Voice of America
14 Dec 2019, 17:35 GMT+10
SAN FRANCISCO - California Gov. Gavin Newsom has rejected a $13.5 billion settlement that Pacific Gas & Electric struck just last week with thousands of people who lost homes, businesses and family members in a series of devastating fires that drove the nation's largest utility into bankruptcy.
The decision announced Friday in a five-page letter to PG&E CEO William D. Johnson marks a major setback in the utility's race to meet a June 30 deadline to emerge from bankruptcy protection.
The San Francisco-based company needs to pull a deal off to be able to draw from a special fund created by the Democratic governor and state lawmakers to help insulate utilities if their equipment sparks other catastrophic fires. The risks have escalated during the past few years amid dry, windy conditions that have become more severe in a changing climate.
In his letter, Newsom said the proposed settlement announced last week does not achieve the goal of addressing what he considers its most important elements, providing safe and reliable power to PG&E customers.
"In my judgment, the amended plan and the restructuring transactions do not result in a reorganized company positioned to provide safe, reliable, and affordable service," he said.
He went on to say that PG&E's problems are the result of decades of mismanagement that must be addressed before he will sign off on any proposed settlement.
"PG&E's board of directors and management have a responsibility to immediately develop a feasible plan," the governor said. "Anything else is irresponsible, a breach of fiduciary duties, and a clear violation of the public trust."
State Sen. Bill Dodd, who represents much of the fire-ravaged area, praised Newsom's action.
"We all know that we can't trust PG&E to do the right thing or even follow the law," the Napa Democrat said. "Gov. Newsom has been standing up for the interests of ratepayers, victims and communities from day one."
Newsom played a pivotal role in prodding Pacific Gas & Electric to work out a settlement with the fire victims instead of sticking to its original plan to earmark about $7.5 billion for them.
That $7.5 billion became particularly galling to the governor and other critics after the company agreed to pay $11 billion to resolve a potential $20 billion liability with insurers. Those insurers had already paid their policyholder claims in the fires that killed more than 120 people and destroyed nearly 28,000 homes and other buildings during 2017 and 2018.
The proposed settlement agreed to last week by the utility and attorneys representing fire victims would have paid $6.75 billion to the victims in installments ending in early 2022, and $6.75 billion in company stock that would give them close to a 21% stake in the reorganized PG&E.
The settlement also required significant concessions from the victims. Their lawyers had been contending victims were owed at least $36 billion and were likely to seek even larger amounts had they pursued their claims in a state trial and federal court hearing that had been scheduled for early next year.
U.S. Bankruptcy Judge Dennis Montali would have to approve a settlement by Dec. 20 for the deal to become part of the utility's official plan to regain its financial footing. If that happens, bankruptcy experts believe the utility's preferred reorganization plan will have a clear-cut advantage over a competing proposal from a group of bondholders and a potential bid from a group of cities and counties who have been mulling an attempt to turn the company into a customer-owned cooperative.
One of the attorneys representing thousands of fire victims said Friday night he hopes PG&E can still pull together a revised proposal that will satisfy the governor before that deadline.
"I'm hopeful that adjustments can be made so that all the parties can move forward to obtain compensation for the victims who have suffered so much over two years," said Rich Bridgford of Bridgford, Gleason & Artinian.
Although he praised the proposed settlement just last week, Bridgford said he understands Newsom's concerns.
"The governor's heart is in the right place in seeking to ensure that PG&E emerges from bankruptcy in such a way as to guarantee it can adopt the safety measures necessary to avoid catastrophic wildfires in the future," Bridgford said. "It's a delicate balancing act."
Get a daily dose of Central Coast News news through our daily email, its complimentary and keeps you fully up to date with world and business news as well.
Publish news of your business, community or sports group, personnel appointments, major event and more by submitting a news release to Central Coast News.
More InformationLONDON, U.K.: This week, BP appointed Simon Henry, former Shell finance chief, to its board as a non-executive director effective September...
OTTAWA, Canada: With Canada Post struggling to maintain operations amid labour unrest, rivals like FedEx and UPS are stepping in to...
NEW YORK, New York - U.S. and global markets showed a mixed performance in Tuesday's trading session, with some indices edging higher...
PARIS, France: French military and intelligence officials have accused China of orchestrating a covert campaign to damage the reputation...
NEW DELHI, India: Birkenstock is stepping up its efforts to protect its iconic sandals in India, as local legal representatives conducted...
HONG KONG: China has fired back at the European Union in an escalating trade dispute by imposing new restrictions on medical device...
WASHINGTON, D.C.: Elon Musk's entry into the political arena is drawing pushback from top U.S. officials and investors, as his decision...
CULVER CITY, California: TikTok is preparing to roll out a separate version of its app for U.S. users, as efforts to secure a sale...
PALO ALTO/TEL AVIV: The battle for top AI talent has claimed another high-profile casualty—this time at Safe Superintelligence (SSI),...
SANTA CLARA, California: Nvidia came within a whisker of making financial history on July 3, briefly surpassing Apple's all-time market...
SACRAMENTO, California: California's multibillion-dollar farms are facing a growing crisis—not from drought or pests, but from a sudden...
Wellington [New Zealand], July 9 (ANI): Ahead of the tri-series against Zimbabwe and South Africa, New Zealand have suffered a major...