PG&E Corporation PCG shares were losing more than 10% Monday after California Gov. Gavin Newsom rejected the company’s bankruptcy restructuring plan late Friday.
“I believe the Amended Plan falls woefully short of the requirements of [public utilities bill] AB 1054,” Newsom wrote in a letter to PG&E Corp. CEO William Johnson.
PG&E’s proposal failed to address governance concerns with steps “that will result in a more qualified and independent board of directors,” Newsom said.
AB 1054 requires the governor’s approval of the PG&E board. It also requires accountability metrics and an enforcement plan to transfer the company’s utilities license and assets in the event of future violations.
Newsom Demands 'Feasible Plan'
By Newsom’s assessment, PG&E’s restructuring plan does not comply with state objectives to advance carbon-neutrality goals; provide residents safe and affordable utilities; and fairly compensate disaster victims.
“PGE&’s board of directors and management have a responsibility to immediately develop a feasible plan,” Newsom wrote. “Anything else is irresponsible, a breach of fiduciary duties, and a clear violation of the public trust.”
Mismanagement and poor safety procedures at PG&E have led to wildfires that have killed Californians and created billions of dollars in economic losses. The utility's efforts to prevent disaster through preemptive power shutoffs this year generated more negative publicity for the company.
PG&E's Rocky Road
Since 2017, PG&E’s stock has plunged 84% on news of deadly disasters, related legal challenges and a resulting bankruptcy filing. Setbacks like this don’t help.
State law does not require Newsom’s approval of PG&E’s restructuring plan, but his resistance hinders the company’s turnaround story. Just before Newsom’s rejection, PG&E had celebrated progress by announcing a $13.5-billion settlement with more than 70,000 wildfire victims.
PG&E Price Action
PG&E must submit a revised proposal by Tuesday. California law requires PG&E to complete its bankruptcy proceeding by June 30.
The stock was down 13.6% at $9.72 at the time of publication Monday.
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Photo by Frank Schulenburg via Wikimedia.
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