PG&E Bankruptcy Plan Rejected by California Governor, Stock Plummets

PG&E works on power lines to repair damage caused by the Camp Fire in Paradise, Calif. on Nov. 21, 2018. Elijah Nouvelage/Reuters

Pacific Gas & Electric stock dropped about 13 percent Monday after Gov. Gavin Newsom told the firm it has to make major changes to its plan to emerge from bankruptcy.

PG&E has until Tuesday to submit a new restructuring plan to Newsom, a Democrat, after he rejected the utility’s initial plan, according to reports.

“For too long, PG&E has been mismanaged, failed to make adequate investments in fire safety and fire prevention, and neglected critical infrastructure,” the governor wrote in a letter that was sent to the firm. “PG&E has simply violated the public trust.”

Newsom’s office reviewed the plan and discovered that it won’t “result in a reorganized company positioned to provide safe, reliable and affordable service to its customers,” the letter said.

“To be approved under AB 1054, any plan of reorganization must position the emerging new entity for transformation,” Newsom continued. “Such [a] plan should include stringent governance and management requirements, enforcement mechanisms, and a capital structure that allows the company to make critical safety investments.”

PG&E announced a $13 billion settlement agreement earlier in December to cover claims associated with several deadly wildfires that ravaged Northern California over the past several years, NPR reported. Those fires, which have been linked to the company’s equipment, killed several dozen people and destroyed numerous businesses and homes in the state.

California Gov. Gavin Newsom looks on during a news conference in Sacramento on Aug. 16, 2019. Justin Sullivan/Getty Images

The firm declared bankruptcy in January 2019 after saying it faced possible liabilities of up to $30 billion.

The recently-announced settlement covers the Camp Fire in 2018, the Tubbs Fire in 2017, the Butte Fire in 2015, and the Ghost Ship Fire in Oakland, reported NPR.

As reported by the San Francisco Chronicle, the utility said it believes the plan complies with the law, which also requires PG&E to resolve its bankruptcy issues by June 30. NPR reported that the new law, approved in July, gave a $21 billion insurance fund to pay for fire damages.

The governor’s approval of PG&E’s bankruptcy isn’t legally binding, noted the Los Angeles Times.

PG&E said in response to Newsom’s letter that its plan actually “meets the requirements” set forth by the state government. The firm “will continue to work diligently” to submit a new plan, Business Insider reported.

“Looking ahead, we are committed to getting victims paid, continuing to implement changes across our business to improve our operations for the long term and emerging from Chapter 11 as a financially sound utility,” spokesman Paul Moreno said in a statement.

In recent months, Newsom has become a vocal critic of PG&E after it shut off power for millions of customers for days on end in Northern California.