Wall Street players eye takeovers of Pacific Gas & Electric, San Diego Gas & Electric. New wildfire law was a long time in the making. PUC gets a new chief.
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Good morning, California.
“I’ll take inconvenience over death.”—Michael Wara, director of Stanford University’s energy policy program, as quoted in the San Francisco Chronicle, lauding PG&E’s plan to turn off power to avert wildfire.
Fighting for PG&E control
Now that Gov. Gavin Newsom has signed legislation to combat wildfires and stabilize electric utilities, he and legislators can’t help but focus on what comes of California’s most troubled utility, Pacific Gas & Electric Co.
Major Wall Street players led by Elliott Management, which hold PG&E bond debt, are making a play in bankruptcy court for control of PG&E. As it is, PG&E is controlled by a separate group that is heavily invested in PG&E’s stock.
Newsom, some legislators, organized labor and fire victims are seeking assurances from potential ownership groups.
Newsom on Friday was not picking sides:
“There are some very powerful interests that are looking to monetize and not necessarily look out for the best interests of the ratepayers and the state. My interests are California interests, not their interests.”
Sen. Steven Bradford, a Democrat from Gardena and a former executive of Southern California Edison, was more blunt:
“A hedge fund is only concerned about making money, and I believe they’re going to cannibalize this company and sell it to the highest bidder.”
- Bond holders may have the edge, the Wall Street Journal reported.
Whichever ownership group wins would need sign-off from the California Public Utilities Commission. There, Newsom’s newly selected president, Marybel Batjer, will have an outsized say. (See below).
Newsom on Batjer: “She is well aware of the players, well aware of who’s behind these branded names, well aware of their pasts, well aware of their approaches.”
Why Wall Street likes utilities
Even as climate change has increased utilities’ liability costs, Elliott Management and a partner, Bluescape Resources, made a play for control of Sempra, the parent of San Diego Gas & Electric.
As part of a truce, Sempra expanded its board of directors by two members, giving the hedge funds a say over them, and has sold or is selling off certain assets.
Eugene “Mitch” Mitchell, who oversees state governmental affairs for SDG&E:
“It was a hostile take-over of sorts, and we had to make some changes.”
- Why fight it? “We want to make decisions that were best for our customers, aligned with state policy, not have it made by a hedge fund firm that was not necessarily looking at customer needs.”
- Why utilities? But under California law, electric utilities get a guaranteed rate of return. Earlier this year, the three major utilities petitioned the California Public Utilities Commission for fatter profits.
What to know about fire law
Legislation signed by Gov. Gavin Newsom to provide financial stability for utilities may seem to have been done in a rush. It wasn’t.
As governor, Newsom retained bankruptcy experts and assigned Ann O’Leary, his chief of staff, to prepare a detailed report, which came out in April.
Lawmakers and their top aides have been holding public hearings and private meetings on the issue all year.
CalMatters’ Julie Cart weighs in with five take-aways, including whether it’s a utilities bailout, whether it will help prevent future fires, and how all this will work. To read Cart’s analysis, please click here.
Meet Ms. Fix-it
In selecting Marybel Batjer to be president of the California Public Utilities Commission, Gov. Gavin Newsom chose someone who has shown herself to be a jack of many trades, mostly in the service of making government run better.
Batjer’s government service dates to President Ronald Reagan and George H.W. Bush’s administration, when she worked for Defense Secretary Casper Weinberger and Gen. Colin Powell. See this Bob Woodward piece.
She was chief of staff to Nevada Gov. Kenny Guinn, a Democrat turned Republican, and was an executive for Harrah’s in Las Vegas. Her father, Cameron Batjer, was chief justice of the Nevada Supreme Court.
In California, she was part of the administrations of Govs. Pete Wilson, Arnold Schwarzenegger and Jerry Brown.
- Brown tasked her with overhauling the civil service and state hiring process. That remains a work in progress.
- Newsom selected Batjer to fix the Department of Motor Vehicles, another work in progress.
As Public Utilities Commission president, she will have the task of both trying to modernize an agency that was created in the Progressive Era to regulated railroads, and presiding over issues related to the future of Pacific Gas & Electric and the state’s other electric utilities.
Something I didn’t know: State Librarian Greg Lucas infoms me that Batjer is a huge admirer of the late Western painter, Maynard Dixon. On occasion, she will drop by the State Library to take in Dixon’s art. The library displayed the largest mural painted by Dixon in its main reading room.
When your home is your car
High housing costs are inspiring—and forcing—people to live in their cars, vexing cities, blowing up Instagram and driving camper conversion sales.
Caiola: “California’s housing crisis has forced hundreds of people, particularly in the Bay Area and Los Angeles, to move into their vehicles just to get by.”
Signs of the times:
- Bans in San Diego against people living in their cars, and outcries against similar proposals in Berkeley;
- #VanLife Instagram posts passing 5 million as influencers rise from the social media around it;
- Sales of the Mercedes Sprinter, a popular van life vehicle, topping 29,700 vehicles in 2018, an increase of more than 2,100 from the prior year.
Do the math: Average rent for a two-bedroom apartment is $3,102 in San Francisco and $1,755 in Los Angeles, according to an ApartmentList analysis of U.S. Census Bureau data.
How to [re]build California
CalMatters’ Judy Lin and John Osborn D’Agostino wondered: What if you had the awesome power to tax and spend, and chart a new course for California?
- Would you eliminate the property tax caps of Proposition 13?
- How about reducing income taxes—and if so, for whom?
- Would you build a bullet train from north to south, or fund universal preschool?
To build your Golden State using CalMatters’ interactive tool, please click here.
Commentary at CalMatters
Tom Dalzell, IBEW Local 1245: In the fight between hedge funds for control of PG&E, there is only one viable plan for reorganization, as things stand today, and that is the one put forward by the hedge fund-bondholders. The plan articulated several weeks ago by the shareholder hedge funds has dissolved to all but nothing.
Dan Walters, CalMatters: A bill to abolish a controversial reading instruction test for teaching credential applicants died amidst a firestorm of criticism.
See you tomorrow.