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PG&E : Push for Bond Money Shelved in California Legislature

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09/06/2019 | 12:40pm EDT

By Alejandro Lazo and Katherine Blunt

SACRAMENTO, Calif. -- PG&E Corp.'s last-minute push for legislation to help it pay off billions of dollars in wildfire claims fell apart Friday as the California lawmaker who authored the measure said he would shelve the proposal for the year.

The bill, by Republican Assemblyman Chad Mayes, would have given the bankrupt utility giant access to as much as $20 billion in tax-exempt state bonds backed by shareholder profits. Mr. Mayes said in an interview Friday that he expects to make the proposal a "two year bill," meaning it wouldn't go up for a vote before California's legislative session ends next week. Instead, it could be considered again in 2020.

Mr. Mayes said the proposal needs more debate and more time for discussion.

"It's really important for us to get this right. This is a major piece of policy, it needs full sunlight, it needs full transparency, and it takes time to do this," Mr. Mayes said. "Could it be done? It could, but we are running out of time."

PG&E for weeks had been lobbying lawmakers to pass the legislation, arguing that quick access to the bond money is critical to its effort to settle wildfire claims and emerge from bankruptcy court by next summer. PG&E sought Chapter 11 bankruptcy protection in January, citing more than $30 billion in potential liability costs tied to its role in starting a series of wildfires in 2017 and 2018.

In a statement, PG&E said: "We firmly believe that Wildfire Victim Recovery Bonds are a critical element to the state's path forward when it comes to addressing wildfire risk. We're pleased to see policymakers acknowledge the merits of this proposal and look forward to lawmakers considering it in January as a balanced approach that prioritizes and protects both wildfire victims and customers."

California lawmakers in July passed legislation creating a fund to help the state's largest utilities handle wildfire liability costs going forward. PG&E is required to exit bankruptcy by June 30, 2020, to participate in it.

The separate bond measure, however, failed to gain traction, with few legislators in California's large Democratic caucus eager to support a bill that could be viewed as a bailout of the unpopular company. PG&E said it would repay the bonds with future profits, not rate hikes, but the legislation still triggered backlash from consumer advocates and a group of bondholders with other plans. Some particularly objected to the attempt to rush the bill through in the last few weeks of the legislative session.

The measure's failure complicates PG&E's push to devise a restructuring plan, which it intends to submit to the court by Monday. The judge overseeing the bankruptcy case last month affirmed the company's exclusive right to craft that framework as bondholders and insurers pushed to file their own plans.

PG&E's largest shareholders last month proposed raising as much as $15 billion in equity and $5 billion in debt to support the plan, according to regulatory filings. Without the state bonds, the company will likely have to seek additional capital.

The company's total liability burden remains in flux amid new questions about whether it could be held responsible for the 2017 Tubbs Fire, the second-worst wildfire in California history. California fire investigators earlier this year said PG&E's equipment didn't cause that fire, but attorneys representing fire victims strongly dispute that finding and persuaded the bankruptcy judge to permit a state civil trial on the issue, a case that could add billions of dollars to its total obligations.

Write to Alejandro Lazo at alejandro.lazo@wsj.com and Katherine Blunt at Katherine.Blunt@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
PG&E CORPORATION -4.84% 11.61 Delayed Quote.-48.63%
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