By Mark Chediak
PG&E detailed the organizational changes in filings late Friday with the California Public Utilities Commission and U.S. bankruptcy court. The company will seek new board members with extensive safety experience and wants half of its directors to reside in California. The utility will also appoint an independent safety adviser who would take over after the term of its federal probation monitor ends, according to the filings.
The revised restructuring proposal comes as PG&E makes a final push to emerge from the largest utility bankruptcy in U.S. history. The company filed for Chapter 11 last year facing $30 billion in liabilities from wildfires blamed on its equipment, and California Governor Gavin Newsom has threatened a state takeover if the utility doesn’t take aggressive enough steps to reform itself.
“Under our Plan, the company will emerge from Chapter 11 as a reimagined utility with an enhanced safety structure, improved operations, and a board and management team focused on providing the safe, reliable, and clean energy our customers expect and deserve,” PG&E Chief Executive Officer Bill Johnson said in a statement.
PG&E shares rose 6.5% to $16.20 at 8:22 a.m. in pre-market trading in New York.
Last week, Newsom reiterated his objections to PG&E’s previous restructuring plan, saying it didn’t comply with state law. The governor has called on PG&E to replace its current board with directors who had more safety experience and wanted a majority of members who were Californians.
In its statement Friday, the company said its latest reorganization plan addresses Newsom’s concerns and complies with state law. Newsom’s office didn’t immediately return a request for comment.
The governor has criticized PG&E’s present board, saying it’s comprised of Wall Street hedge fund appointees who wrested control of the company last year.
The governor also said the bankruptcy plan depended too heavily on debt and short-term financing that would leave the company without enough capital to fund safety upgrades. And he wanted to set up provisions that would allow for a state takeover if the utility failed to meet certain safety performance standards.
PG&E said in its filing with regulators that it will have “investment-grade credit metrics” when it emerges from Chapter 11. The utility has reduced its holding-company debt by $2 billion compared with its earlier restructuring plan.
It also plans to pursue securitization financing to cover $7 billion in wildfire claims costs, according to the filings. The securitization would help improve the utility’s credit metrics and accelerate payments to a trust for wildfire victims, PG&E said.
PG&E said Friday it would set up new governance and safety metrics and allow for stricter regulatory oversight of its operations. Its plan, however, doesn’t include an option for a state takeover.
The company would also expand the role of its chief risk officer and increase the number of members on its independent safety oversight committee comprised of outside experts.
Under the regionalization plan, a number of local units would each have an executive officer who would report directly to the company’s chief executive. Each region would also have its own chief safety officer.
The move to create regional units also comes as San Francisco and three county-level agencies in Northern California have made offers to buy parts of PG&E’s system, with each saying they want more local control over their power supply. PG&E has so far rejected all of the offers.
The utility has a June 30 deadline to win approval from state regulators and the judge overseeing its bankruptcy in order to access a state fund designed to partially cover the costs of future wildfires.
PG&E has already reached $25.5 billion in settlements with those impacted by the fires including residents, businesses, insurers and local governments. It recently struck a deal with bondholders that requires them to drop their opposition to PG&E’s restructuring plan and support the company’s proposal.