Good morning, California.

“PG&E currently expects the Chapter 11 cases to take, subject to satisfaction of certain terms and conditions, approximately two years.”—Pacific Gas & Electric Co. to the U.S. Securities and Exchange Commission, as it lined up $5.5 billion to pay its bills and keep our lights on.

Concern spreads beyond PG&E

Edison-served Southern Californians flee the Woolsey Fire.

Uncertainty surrounding electric utilities in California has led a major rating agency to downgrade Southern California Edison and San Diego Gas & Electric Co., citing the ongoing threat of climate change-driven wildfires and Pacific Gas & Electric’s potential bankruptcy.

  • S&P Global Ratings’ actions on Monday made clear the concern is not limited to PG&E in Northern and Central California.

In the Legislature, there has been little appetite to assist PG&E, despite its threat to seek bankruptcy protection in the face of billions of dollars in costs related to deadly 2017 and 2018 wildfires.

  • But the downgrades of the other two private utilities could prompt lawmakers to reconsider, and confront what is seen as climate change-related impact on corporations’ bottom line, which, in turn, will be passed along to investors and customers.

Edison and SDG&E did avoid junk bond status, unlike PG&E. But the actions will raise the utilities’ cost of borrowing money. In downgrading Edison, S&P cited three elements:

  • “Edison experienced catastrophic wildfires in 2017 and 2018 because of climate change and we expect that this trend will persist.
  • “Furthermore, we assess that California offers insufficient regulatory protections …
  • “Lastly, the swift deterioration of PG&E‘s financial health only heightens the uncertainties facing all of California’s other electric utilities.”

S&P made a similar statement about SDG&E, though added that the company’s effort to mitigate wildfire is “exceptional compared with that of its peers.”

Edison, urging legislators to act: “Clearly, changes need to be made so that all California residents can continue to receive safe, reliable, affordable and clean power.”

Sen. Bill Dodd, a Napa Democrat who took a leading role in utility-related legislation in 2018, said it remains highly unlikely legislators would overhaul liability law, also known as inverse condemnation. That would be seen as a bailout.

A suggestion to confront wildfire costs

Does California need a Wildfire Catastrophe Fund Authority?

California has an Earthquake Authority to help property owners pay for the recovery from temblors that surely will hit. Now, Republican Chad Mayes of Yucca Valley is urging that the state create the California Wildfire Catastrophe Fund Authority.

  • Mayes’ bill would require public and privately owned electric utilities, shareholders in private utilities and ratepayers to contribute to the fund to help shoulder the cost of wildfires. It’s the first bill of note introduced this year to confront what lawmakers and other experts see as climate change-related impact on corporate California. Expect more to come.

Lawmakers created the Earthquake Authority after the 1994 Northridge Earthquake caused $20 billion in damage. Sen. Robert Hertzberg, a Los Angeles Democrat, is carrying legislation this year that would free up Earthquake Authority money to pay for retrofit of homes and other structures.

Transition watch: Energy appointments

An advocate of municipally-run electric utilities is Gov. Gavin Newsom’s choice for the five-member California Public Utilities Commission, which regulates privately owned utilities such as Pacific Gas & Electric Co.

  • Genevieve Shiroma, described in a Newsom press release as a “longtime public servant,” served 20 years on the Sacramento Municipal Utility District board ending a year ago. Her appointment comes as PG&E prepares to seek bankruptcy protection.
  • How PG&E might emerge remains to be determined. But municipal utility districts could take on a greater role in providing electricity to Northern Californians.

The Sacramento utility charges less for electricity than does PG&E, and long has been a thorn in PG&E’s side.

  • In 2010, PG&E spent $46 million on a failed initiative aimed largely at blocking efforts by municipalities to form their own municipal utility districts.
  • In 2006, PG&E funded a campaign to block SMUD from expanding into neighboring Yolo County, something Yolo had sought.

As California seeks to avert an energy crisis, Newsom filled openings on the California Independent System Operator board of governors, which oversees the state’s electrical grid:

  • Severin Borenstein, a UC Berkeley professor and widely recognized expert on electricity.
  • Mary Leslie, president of the Los Angeles Business Council and a former Los Angeles Department of Water and Power commissioner.

And he made these appointments to the Commission on Catastrophic Wildfire Cost and Recovery:

  • Dave Jones, the former Insurance Commissioner.
  • Michael A. Kahn, an attorney who was a key adviser to Gov. Gray Davis during the 2000-01 energy crisis.
  • Carla Peterman, a former California Public Utilities Commission member.

Correction: An earlier version misstated the year of PG&E’s initiative. It was 2010.


FSB Core Strategies: Public Affairs. Ballot Campaigns. Legislative & Regulatory Fights

L.A. school strike ends but issues remain

Students strike with teachers on Jan. 14 in Los Angeles.

Los Angeles teachers were back at work today, after a six-day strike at California’s largest school district. Legislators will have a hand in at least some aspects of the settlement, CALmatters’ Ricardo Cano writes.

  • The Los Angeles Unified School District board, which has been controlled by charter school advocates, is being called upon to urge legislators to place a cap on the growth of new charter public schools in Los Angeles.
  • Legislators also will be urged to increase public school funding, though Gov. Gavin Newsom already is proposing to allot $80 billion to that line item in his $209 billion spending plan for 2019-2020.

L.A. Superintendent Austin Beutner: “Public education is now the topic in every household in our community. Let’s capitalize on that. Let’s fix it.”

The L.A. Times: “The union leader hailed the strike as a success and a national model, as did L.A. Mayor Eric Garcetti, who mediated the talks that led to a deal. Even Beutner, who had tried to stop the strike, said the job action had put an important focus on public education, beginning a community conversation.”

Republican Sen. John Moorlach of Orange County said the settlement does nothing to solve L.A. Unified’s long-term financial problem.

Citing billions in unfunded retiree medical benefits, Moorlach said: “There is a train wreck coming.”

And speaking of school ...

San Francisco's treasurer takes kindergartners to the bank.

As mayor of San Francisco, Gavin Newsom launched a program to give free money for college to every kindergartner in the city. Now as governor, Newsom wants to roll that out statewide.

  • Will seeding a college fund for every California kid make a difference? CALmatters’ Felicia Mello reports on child savings accounts, their track record and the rationale behind them.

Commentary at CALmatters

Supply and demand only goes so far, Roberto Jimenez argues.

Roberto Jimenez, Mutual Housing California: It’s great that the free market works well for builders and buyers who want to make a lot of money or have a lot of it to spend. Supply and demand, however, only go so far. Housing is a basic human need that is crucial to giving children and families the ability to grow and thrive and the elderly a safe place to retire.

Dan Walters, CALmatters: By announcing on the holiday commemorating civil rights leader Martin Luther King Jr., Harris made it clear that she will capitalize on her mixed-race heritage—Jamaican and East Indian—to appeal to voters of color in her quest to differentiate herself from her many rivals.


Please email or call with tips, suggestions and insights, [email protected]org, 916.201.6281. Shawn Hubler, [email protected], edits WhatMatters. Thanks for reading, please tell a friend and sign up here.

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