uncharted territory,” Liccardo said. “While there’s 900 customer-owned utilities in this country, there’s never been a conversion of this size.”

PG&E said changing the company’s structure wouldn’t improve safety issue that have dogged it. “We remain firmly convinced that a government or customer takeover is not the optimal solution that will address the challenges and serve the long-run interests of all customers in the communities we serve,” the utility said in a statement.

The push comes as California Governor Gavin Newsom urged backers of two rival PG&E reorganization plans to reach a deal during a meeting in Sacramento Tuesday. Newsom warned the state will intervene if they don’t come to a “swift resolution,” according to a statement.

The push to turn PG&E into a cooperative has one notable holdout: San Francisco. The city, PG&E’s hometown, wants to buy the company’s local electric equipment for $2.5 billion, an offer the company has rejected as too low. On Monday, San Francisco’s mayor and city attorney sent PG&E Chief Executive Officer Bill Johnson a letter urging him to reconsider, warning that if necessary they may pursue “an acquisition through other means.”

--With assistance from Mark Chediak, Dave Merrill and Romy Varghese.

To contact the reporter on this story: David R. Baker in San Francisco at dbaker116@bloomberg.net

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Joe Ryan, Joe Richter

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