Just as PG&E Corp. prepares to exit bankruptcy protection, Gov. Gavin Newsom authorized a new law paving the way for the state to radically restructure the company if it fails to rehabilitate itself.
Newsom’s office said Tuesday that he had signed SB350, a bill through which the state could someday transform investor-owned PG&E into a nonprofit public benefit corporation named Golden State Energy. The bill’s approval came a day before PG&E’s planned exit on Wednesday from bankruptcy protection and move to provide about $5.4 billion in initial funds to pay wildfire victims.
Sponsored by state Sen. Jerry Hill, D-San Mateo, SB350 is intended to provide the state with assurances about what will happen if PG&E’s Chapter 11 restructuring does not prevent the company from starting more fires like the ones that led to its bankruptcy. The state Senate approved the bill on Monday, about two weeks after it cleared the Assembly.
The corporate overhaul enabled by SB350 would occur if state regulators decide to revoke PG&E’s operating license — a drastic step they will consider taking if the company continues to cause major disasters.
“No more business as usual for PG&E,” Newsom said in a statement. “As we head into wildfire season amid a pandemic, Californians need to have confidence that their utility is focused on customer safety — preventing wildfire sparks and making critical safety upgrades. SB 350 marks a critical step in the transformation of PG&E into a utility that is accountable to those it serves — the people of California.”
PG&E stressed that it had worked closely with state officials on its bankruptcy restructuring plan and won support from the governor several months ago.
“We intend to meet our safety and operational commitments to California and our customers and ultimately render this legislation unnecessary,” said company spokeswoman Lynsey Paulo.
PG&E’s emergence from bankruptcy is coming after its power lines caused a series of huge and devastating wildfires that collectively killed more than 100 people and incinerated more than 20,000 buildings in Northern California.
The company’s bankruptcy plan provides for the creation of an estimated $13.5 billion trust to pay people harmed by those fires, which occurred in 2015, 2017 and 2018. But the money will not all arrive at once.
PG&E is providing an initial about $5.4 billion in cash to launch the fire victims’ trust. The company is also granting a projected $6.75 billion in company stock to the trust and will pay more cash later. However, the actual value of the stock portion — a major source of contention during the bankruptcy — may eventually be worth more or less than the projected amount.
The company is giving the victims’ trust nearly 477 million shares, which on Wednesday were worth about $4.3 billion based on PG&E’s closing price of $9.03 per share. While that is far less than the $6.75 billion projection, the trust cannot yet cash out any of the stock it holds. First, the shares are subject to a 90-day “lockup period,” after which the trust is expected to gradually sell off its holdings in order to maximize the amount of money available to fire victims.
“The ultimate value of the stock component ... therefore, is not known at this time and could exceed $6.75 billion,” Paulo said.
Still, the gap between the stock’s current value and its intended value was disappointing to fire victims who have long been concerned about that part of the deal to pay their claims.
“This is what we all feared would happen,” said Helen Sedwick, who lost her Sonoma County home in the 2017 Nuns Fire. “Our prediction proved to be accurate, and it means that fire victims are shortchanged ... we have so far to go to get to what we were promised.”
Gerald Singleton, an attorney for fire victims has been involved in the PG&E bankruptcy, said the trust likely won’t need to sell any shares until early next year. Singleton, who sits on an oversight committee for the victims’ trust, said he wasn’t surprised to see where PG&E’s stock stood as of Wednesday.
“We hope that it’s going to go up — that’s what everybody’s anticipating — but time will tell,” he said.
The trust should start paying the first fire victims in October, according to Singleton.
J.D. Morris is a San Francisco Chronicle staff writer. Email: jd.morris@sfchronicle.com Twitter: @thejdmorris
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