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PG&E Names 11 New Board Members as Part of Bankruptcy Agreements

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As a condition of the Chapter 11 process, PG&E announced the selection of a new board of directors to who will be officially appointed once the utility emerges from bankruptcy, according to a press release issued on June 10.

“Putting in place a new Board is a critical component of PG&E’s plan to emerge from bankruptcy as a reimagined utility—one that is in touch with its customers and communities and is safe, reliable, financially stable, and capable of helping California meet its energy goals,” said Nora Mead Brownell, the current PG&E board chair.

From the press announcement, the new board includes (returning board members indicated with an asterisk):

Rajat Bahri: Currently CFO of Wish, a mobile eCommerce platform (2016-present), Bahri was previously CFO of Jasper Technologies (2013-2016), CFO of Trimble Navigation (2005-2013), and CFO of Kraft Canada (2001-2004).

Beyond his financial expertise, Bahri brings decades of experience in executive compensation, enterprise risk management, corporate governance, and the operation of audit committees.

*Cheryl Campbell: Currently providing safety and leadership consulting, Campbell has 35 years of energy experience in interstate pipelines and utilities. She previously spent 13 years at Xcel Energy (2004-2018), was member of the U.S. Department of Transportation’s Gas Pipeline Advisory Committee (2013-2018), and was also a member of the independent panel assessing the safety of 11 gas utilities in Massachusetts following the September 2018 explosions and fires in Merrimack Valley (2018-2020).

Campbell has extensive experience with risk management, employee and public safety, and regulatory, environmental, and operating plans in the gas industry.

Kerry Cooper: Most recently, Cooper served as President and COO of Rothy’s (2017-2020) and was previously CEO of Choose Energy (2013-2016) and both COO and CMO of ModCloth (2010-2013). He was also VP of Global eCommerce for Walmart (2010), and CMO and VP, Marketing and Strategy of Walmart (2008-2010).

Cooper has extensive experience in the consumer space, leveraging customer insights to create a better customer experience through a multi-channel approach, including mobile and online strategies.

Jessica Denecour: Most recently, Denecour was Senior VP and CIO of Varian Medical Systems. She previously served in numerous roles at Agilent Technologies, including VP of Global IT Applications and Solution Services (2005), VP of Global Infrastructure and Operations Services (2000-2004), and Senior Director and CIO of Test and Measurement Group (1999-2000). She also spent 16 years at Hewlett Packard.

Denecour joins the board with decades of experience in information technology and cybersecurity, having led IT transformations that encompassed customer, voice and data networks, data center operations, security, and technical computing.

Admiral Mark Ferguson: Currently, Admiral Ferguson is a Senior Advisor to private consultancies and the Institute for Defense Analysis and NATO Allied Command Transformation. After a 38-year career in the U.S. Navy, he retired in 2016, having served as Commander of the U.S. Naval Forces in Europe, Africa, and NATO Allied Joint Force Command (2014-2016). He was also Vice Chief of Naval Operations (2011-2014).

Through Ferguson’s leadership positions in the U.S. Navy, he brings the PG&E Board decades of experience in nuclear reactor operations, risk and change management, cyber preparedness, legislative initiatives, personnel operations, and the efficient management of transportation and equipment assets.

Bob Flexon: Most recently the CEO of Dynegy (2011-2018), Flexon was previously CFO of UGI (2001-2011). Flexon’s expertise is in finance and accounting in the chemicals, oil, and gas sectors. He brings experience in safety, workforce organization, and turnarounds, having led both Dynegy’s 2011 bankruptcy, and its culture transformation and M&A growth post-emergence.

Craig Fugate: Fugate is currently the Chief Emergency Management Officer of One Concern (2017-present), but previously served as Administrator of the Federal Emergency Management Agency (FEMA) (2009-2017) and the Director of the Florida Division of Emergency Management (2001-2009).

Fugate joins the board with decades of experience at the local, state, and federal levels in disaster preparedness and management. He has overseen preparation and response efforts for disasters such as wildfires, hurricanes, health crises, and national security threats.

