Once Powerful PG&E Has Few Friends Left in California Capital

State political leaders have no plans to help once-influential utility; ‘The landscape has really shifted’


January 30, 2019

SACRAMENTO—In the hours following PG&E Corp.’s filing for bankruptcy protection, leaders here in California’s capital had very little to say.

A new governor, Democrat Gavin Newsom, hasn’t proposed a financial rescue plan for the state’s largest public utility, nor detailed any specific changes he would like to see. Legislators who in the past were staunch supporters have also distanced themselves.

“Nobody in the building is willing to offer PG&E a bailout,” said state Sen. Jerry Hill, a Democrat and longtime critic of the company.

The absence of support from California political leaders in the lead up to the bankruptcy filing contributed to the decline of its stock and a downgrade in its bonds, according to analysts.

Soon after the company’s Tuesday chapter 11 filing, Mr. Newsom said in a brief statement that his focus “remains protecting the best interests of the people of California.”

A company that was once one of the most influential in Sacramento and regularly got its way on legislation and regulation now has few defenders left.

The reason, Sacramento veterans say, is that years of bad news related to deadly fires and other disasters have made the company unpopular among the public.

That sentiment now outweighs the goodwill PG&E had amassed from years of lobbying, donations and other close ties to key leaders.

From 2011 through the November 2018 election, the major utilities including PG&E contributed about $14.5 million to the state’s legislators, political parties, former Gov. Jerry Brown and Mr. Newsom, according to data compiled by Consumer Watchdog, a California-based advocacy group.

A representative for PG&E declined to comment.

“The landscape has really shifted,” said Chris Holden, a Democrat who chairs the state assembly utilities and energy committee. Mr. Holden planned to introduce legislation in December that would allow the utility to securitize costs related to last year’s devastating fires. But it proved so unpopular he quickly shelved the idea.

Going back decades, PG&E and other utilities had scored a number of major wins in Sacramento. When the state deregulated energy markets in the late 1990s, PG&E, San Diego Gas & Electric and Southern California Edison helped to shape the legislation signed by then-Gov. Pete Wilson, a Republican, and were allowed to pass on billions in bad investment costs to customers.

When deregulation led to rolling blackouts as PG&E and the other utilities were forced to buy energy at inflated rates, Mr. Wilson’s Democratic successor, Gray Davis, ordered state agencies to buy power on behalf of the utilities with taxpayer funds.

But the high costs it was paying for energy led PG&E to declare bankruptcy in April of 2001. After a protracted two-year process, California approved a plan for customers, rather than shareholders, to bear most of the financial burden for its emergence from chapter 11. By then, Mr. Davis had been recalled by voters, in part due to the energy issue, and replaced by Republican Arnold Schwarzenegger.

The state’s next governor, Jerry Brown, employed two former PG&E executives as top aides during his 2011-2019 tenure. Mr. Brown vetoed bills that would have overhauled the utility’s regulator, the Public Utilities Commission and that would have required the PUC to update fire-safety maps, all of which were approved by the state Legislature.

In veto messages, Mr. Brown said the overhaul was unworkable and that the maps legislation would have interfered with work already under way. A spokesman for the former governor pointed to legislation he later signed that also implemented changes at the PUC.

State political leaders have worked with the company on climate change over the past decade, counting on the utility to buy renewable energy in order for the state to hit targets.

But public perception related to PG&E’s safety record began its nearly decade-long downswing in 2010, after one of its gas lines exploded in the Northern California town of San Bruno, killing eight people. PG&E was put on federal criminal probation following felony convictions stemming from the catastrophe.

A recent spate of deadly wildfires in PG&E’s Northern California operating territory have put it further on the defensive.

Last August, the Legislature passed and Mr. Brown later signed a bill that allowed PG&E and other utilities to pay wildfire-related obligations with securitized debt, the costs of which could be passed on to ratepayers. The bill didn’t cover liability in 2018, however, and when the Camp Fire, the deadliest in California history, struck this past fall, PG&E was left unprotected. That helped drive the company to seek court protection.

State Sen. Bill Dodd, a Democrat who wrote last summer’s wildfire legislation, said PG&E’s political clout has waned and that his focus has shifted from stabilizing the utility to “helping victims and ratepayers in the long run.”

Wildfire victim advocates held a rally on the steps of the state Capitol last week calling on state leaders to save the company from bankruptcy, arguing that victim claims will likely take low priority in a restructuring, potentially leaving thousands without relief.

“Be at the head of the table and take control of this runaway monopoly,” advocate Erin Brockovich said at the event.

—Katherine Blunt contributed to this article.

Write to Alejandro Lazo at [email protected]

Latest Energy Videos

Latest Energy Releases

Energy In The News

Latest Energy Report

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Energy articles