SACRAMENTO, Calif. -- California Gov. Gavin Newsom on Friday rejected Pacific Gas & Electric's proposal to pull itself out of bankruptcy, saying its reorganization plan falls "woefully short" of safety requirements set under state law and demanding the company make major changes if it wants to access billions of dollars in a fund to pay wildfire claims.
The move complicates PG&E's ability to remain in control of the company in a bankruptcy process that has seen financial interests vying to take over and local politicians preparing models for an entirely new utility. PG&E triggered the bankruptcy in January citing an estimated $30 billion in financial liabilities from California wildfires sparked by its equipment.
"In my judgment, the amended plan and the restructuring transactions do not result in a reorganized company positioned to provide safe, reliable, and affordable service to its customers, as required by AB 1054," Newsom wrote in a letter to PG&E. "The state remains focused on meeting the needs of Californians including fair treatment of victims -- not on which Wall Street financial interests fund an exit from bankruptcy."
Newsom's approval was not required under state law, but PG&E asked the governor to weigh in after reaching a $13.5-billion settlement with victims of some of California's worst wildfires on record last week.
The request was a political gamble for the company, which gave Newsom and his team of advisers five days to review whether the proposal fulfilled the requirements of a new state law that allows utilities that meet certain requirements to dip into a fund to pay costs from California wildfires. Without access to the fund, Newsom said the company's plan isn't feasible.
PG&E pushed back and said it believes the plan conforms to requirements under state law. Jennifer Robison, a spokeswoman for the company, said PG&E was committed to working "diligently in the coming days to resolve any issues that may arise." The company has until Tuesday to revise its proposal.
The request for the governor's blessing forced Newsom to take a public position on the company's reorganization long before state regulators perform an extensive review and must formally sign off on the PG&E proposal or a competing plan next year.
Rejecting the plan could risk delaying the bankruptcy process and payments to wildfire victims, said Jared Ellias, a bankruptcy law professor at the University of California, Hastings.
"The company is kind of saying now, 'You're going to have to sign off on this,'" Ellias said. "'We're not going to let you have the benefit of distance from what we're doing. If you say no, this thing could crash and burn, and you're going to own the wreckage.'"
Richard Bridgford, an attorney who is part of a team representing wildfire victims, said the bankruptcy involves complex matters and balancing multiple interests.