Arno Harris: Currently Managing Partner of AHC (2015-present), Harris previously served as Executive Chair and CEO of Alta Motors (2017-2018). He was also the Founder, CEO, and Board Chair of Recurrent Energy (2006-2015), CEO and General Manager of EI Solutions (2005-2006), and Founder and CEO of Prevalent Power, Inc. (2001-2004).

Harris has dedicated his career to solving climate change through the intersection of technology, business, and public policy. He has extensive experience in the clean energy and electric mobility sectors with a focus on innovation, change, and advocacy.

Mike Niggli: Niggli most recently spent 13 years at Sempra Energy, including President and COO of San Diego Gas & Electric (2010-2013), COO of San Diego Gas & Electric (2007-2010), COO of Southern California Gas (2006-2007), and President of Sempra Generation (2000-2006). He was also Chairman, CEO and President of Sierra Pacific Resources/Nevada Power Company (1998-2000).

Niggli brings long-time leadership experience in regulated utilities. He has strong relationships across the industry with significant accomplishments in areas of reliability, customer satisfaction, supplier diversity, and climate-oriented management.

Dean Seavers: Most recently, Seavers was President and Executive Director of National Grid (2015-2020). He was previously Founder, CEO, and board member of Red Hawk Fire & Security (2012-2018); President of Global Services of United Technologies Fire and Security (2010-2011); and President and CEO of GE Security (2007-2010).

Following a long career in managing operations in commercial and residential security companies, Seavers led National Grid’s business transformation, which included a focus on safety culture and performance. He is experienced in customer-centric initiatives and led the division of National Grid’s utilities into jurisdictions with jurisdictional presidents.

*Bill Smith: Smith is currently the interim CEO of PG&E Corporation. Previously, he spent 37 years with AT&T Technology Operations at AT&T Services, Inc. Smith brings to PG&E decades of operational and transformation experience in large and heavily regulated, consumer-facing organizations with expertise in data center and information technology operations, field operations, planning, engineering, construction, provisioning, and maintenance.

Dara Treseder: Currently CMO of Carbon (2018-present), Treseder was previously CMO of GE Business Innovations and GE Ventures (2017-2018) and Global Head of Demand Generation of Apple’s FileMaker Division (2015-2017). Treseder is experienced in leading marketing and communications in highly regulated industries and driving customer engagement to increase growth. She brings expertise and focus to digital transformations.

Ben Wilson: Wilson is currently chairman of the national law firm Beveridge & Diamond PC (2017-present), where he has spent his career since 1986. Through his work litigating and advising clients on environmental issues, as well as his service as Monitor for the Duke Energy coal ash spill remediation project and as Deputy Monitor in the Volkswagen emissions proceedings, Wilson brings extensive experience in workplace safety, relevant environmental and wildlife protection legislation, and the need for communication, accountability, and transparency in dealing with customers and regulators.

*John Woolard: Currently CEO of Meridian Energy and Senior Partner at Activate Capital, Woolard previously served as President and CEO of BrightSource Energy (2006-2013), CEO of Silicon Energy Corp. (1998-2003), and VP of Energy at Google (2014-2016).

Woolard has more than 20 years of leadership experience in the energy technology sector developing world-class clean energy projects. He also has extensive expertise in software and grid modernization solutions, as well as California’s regulatory and policy goals in the energy sector.

Utility Appeals Transmission Line Inspection Requirements

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PG&E is appealing the imposition of strict power line inspection requirements as part of the utility’s criminal probation to the U.S. Court of Appeals for the 9th Circuit.

In their appeal, PG&E argued that the judge overseeing PG&E’s criminal probation for a 2010 pipeline explosion didn’t follow due process ahead of levying the new mandates. The company also argued that the judge’s criticisms of PG&E’s tree-trimming and infrastructure inspection programs weren’t accurate.

Last month, in a surprise move, U.S. District Judge William Alsup ordered PG&E to boost inspection procedures and hire an internal workforce of inspectors to oversee contractors’ tree-trimming work. Those contractors are also now directed to carry “sufficient” insurance in case their work is deficient and results in a wildfire.

