Bill to allow state takeover of PG&E heads to Senate floor

A bill that could become a de facto death sentence for Pacific Gas & Electric Co. if the utility runs into trouble in the future headed to the Senate floor on Monday.

The Golden State Energy Act, SB 350, would authorize the Public Utilities Commission to petition for a court-appointed receiver "to assume possession of Pacific Gas and Electric Company's property and to operate its electrical and gas systems."

It passed the Senate Energy, Utilities and Communications Committee by an 8-3 vote.

Senators opposing the bill raised questions about the state's authority to take over a private company and potentially saddle taxpayers with liability.

The vote came about two weeks after U.S. Bankruptcy Judge Dennis Montali in San Francisco approved a plan to allow PG&E to exit Chapter 11. That plan will keep the company intact but put it in the vulnerable position of carrying about $38 billion in debt.

The bill was written by longtime company nemesis Sen. Jerry Hill, D-San Mateo, who terms out at the end of this year. The 2010 San Bruno gas pipeline explosion that PG&E was convicted of causing occurred in Hill's district. The blast killed eight people and destroyed three-dozen homes.

"This bill, SB 350, holds PG&E accountable for meeting those requirements and provides our state with a failsafe in case the new PG&E falls short of expectations," Hill said. "SB 350 authorizes the creation of a new entity, Golden State Energy, a non-profit public benefit corporation which would step in and take over if PG&E fails to emerge from bankruptcy."

PG&E has taken no official position. Reached Monday, company spokesman James Noonan said the company is committed to compensating victims of fires caused by PG&E equipment and helping the state reach its climate mitigation goals.

"Over the past several months, we have worked closely with California's leadership to refine and strengthen this plan, resulting in the governor's office voicing support earlier this year," Noonan said in an emailed statement. "We intend to implement our plan, become a new and transformed company that is positioned to meet our commitments to California and our customers and, ultimately, render this legislation unnecessary."

State Sen. John Moorlach, R-Costa Mesa, an opponent of the measure, said "It seems like the state is trying to nationalize a company. I'm a little concerned. What other examples do we have we could research where a publicly owned and traded corporation was bought out by a state or other government that have worked?"

Hill pointed to the community-owned Sacramento Municipal Utility District as an example of a utility with a positive track record.

The Senate initially approved a far different version of the bill by a 37-0, bipartisan vote in April. But the Assembly amended it into its current form in May, with Hill's blessing, requiring a new round of votes.

Amendments made in June would exempt the new entity from franchise and corporate income tax. Other changes added members to the new entity's board who would be elected by ratepayers.

Among those who spoke in favor of the bill was Sen. Scott Wiener, D-San Francisco, an attorney and a frequent critic of the utility. Wiener introduced SB 917 in February, but it never received a committee vote. That bill would have allowed an existing entity known as the California Consumer Power and Conservation Financing Authority to seize a utility's assets by eminent domain "if that corporation has been convicted of one or more felony criminal violations of laws enacted to protect the public safety within 10 years."

Speaking in favor of SB 350 on Monday, Wiener defended the idea of government-provided power services.

"Sometimes there is this assumption that a private corporation is always going to be better in terms of running something like a utility," Wiener said. "PG&E has been a private shareholder corporation for a century and PG&E is a complete disaster."