/California governor slams PG&E, saying greed, mismangement led to widespread power cuts

California governor slams PG&E, saying greed, mismangement led to widespread power cuts

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Amid widespread power cuts, California Gov. Gavin Newsom slammed the giant bankrupt power company Pacific Gas & Electric on Thursday, criticizing it for “greed” and “mismanagement” and pledging to “get this utility into the 21st century” as it reorganizes. 

This is “not a climate change story as much as a story about greed and mismanagement over the course of decades,” the Democratic governor said. “Neglect. A desire to advance not public safety, but profits.”

PG&E shut off power to hundreds of thousands of customers this week in Northern and Central California amid forecasts of high winds that can down power lines and spark wildfires. The company’s equipment was blamed for last year’s Camp Fire that devastated the town of Paradise and killed 86 people. 

Newsom framed the situation as the result of decades of bad choices at PG&E, and questioned whether the utility, whose service area covers 70,000 square miles and 16 million people, was too large. He suggested he wanted to see more competition in the market, and called PG&E a “corpus” with a rotating cast of CEOs. “I don’t know who PG&E is.”

On Thursday, PG&E began restoring power to some customers as winds died down in parts of its service area and gusty conditions moved southward away from its territory. But hundreds of thousands of people remained without electricity. 

“What has occurred in the last 48 hours is unacceptable,” Newsom said of the power cuts that left an estimated 2 million people without power at their peak. “We are seeing the scale and scope of something that no state in the 21st century should experience.”

Newsom said he was not opposed to de-energizing the grid when conditions called for it, noting that it was an “industry best practice” and had been a technique implemented effectively for more than a decade by the utility SDG&E in San Diego. However, he characterized PG&E’s shutoffs this week as less than surgical or strategic. 

At the same time, he noted that PG&E had had the opportunity to shut off power to the Paradise area before last year’s conflagration, but had not done so. “A lot of people’s lives were lost because they chose not to do the right thing,” he said.

‘They are in peril of not existing’

Newsom said once the state got through this week, “we are going to drive these reforms hard,” he said, pledging to make sure the utility does “every damn thing” lawmakers had required in legislation passed last year that incentivized major utilities to upgrade and maintain their equipment. “We are going to hold them to account.”

Newsom said it was critical to move PG&E out of bankruptcy by mid-2020 so it could recapitalize and invest in modernization. But he warned that the company was not “untouchable” and said he was interested in “major reorganization of this entity.”

“They are in peril of not existing,” Newsom said of PG&E, calling the bankruptcy proceedings an opportunity for change.

PG&E filed for bankruptcy in January, facing tens of billions of dollars in liabilities for damages related to wildfires. This week, the company’s shares tumbled as a federal bankruptcy judge ruled that the company no longer had the sole right to shape the terms of its reorganization.

That cleared a path in court for supporters of a rival proposal. A group of PG&E creditors including prominent hedge funds is backing a competing reoganization plan, and it has support from some people with claims against PG&E for wildfire damages.

Though he was clear in his criticism of PG&E, Newsom said state officials were working closely with the utility and providing resources as they “move from turning the lights off to turning the lights on.” Thousands of miles of power lines need to be inspected before the power is restored, and he said the state is providing resources to supplement that effort to ensure it’s done in an efficient and expedited way. 

“It is not the state’s responsibility,” he said, “but we will take responsibility because the moment requires that.”

There hasn’t yet been an official calculation done on how much the outages have cost the state, either in business and social disruption or in direct costs to government agencies. But some analysts have estimated it will reach into the billions.

The governor said he supported reimbursements and encouraged households and businesses to keep detailed receipts of their losses. 

He also added that legislators made $75 million available in the state budget to prepare for power outages and that those funds would go toward supporting local governments with generators or other essential equipment. 

In the week before the blackout, the governor also signed dozens of new wildfire bills into law that will add more oversight to so-called Public Safety Power Shutoffs to ensure better outcomes in the future. Newsom said Thursday night that those expected improvements, however, may take time. 

“A lot of things are underway that give me confidence about the future, but we have got to get through this immediate moment,” he said. “I am as frustrated as anybody.”

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