In addition to appealing to the 9th Circuit, PG&E also asked Alsup to scrap his conditions, arguing that they interfere with existing state regulations, are “counterproductive to the aim of reducing fire risk,” and are “impractical, dangerous, or impossible to satisfy.” 

Alsup gave PG&E until May 28 to submit plans explaining how it would comply with his order. The judge has not yet scheduled a hearing on the order or PG&E’s appeal.

PG&E’s criminal probation stems from felony convictions after the 2010 San Bruno natural gas pipeline explosion that killed eight people. The company was sentenced in January 2017, with its probation slated to run through January 2022.

Commission ALJ Recommends PG&E Bankruptcy Approval

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On April 20, the California Public Utilities Commission (CPUC) Administrative Law Judge (ALJ) Peter Allen issued a 117-page document endorsing PG&E’s new governance structure, which includes a regional restructuring that aims to establish more responsive operations after years of catastrophic wildfires and last fall’s public safety power shutoff events. Allen’s action is another step toward ensuring PG&E can close its Chapter 11 case by the June 30 deadline mandated by AB 1054.

ALJ Allen also approved CPUC President Marybel Batjer’s blueprint for a stepped-up enforcement process at PG&E for future violations. Commissioners may vote on the judge’s proposed decision as early as May 21.

CPUC approval is one of two major approvals required by PG&E. The other, a sign-off by the Federal Bankruptcy Court, is expected in late May or early June.

ALJ Allen also directed PG&E to describe how it will implement an independent safety monitor after the term of a court-appointed overseer expires in January of 2022. In addition, Allen authorized the company to issue long- and short-term debt to fund its bankruptcy exit, one of Governor Newsom’s objections until PG&E agreed to Newsom’s terms on financing. Allen also asked the company to update the CPUC annually on its capital structure and any changes made to it.

The CPUC must also approve a fine against PG&E for the fires it sparked in 2017 and 2018. Over the past two months, the fine amount has been between $2.1 billion and $1.9 billion. As previously reported, Commissioner Cliff Rechtschaffen recommended lowering the fine by $200 million, arguing it would threaten PG&E’s finances. The all-but-finalized fine of $1.9 billion has also been officially unveiled.

Bankruptcy Court Approves PG&E Settlement, Dismisses Last Minute Objections Regarding COVID-19

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On April 7, U.S. Bankruptcy Judge Dennis Montali rejected an attempt by wildfire victims’ attorneys to notify clients that their $13.5 billion settlement with PG&E could be devalued by a stock market impacted by COVID-19.

Montali issued his order just hours after hearing from PG&E and victim attorneys on the issue, ultimately siding with PG&E and maintaining its momentum toward an exit from Chapter 11 protection. Montali characterized the victim attorneys’ effort as “not appropriate,” citing how their protests on financial issues were already known when a wider notice was approved and distributed to victims last month. Montali further stated that sending a second letter would confuse victims, echoing an earlier argument made by PG&E.

Victim attorneys are still allowed to tell clients to vote for, or against, PG&E’s bankruptcy exit plan, Montali said. However, he continued, that communication isn’t the same as the letter being used as an attempt to delay that vote, especially given pressures of the coronavirus pandemic and the state’s June 30 deadline for PG&E to close its Chapter 11 case.

The next milestones in PG&E’s bankruptcy case are an April 14 hearing on the company’s plea deal with Butte County over the 2018 Camp Fire, and a May 27 hearing on PG&E’s overall Chapter 11 plan. The California Public Utilities Commission (CPUC) is also expected to issue a proposed decision this month on whether to approve the plan.

The actions of the court this week further clear the path toward PG&E’s bankruptcy exit by June 30, 2020. As previously reported, key members of the legislature have expressed that there is no appetite to slowdown PG&Es exiting from bankruptcy. With Governor Newsom also removing his opposition, it seems very likely that the CPUC will support the utility’s plan as it stands today.

PG&E Reaches Deal with Governor Newsom to Emerge from Bankruptcy

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On Friday, March, 20, PG&E announced it had reached a deal with California Governor Gavin Newsom and would emerge from its Chapter 11 case before the State’s June 30 deadline.

