Troubled utility company PG&E is asking the California Legislature to let it borrow money without paying taxes so it can compensate victims of a devastating wildfire caused by its equipment.
The utility is facing up to $30 billion in potential damages from lawsuits stemming from recent wildfires, including one last year that killed 86 people and destroyed much of the town of Paradise, Calif.
The proposed bill authored by Assemblyman Chad Mayes (R-Yucca Valley) would let the California Infrastructure and Economic Development Bank issue tax-exempt bonds on behalf of PG&E, borrowing against the company’s future profits. Shareholders would pay off the bonds, not customers. Taxpayers would not have to pay off the bonds if the shareholders default.
“Very simply, is this is a mechanism for the owners of the utility to be able to pick up 100% of the cost for their fires,” Mayes said. “It cannot be considered a bailout, there is no ratepayer money there, no government money that is there. This is 100% shareholders.”
But the proposal has stalled in the Democratic-controlled Legislature, where lawmakers are wary of any perception of helping the utility company blamed for starting last year’s deadly fire.
Lawmakers have about three weeks left to pass legislation before adjourning for the year. Because the bill was filed so late, it could not come up for a vote without permission from the Senate’s Democratic leadership. A spokeswoman for Senate President Pro Tem Toni Atkins (D-San Diego) said the Senate Rules Committee has not decided if the bill will move forward.
PG&E Chief Executive Bill Johnson was at the state Capitol on Wednesday to discuss the proposal with lawmakers. Johnson characterized the bill as “a pay up bill,” according to comments provided by the company.
“This is PG&E saying we’re accountable for this, we want to resolve these claims and we want to pay up,” he said. “So I think it ought to be viewed as the PG&E accountability bill.”
But others view the bill as a way to protect PG&E shareholders from a proposal by Elliott Management Corp. that would give it nearly full control of the company. If lawmakers approve the proposal, it would give shareholders more leverage to resist the proposal from Elliott, a hedge fund.
Assemblyman James Gallagher (R-Yuba City), whose district includes the town of Paradise, said the proposal is not necessary for wildfire victims to get paid. Democratic Gov. Gavin Newsom signed a law earlier this year that creates a fund of up to $21 billion that will help utility companies pay out claims for future wildfires.
But to take advantage of it, PG&E would have to emerge from its bankruptcy proceedings and settle its pending lawsuits from homeowners, insurance companies and local governments by next June 30.
“I don’t think it can be denied that one of the significant motivations for PG&E is that it helps their restructuring plan,” Gallagher said. “I’m very skeptical whenever it comes to anything that PG&E is asking you for.”
Mayes said the intent was not to pick sides, but to make sure PG&E customers don’t have to pay for the wildfires started by the company’s equipment.
“If there is a bailout, it’s the owners of the company that are bailing themselves out,” Mayes said. “To me, that’s what this is all about. It makes perfect sense.”