An urgent plea to Sacramento: Don’t bail out PG&E

By Bob Mulholland, Special to CalMatters

On Nov. 8, 2018, my wife called and told me to look outside. 

I saw something I’d never seen before. I didn’t know what it was, but I knew it was going to be bad. It was the nascent stages of the Camp Fire, which would become the most devastating wildfire the state of California has ever seen.

Today, I see another growing threat to Californians on the horizon. Most disturbingly, it is one that would hit hardest those who have already been so devastated by the wildfires of the past few years. Accordingly, I must issue a dire warning to Sacramento.

As in so many of our state’s recent dramas, the threat emanates from the management of Pacific Gas & Electric, the utility whose equipment sparked devastating fires in 2017 and 2018 that cost Californians so much in lives, property and peace of mind.

PG&E is now begging the state Legislature to pass new bailout legislation that would allow it to pay for those damages by taking on billions of dollars in new debt.

PG&E claims that its shareholders would pay for this debt by giving up 2% of their current 10% profits for a time, thus sparing ratepayers from having to pay. The company and its backers are hoping that Californians will fail to notice that right now, at the same time, PG&E is asking the California Public Utilities Commission for a 2% increase in the amount of profit it is permitted to collect from ratepayers.

The term for this kind of sleight of hand is “shell game,” and Californians must not fall for it.

The masterminds of this shell game are the hedge funds who control PG&E. These ruthless financial players have snapped up more than 50% of PG&E’s stock, stacked the company’s board with their cronies and taken control.

According to The San Francisco Chronicle, the three leading hedge funds in this group–Abrams, Knighthead and Redwood–made a collective profit of about $450 million by buying up PG&E’s stock before it entered bankruptcy. Now, they will stop at nothing to lock in their gains by passing as much of PG&E’s wildfire costs to ratepayers as possible.

The shell game PG&E is playing with its allowed profits is not the only way that its new bailout legislation would hurt ratepayers. 

Taking on new debt for wildfire costs that PG&E has already incurred would place the company in an incredibly precarious position should any unforeseen expenses occur in the future.

If the approach is to cut costs and hand out IOUs that will need to be paid back in the coming years, what happens when there’s another massive wildfire? Or a major system problem? It leaves PG&E with no room for error and it will surely come knocking at our door to increase rates even further.

But just forcing California ratepayers to shoulder this burden is not enough. PG&E and its hedge fund owners also want this new debt to be tax-free for investors, meaning lost tax revenue for California. If that forgone revenue results in the need for tax increases or spending cuts elsewhere in the budget, then taxpayers across the state will also find themselves victims of this scam.

PG&E has protested that this legislation is not a bailout. But of course it is. Otherwise, there would be no need to ask the Legislature for assistance when there are plenty of other standard, responsible ways for PG&E to raise the money to pay victims. 

The only difference is that those other mechanisms–such as raising billions in fresh equity by issuing new shares–risk eating into the profits of the hedge funds who bought PG&E’s at rock-bottom in the hopes of making a windfall gain, courtesy of California’s ratepayers and taxpayers.

I again find myself looking at a serious threat to well-being of my fellow Californians. 

PG&E’s hedge fund-backed plan will harm our wildfire victims, our ratepayers, and our taxpayers. I am imploring our elected representatives in Sacramento to peer through this smokescreen and see this plan for what it truly is: a threat to the safety and security of all Californians.

 —

Bob Mulholland has worked for over 45 years in Democratic politics and is a longtime resident and community leader in Chico, who helped with the response efforts to the 2018 Camp Fire, [email protected]. He wrote this commentary for CalMatters.

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