California rejects PG&E’s bankruptcy plan

PG&E crews work on restoring power lines in a fire ravaged neighbourhood in California. (AP pic)

LOS ANGELES: California’s governor has rejected a plan by the state’s largest utility to emerge from bankruptcy, which included a US$13.5 billion payout for victims of a series of wildfires blamed on the company’s faulty equipment.

Governor Gavin Newsom said in a letter to Pacific Gas and Electric CEO William Johnson on Friday that the plan “falls woefully short” of a state law requiring organisational changes and “a capital structure that allows the company to make critical safety investments”.

The utility had announced on Dec 6 that it would pay US$13.5 billion to settle lawsuits over its role in a series of wildfires that killed scores of people and destroyed thousands of homes.

Faulty PG&E power lines were blamed for sparking last year’s so-called Camp Fire in northern California. It was the deadliest in the state’s history and left 86 people dead.

“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,” Newsom said in the letter.

He said the state “remains focused on meeting the needs of Californians including fair treatment of victims”, and not on Wall Street financial interests funding an exit from bankruptcy.

The company was also sued over three other fires dating back to 2015, including one that devastated the state’s wine region and killed more than 40 people two years ago.

It filed for bankruptcy protection in January, saying it faced more than US$30 billion in fire-related claims.

PG&E spokeswoman Jennifer Robison told the Los Angeles Times that the company would work “diligently in the coming days to resolve any issues that may arise”.

The firm has a deadline of Tuesday to revise its proposal.

PG&E must exit bankruptcy by Jun 30, 2020 to access a multi-billion dollar fund to compensate wildfire victims.

PG&E prompted outrage earlier this year when it cut off power to millions of customers in northern and central California in a bid to reduce the risk of wildfires.