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PG&E Seeks $20B Wildfire Bonds Issuance

Measure Would Require Swift Passage Through the Legislature

By Hudson Sangree

SACRAMENTO, Calif. — PG&E Corp. is hoping the State Legislature will quickly approve a bill providing up to $20 billion in bonds to help the company pay its massive debts to wildfire victims and emerge from bankruptcy.

PG&E CEO Bill Johnson | PG&E

New CEO Bill Johnson last week lobbied state lawmakers on the bond measure, which is being proposed as amendments to AB 235, which had been stalled in committee. The new version of the bill is circulating in draft form but hasn’t been formally introduced yet.

“These bonds would hold PG&E accountable to wildfire victims and will be repaid using PG&E profits, not customer dollars,” the company said in a statement Wednesday.

Opponents call the bond measure a bailout that could ultimately hurt consumers.

“Should PG&E shareholders default on their payments due to continued wildfire safety negligence or poor management decisions, the bondholders are not at risk of getting stiffed because ratepayers serve to guarantee payment,” The Utility Reform Network said in a statement.

PG&E’s unsecured bondholders, who want to be paid in bankruptcy and gain greater control of the company, also oppose the issuance of new bonds. The ad hoc committee of senior unsecured noteholders recently launched a website opposing the proposed amendments to AB 235. The group has offered its own $30 billion bailout plan for PG&E. (See Only PG&E Can File Bankruptcy Plan, Judge Says.)

Fast Action Required

The original version of AB 235 — which sought to have the Public Utilities Commission consider a utility’s financial health when deciding whether to award recovery of wildfire costs — stalled in late June, missing the deadline for bills to be reported out of committee. Legislative rule waivers would be required to amend the bill and bring it to a floor vote now.

Lawmakers have until Sept. 13 to pass bills and send them to Gov. Gavin Newsom.

Three weeks is a short time frame, but other wildfire measures have been hastily passed this year and last, including SB 901, a major bill that cleared the legislature in a matter of days in 2018 after it was heavily amended. (See California Wildfire Bill Goes to Governor.)

In July, lawmakers passed AB 1054 in less than a week after it was amended to include Newsom’s wildfire plan. It created a $21 billion fund to pay for wildfire damages. The state’s three big investor-owned utilities and ratepayers will bankroll the insurance-like fund equally. (See Calif. Wildfire Relief Bill Signed After Quick Passage.)

PG&E tried to have the wildfire bonds included in AB 1054 but was unsuccessful.

| © RTO Insider

Bankruptcy Continues

To take advantage of the new law’s wildfire fund, PG&E and its utility subsidiary Pacific Gas and Electric must emerge from Chapter 11 reorganization by June 2020. They filed for bankruptcy in January after November’s Camp Fire killed 85 people and destroyed most of the town of Paradise. PG&E has acknowledged its 100-year-old Caribou-Palermo transmission line likely sparked the blaze.

A bankruptcy hearing is scheduled Tuesday to weigh PG&E’s estimated liability for the Camp Fire and a series of wildfires that tore through Northern California wine country in October 2017. The fire damages will likely total tens of billions of dollars, the company has said.

The U.S. Bankruptcy Court judge overseeing the case recently allowed fire victims and insurers to proceed with lawsuits against PG&E for the Tubbs Fire, which killed 22 people and destroyed part of the city of Santa Rosa. State investigators determined a private landowner’s faulty wiring sparked the fire, but plaintiffs’ lawyers hope to prove PG&E is blameworthy.

The judge’s decision sent PG&E’s stock price tumbling from $18.12/share on Aug. 9, the day of decision, to $10.67/share on Aug. 19. Critics of the AB 235 amendments also have contended the bond proposal is meant to bolster the company’s beleaguered stock price.

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