As part of the deal, PG&E agreed to not pay dividends to investors for the next three years, along with committing to use $7.6 billion of shareholder assets to repay or refinance the utility’s debt. These moves will result in $1.4 billion in savings to customers, meeting one of Newsom’s conditions that PG&E’s bankruptcy exit have a neutral financial impact on ratepayers.

PG&E also agreed to “a complete overhaul of its board selection process,” and will agree to a step-up enforcement process at the CPUC for any future violations, along with appointing a chief transition officer and allowing the State to select an operational observer for safety.

Most significantly, if the reorganized PG&E is “unable to succeed” after it emerges from Chapter 11 protection, the utility will be sold, according to Newsom’s office. That differs from Newsom’s previous threat to have the State take over the company.

Is the plan a done deal? No – the five CPUC commissioners must still vote on a decision, but they will likely vote in favor, now that Newsom is on board.

In addition to the idea of a group of mayors breaking up the company and turning it into a municipal entity, SB 917 seeks to create a structure by which the State could take over PG&E by eminent domain. Both of these options now seem highly unlikely.

While we are very early in the session, there are at least 20 bills that touch on wildfires and, specifically, Public Safety Power Shutoffs (PSPS), as well as the costs associated with both events. Both the Senate and the Assembly have expressed significant concern with the impacts of the PSPS and, through legislation, will seek to limit them to some degree.

There will likely be many other ideas in the coming month that we will monitor closely, and the impacts of the “next” potential wildfire will continue to be a top priority in this legislative session.

Read PG&E’s press release on its agreement with Governor Newsom.

Utility Bankruptcy Exit Plan to Cost $58 Billion

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PG&E told the California Public Utilities Commission (CPUC) that its plan to exit bankruptcy and pay victims of fires its power lines caused would cost $57.65 billion. The exit plan would be funded partly by PG&E raising more than $44 billion in new financing. Since state law requires PG&E to resolve its bankruptcy without raising rates, most of the financing, about $28.5 billion, would come through new debt held at the company and subsidiary. The debt and equity raise could be a historic effort of
its own.

During the March 2-4 CPUC Evidentiary Hearings in PG&E’s Bankruptcy Proceeding, PG&E’s Chief Financial Officer, Jason Wells, told the CPUC that, “This … will be the largest capital raise in the utility industry, and one of the largest in corporate history.”

The bankruptcy exit plan would, if finalized, fund more than $25 billion in settlements related to fires blamed on PG&E, including the 2017 Wine Country wildfires and the 2018 Camp Fire. One of the settlements would establish a $13.5 billion trust to pay individual fire victims. The fund, established with PG&E stock, would be cashed out over time, something that has troubled fire victims. PG&E officials told CPUC that the plan – specific to the trust fund – would provide the market with some stability as to when and how those shares will be disposed, and would help support a better stock value and, therefore, a higher recovery for victims.

In order to qualify for the AB 1054 multibillion-dollar fund to protect itself from future fire costs, PG&E needs to get its bankruptcy judge and the CPUC to approve its exit plan by June 30. The company has made a lot of progress toward meeting that deadline, and completing the recent evidentiary hearings was part of that progress.

Is the plan a done deal? No; the five CPUC commissioners must still vote on a decision, and it’s not totally clear as to how any of them will vote.

As the evidentiary hearings began, CPUC President Marybel Batjer offered the following:

“I appreciate the tremendous amount of time and effort the parties have put into the proceedings so far and believe it underscores the monumental importance of the issue that is before us.”

As CPUC considers the PG&E bankruptcy plan, it is also considering a proposal from Batjer that could establish an escalating enforcement process, should the company continue to endanger the public when the case concludes. The most severe consequences would involve CPUC seeking to put someone else in control of the company or revoke its operating license. PG&E and other groups are expected to weigh in on that proposal by the end of March.

Beyond the actions of the CPUC and the court, there is, of course, the unpredictability of what the legislature may also conjure in the balance of the current legislative session.

Fifth District Court of Appeals Challenges Kern County’s 2015 EIR for Oil Wells

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On February 25, the 5th District Court of Appeals threw out a Kern County law that allowed oil and natural gas producers to rely on the approval of a single environmental impact report (EIR) for nearly 70,000 wells, stating that the county’s law was in violation of California’s Environmental Quality Act (CEQA).

