Newsom Meets with Mayors to Explore Turning PG&E into a Co-Op

Published On: November 5, 2019

Governor Newsom reiterated this week that he wants to speed up the PG&E bankruptcy case so the company can be restructured in time for next year’s wildfire season. He added that, if that does not happen, the state could step in and restructure the utility if the parties fail to reach an agreement quickly, noting wildfire victims need money immediately and cannot afford to wait until PG&E’s June 30 deadline for exiting bankruptcy.

In a closed-door meeting with several Northern California mayors and PG&E’s CEO Bill Johnson, Newsom discussed several possible options, including the possibility of the state taking over the utility or turning the utility into a co-op of several cities.

A spokesman for Newsom told reporters after the meeting that the Governor spelled out, in vivid detail, how the blackouts have prevented people from refilling lifesaving prescriptions and using powered breathing machines, as well as how small businesses and schools were closed for days.

Johnson defended the company, telling reporters after the meeting that the power shutoffs have been well planned and executed.

“I came to California with one basic purpose – let’s make sure we don’t kill anybody at our operations. I think we achieved that this year. I understand the hardship, I apologize for it, but for me, safety has to come first.”

State and local government leaders disagree, saying PG&E has communicated poorly and has often given conflicting accounts about when the lights would go out. In a response to the California Public Utilities Commission (CPUC) last week, PG&E acknowledged “various, and in some cases, extreme, shortcomings.”

Notwithstanding, PG&E has been aggressive in shutting off power during dry, windy conditions to prevent wildfires, and Johnson said he believes the company won’t have power shutoffs on this scale in 10 years as it works to “sectionalize the system.”

A judge appointed a mediator, and the first meeting is scheduled for Wednesday in San Francisco. But Tuesday, mayors and local leaders from more than two dozen cities and counties scattered across PG&E’s sprawling service area endorsed an alternative proposal by urging regulators to consider a still-nascent proposal to convert the utility into a customer-owned cooperative.

The request outlined in a letter to the CPUC echoes an idea already floated by Newsom and San Jose Mayor Sam Liccardo, who joined other leaders pushing for an alternative to keeping PG&E under the ownership of profit-driven investors.

Turning the utility into a nonprofit company, “would allow PG&E to begin the process of restoring public confidence, in part by allowing the public to have greater role in determining decisions that increasingly have come to define matters of life and death,” the letter asserted.

Frank Wolak, professor of economics at Stanford University, says the plan may be a risky move.

“The big issue is, what are you going to do with the liabilities of PG&E? Very likely, you’ll have to take those on or in some way deal with those.”

In a co-op takeover, because the utility faces $30 billion or more in potential liabilities from past wildfires, the participating counties and cities would likely have to raise tens of billions of dollars in the municipal bond market to buy PG&E. They would then need to pay for the expensive improvements needed to ensure the utility could keep the power on instead of resorting to planned blackouts during the late summer and early autumn, when California’s climate traditionally escalates the risk of wildfires.

While legislation would not likely be necessary, 2020 is an election year, and there will likely be some members that will push these ideas into legislation in the next session.

About the Author: Jesus Arredondo

Jesus Arredondo is an Energy Industry Analyst and former State of California official. He can be reached at jesus at govreport.org