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It's Down to the Wire for PG&E

Bankruptcy settlement pleases few, but faces crucial June 30 deadline

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The mayors' letter rejects the financial plans outlined in PG&E's proposal, saying, "The sixteen million Californians already imperiled by the company's serious lack of safety, financial stability and reliability ... cannot place their homes, their livelihoods and their futures on the prospects of a company that issues junk bond debt." The letter said the company should raise more of the money by issuing stock and less by increasing debt.

An earlier letter, signed last November by 22 mayors, initiated by Mayor Sam Liccardi of San Jose and signed by Schaaf, Berkeley's Jesse Arreguin and Richmond's Tom Butt, called for the state to take over PG&E and convert it to a "mutual benefit corporation" owned by its customers—a consumer cooperative. It argued that a cooperative could borrow the money needed for safety improvements more easily and at lower rates, would be exempt from federal taxes, and would not have to pay dividends to shareholders. In addition, giving the public a role in decision-making would restore confidence.

The mayors' May letter stopped short of calling for a public takeover, saying only that if PG&E "cannot emerge as a financially viable, reliable utility, then the Commission should pursue another path." The International Brotherhood of Electrical Workers, which represents 12,000 PG&E employees, opposes a public takeover.

But the Reclaim Our Power coalition continues to press for replacing PG&E with an electric utility controlled by the public. One of its organizations, the Local Clean Energy Alliance, points to PG&E's conviction for manslaughter in the 2010 San Bruno fire and guilty pleas in recent wildfire deaths. Although The Utility Reform Network has not called for a public takeover, Spatt agreed that "We basically have a career criminal in charge of our electric system." Taruc of Reclaim Our Power said California should "use this [crisis] as opportunity to reimagine and rebuild" a clean, decentralized energy system that's democratically controlled.

A public system taking over from PG&E would still have massive financial burdens: paying off the debt and investing in major safety improvements. But a public entity would have the advantages outlined in the November mayors' letter, and "there are more equitable ways to spread the costs," Geesman said.

Michael Wara, a lawyer and expert on climate and energy policy at Stanford Law School, said he shares some concerns about PG&E's proposal. He said he doesn't approve of paying wildfire survivors' claims half in stock while other creditors get cash, and agrees that the survivors are not fully compensated. The proposal is "transferring risk from the company to the fire victims, probably also to the state and ratepayers."

But Wara favors accepting the deal because it would be "enormously disruptive" if the bankruptcy plan is not completed by the June 30 deadline. Liabilities from the upcoming fire season would throw PG&E's finances into even worse shape, and fire survivors could end up with a lot less. It's not justice, he said, but "the bankruptcy process is not designed to produce justice, but to maximize claims of creditors."

Wara pointed out that Governor Newsom's preference is for the utility to remain a private company. In addition, he said, there isn't enough time before the June 30 deadline to create a blueprint for a public takeover, which would be a long and controversial process.

Taruc responded, "There was active discussion of all kinds of restructuring proposals—we analyzed a dozen of them. What shut all that down was Newsom's cave-in to PG&E's plan in March. Newsom holds responsibility for this predicament." She said the state should not be pressured to accept a plan that "looks very much like the same PG&E that caused the wildfires and the shutoffs." Instead, it should reopen the discussion of alternative proposals, extending the June 30 deadline if necessary, "to give us a chance to open up those other possibilities and have a safe, reliable, climate-resilient, worker- and community-controlled electricity system."

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