The court ruled that Kern County’s blanket environmental review process for more than 67,000 gas and oil wells violated Kern County’s policy, finding that it did not accurately address agricultural land, noise, and water impacts. The court gave the County 30 days to stop issuing permits until the violations were addressed. This ruling effectively stays all future permits until the matter is resolved, but allows continued activity for permits issued before the court’s decision.

In 2015, Kern County streamlined its review process by doing a blanket review for oil and gas wells after the industry asked for the change. At the time, the proposal was considered a landmark idea that established new zoning laws and creating a program EIR. Under a program EIR, Kern County would review all of the potential impacts of the oil and gas industry over a 25-year period rather than on a project-by-project basis. The project EIR would develop plans to mitigate the potential cumulative impacts on the environment and the appropriate actions the oil and gas industry would need to take to address such concerns. In return, the oil and gas industry would only need ministerial permits from the County, though they would still need to receive approval from the State.

While it is unknown whether Kern County will appeal the decision, it is clear that the County will look to keep its zoning ordinance and EIR.

In response to the ruling, Kern County Planning Director Lorelei Oviatt said, “The appeals court has provided a roadmap for us to correct our analysis and provides the public with the information it needs to understand our decision-making process and adopt a new ordinance. We will not only get it right; we will improve the ordinance and once again ensure our communities are protected from environmental harm, as well as having jobs that support families and create new generations of Kern County residents living and working in healthy communities.” 

No matter what the County decides to do, this will have a significant impact on the State’s gas and oil supply as Kern County accounts for more than two-thirds of the State’s oil and three-fourths of the State’s gas production.

The court ruling is available here.

Newsom Says Takeover of Utility Still in Play

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At the Public Policy Institute of California (PPIC) conference on January 29, 2020, Governor Newsom again reiterated his threat for a State takeover of PG&E if the bankrupt utility falls short in the changes he wants.

Newsom said his administration has proposed what he called “detailed terms” on what a takeover would look like and is working on it with legislative leaders in case it’s needed, adding that the bankruptcy of PG&E was a “tremendous opportunity” and a “godsend.”

Newsom is insisting that a “new” PG&E has to be a “… completely re-imagined, completely transformed company. If PG&E can’t do it, we’ll do it for them.”

Notwithstanding the threat, the governor thought the utility was making progress. He stated that his administration is meeting with PG&E on a daily basis. “We are making progress on governance,” he said. “We are making progress on finance.”

If a deal can’t be reached within the next few weeks, Newsom told reporters that he will lay out a detailed plan for a takeover.

At the PPIC conference, Newsom expressed that he has no interest in the existing management or board. He also wants executive pay to be tied to safety, and at least half of the governing board to be California residents. He also expects the utility to be reliable and provide green energy.

“There’s going to be a new company or the State of California will take it over,” Newsom said.

At the U.S. Bankruptcy Court hearing on January 29, PG&E attorney Stephen Karotkin told Judge Dennis Montali that PG&E is “well aware” of the concerns raised by Newsom, and that he believed they would “be able to resolve those concerns.”

Championing Newsom’s idea of a State-driven change to PG&E, San Jose Mayor Sam Liccardo is urging that the utility convert the current ownership model to a customer-owned co-op, an idea that is gathering support. There is a rumor that we may see legislation introduced in the very near future on this option.

PG&E faces a deadline of June, 2020, to emerge from bankruptcy in order to avail itself of a state fund established for future wildfires under AB 1054.

Watch the governor’s hour-long appearance below:

Source: Public Policy Institute of California

Creditors Group Offers All-Cash Deal in New Proposal to PG&E Victims

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In an attempt to salvage their bid to take control of PG&E, a group of creditors led by Elliott Management Corporation (Elliott) and Pacific Investment Management Company (Pimco) said late Friday that they would commit to addressing Governor Newsom’s concerns with PG&E, including the formation of a new board and making provisions for the option of a state takeover.

In a letter to Governor Newsom, the creditor group said they are prepared to pay the victims $13.5 billion in cash upfront instead of using stock in the reorganized company to finance half of the settlement. The creditor group said they plan to make their pitch directly to those with claims from PG&E’s caused wildfires.

