The devil, goes the old saying about any complicated deal, is always in the details. In the ultra-complicated deal between Gov. Gavin Newsom and the bankrupt Pacific Gas & Electric Co., the potentially perilous devil may lie in one key detail that could cost electric customers around the state many billions of dollars over decades to come.
Newsom bragged that the agreement designed to bring the huge utility out of bankruptcy marks “The end of business as usual for PG&E.” He said this while preoccupied with imposing more and more rules to fight the coronavirus pandemic, but said nothing about one tax provision that immediately duns PG&E’s customers for $1.4 billion.
This deal certainly could cause big changes for the felonious, twice-convicted PG&E. There would be no dividend paid to stockholders for at least three years, depriving share owners of $4 billion. That’s a major blow to the many small investors who bought PG&E shares for the steady income they once produced.
The company will also pay about $7.6 billion at no charge to its customers to repay or refinance utility debts. A state observer will monitor PG&E’s safety performance. And the state can buy or break up the company if it doesn’t leave bankruptcy by July 1, selling off the pieces if Newsom and the state Public Utilities Commission he greatly influences should so choose.
PG&E's fire victims face an agonizing choice: accept a bad deal or risk everything by holding out for something better, columnist Tom Elias says.
All this has to be approved by the PUC before the company can escape bankruptcy. Also, victims of the wildfires started at least in part by PG&E equipment will have to vote to accept an alleged $13.5 billion settlement or federal Bankruptcy Judge Dennis Montali says he won’t okay the deal.
The July 1 date is vital because PG&E must be on its own by then to be covered by the state’s new Wildfire Fund, paid for by all electric consumers in the state. Created by a 2019 law known as Assembly Bill 1054, the fund will reimburse privately-owned utilities like PG&E, Southern California Edison and San Diego Gas & Electric up to $20 billion for fire damage they cause starting this year.
It’s an unprecedented bailout for corporate wrongdoing and negligence.
But the tax provision in the out-of-bankruptcy deal sets an equally dangerous precedent. Under the plan, all $1.4 billion in tax benefits PG&E will get from losses during the fires of the last few years will become part of the funding for the victim settlement.
This would set a pattern the always utility-friendly PUC could follow whenever PG&E or the other utilities propose new settlements with their fire victims, past, present and future.
A damning new report shows just how incompetent PG&E was when it came to maintenance, columnist Tom Elias says.
For the past 109 years since the PUC began under the Progressive Republican Gov. Hiram Johnson, all outside financial benefits gained by any utility have gone toward keeping electric rates down. The huge PG&E tax write-off is just such an outside benefit, not resulting directly from gas or electric operations.
Giving that money to the settlement fund will raise rates for all PG&E customers, piling atop the $2.50 per month they and other electric consumers will pay for the next 15 years for the Wildfire Fund. Customers would pay both for that fund and some of the settlement with victims.
Newsom has not publicly mentioned this new cost to PG&E’s customers. If anyone could be sure this is a one-time thing, it might not be such a big deal, costing each customer about a buck a month for years to come. Not much if you have money; a problem if you don’t.
Two efforts to recall Gov. Newsom are big flops, at least so far, columnist Tom Elias says.
But no so-called consumer advocate except former PUC President Loretta Lynch has complained about the provision. She rightly notes that it marks “the first time a(n outside) revenue stream goes anywhere but to the ratepayers.”
This provision alone ought to be reason for the PUC to reject the deal. But since current PUC President Marybel Batjer has a history of aiding PG&E, including helping design both the Wildfire Fund and the latest deal, that won’t happen. This arrangement appears greased.
That leaves electricity users all over California at far more future financial risk than ever before.
Thomas D. Elias writes the syndicated California Focus column. He is author of the book, “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It.”
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