“We believe,” the letter stated, “[that] this is simply a better deal for the true victims of PG&E’s fires, the individuals who need this money as soon as possible so they can rebuild and move on.”

The Elliott and Pimco group face a big challenge given that the U.S Bankruptcy Court has already approved the utility’s $13.5 billion settlement with fire victims, along with an $11 billion payout to holders of insurance claims. Those claimants are now required to support PG&E’s restructuring proposal as a condition of the agreements. On Thursday, the official committee representing fire victims formally withdrew its support for the creditor plan.

PG&E said in a statement Friday that this week marked an “important milestone,” and that it’s moving forward with its bankruptcy proceedings.

Under PG&E’s plan, as outlined in previous reports, half of the payout to wildfire victims is to be financed through stock in the reorganized company, and the other half would come from a series of cash payments.

While Newsom rejected the restructuring plan offered by PG&E, and has said that the current plan doesn’t comply with state law, his administration has also stated that the Elliott and Pimco plan doesn’t meet his requirements either. The bondholders have offered to inject as much as $20 billion in cash into PG&E in exchange for almost all of the company’s equity, effectively wiping out shareholders.

The creditor group said Friday that they envision a new independent board with the majority of directors being California residents, and with some appointees to be selected by the Governor’s Office, labor unions and the wildfire fund. The creditor group also said they would allow for a PG&E takeover by the state if the company causes any future fires that destroy more than 5,000 structures, according to the new term sheet.

California’s purchase options would be at a price equivalent of 1 1/2 times the total value of the utility’s assets, and allow for a right of first refusal if a competing superior bid comes in for the company. The proposal would also cap rate increases at 3% through 2023. Further, any future reorganization would be approved by the California Public Utilities Commission.

Newsom Reaffirms Opposition to PG&E Plan; Court Ignores Governor’s Views

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Following his letter from last week, Governor Newsom on Monday submitted a filing before U.S. Bankruptcy Court Judge Dennis Montali in which he said that PG&E’s reorganization ignored his concerns and offered a restructuring plan that is “more about creating an illusion of momentum” than a true reorganization plan. Notwithstanding Newsom’s filing, the court afforded a win to the utility this week.

In response to the governor, and perhaps aiding the court’s decision, PG&E quickly amended its restructuring support agreement with representatives of the wildfire victims to reaffirm the parties’ support of the $13.5 billion settlement. In addition, PG&E said it fully intends to comply with the provisions of AB 1054 and would continue to address the concerns in Governor Newsom’s letter.

The Court Reacts

On Tuesday, Montali handed PG&E a win by approving nearly $25 billion in settlements for wildfire victims and insurers, and allowing the utility to move forward with reorganization.

“I don’t think that I have the wisdom or the knowledge or, frankly, my role, to second-guess the decisions of those victims who have told their lawyers this is how we want to go with the plan,” Montali said.

He also said that his approval wasn’t a power play to say that he knows more than the governor does, but that he believed the governor has “bigger fish to fry” in protecting the public interest, rather than the bankruptcy court’s primary purpose of financial and legal rehabilitation. He added that, even if PG&E’s settlements include the radical governance changes that critics have called for, that aspect of the company’s plan wasn’t up for debate.

The utility plan leaves PG&E’s current board of directors in place, and allows Abrams Capital Management, Knighthead Capital Management and Redwood Capital Management to retain control.

The settlements include $13.5 billion for wildfire victims and their attorneys, plus another $11 billion in claims. It also includes a lock-out provision preventing negotiations with hedge funds that own billions in PG&E bonds.

PG&E and lawyers representing fire victims told Montali that avoiding a costly trial over the utility’s liability in the 2017 Tubbs Fire offered their clients the most certainty.

Governor Newsom’s attorney, Nancy Mitchell, said Newsom would not stop PG&E’s settlement, but the reorganization plan, as it stands, doesn’t meet the criteria for accessing a new state wildfire fund.

The California Public Utilities Commission (CPUC), whose members are appointed by the governor, must also approve the reorganization.

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