By Hudson Sangree

SACRAMENTO, Calif. — More elected officials are calling for a public takeover of Pacific Gas and Electric or a government restructuring of the utility after it blacked out millions of Californians to prevent deadly wildfires sparked by its equipment.

Gov. Gavin Newsom summoned PG&E executives and creditors to his office Tuesday to try to resolve the battle between Wall Street hedge funds for control of the bankrupt company. A spokesman said Newsom told PG&E CEO Bill Johnson in the closed-door session unless the situation changes, the state will step in.

Newsom told U.S. Bankruptcy Judge Dennis Montali much the same thing in a letter Friday.

“It is my hope that the stakeholders in PG&E will put parochial interests aside and reach a negotiated resolution in the near term,” Newsom wrote to Montali, who is overseeing the utility’s Chapter 11 case in San Francisco. “If the parties fail to reach an agreement quickly to begin this process of transformation, the state will intervene to restructure the utility.”

On Monday, a coalition of California mayors and county supervisors wrote a letter to the California Public Utilities Commission and Newsom arguing PG&E should be transformed into a public cooperative to fix the operational and governance problems that have plagued it for years and to ensure it emerges from bankruptcy as a “viable, credit-worthy entity.”

“In a growing coalition of local community leaders, we are developing a proposed structural change for PG&E that addresses all three of these key elements,” it said. “Based on a foundation currently in the Public Utilities Code, we will propose transforming PG&E into a mutual benefit corporation — in essence, a cooperative owned by its customers.”

The battle between PG&E’s bondholders and shareholders playing out in the bankruptcy court is “merely spectacle, without regard for what will be left behind when the financial players inevitably leave the scene,” it said. (See Attorneys Clash over PG&E Reorg, Blackouts Resume.)

Billions of dollars in government bonds could help harden PG&E’s grid against wildfires, the officials argued.

The letter was signed by the mayors of 16 cities — including San Jose Mayor Sam Liccardo, who initially proposed the plan — and supervisors from five counties in Central and Northern California.

Sacramento Mayor Darrell Steinberg signed the letter, though his city is already served by the Sacramento Municipal Utility District (SMUD), which began its efforts to purchase PG&E’s local electrical system in 1923 and finally succeeded after more than 20 years of legal wrangling.

SMUD is now the nation’s sixth-largest community-owned nonprofit electric utility. Its service territory, surrounded by PG&E’s, has avoided many of the problems that have plagued PG&E, including the large-scale blackouts of recent weeks.

“I signed the letter out of solidarity with my fellow mayors,” Steinberg said in a statement. “Here in Sacramento, we’re fortunate to be served by SMUD, our municipal utility, and we haven’t experienced the blackouts or other problems like those happening in PG&E’s territory. Electricity is a life-or-death commodity and should be viewed as a public resource.”

PG&E Responds

On a sidewalk near the state Capitol, PG&E CEO Johnson said he understood the urgency of the situation and why the governor had called for a brokered solution.

“We have to emerge from bankruptcy and then we have to become the utility of the future,” the former head of the Tennessee Valley Authority told reporters. But he said making PG&E a public utility could burden ratepayers with expenses they don’t pay now.

“I think it has the potential to inadvertently shift costs,” he said. “I think the way it’s structured now is the best idea for the majority of customers.”

Regarding the recent public safety power shutoffs, which blacked out more than 2 million people twice in one week, Johnson said PG&E’s decisions had saved lives as the region faced high fire danger from unusually dry and windy conditions. The company’s equipment came under suspicion, however, for starting the 78,000-acre Kincade Fire on Oct. 23 in Sonoma County. (See PG&E Stock Plummets amid Wildfires, Shutoffs.)

This Friday marks the one-year anniversary of the Camp Fire, which killed 86 people and leveled the town of Paradise. PG&E equipment sparked that fire, state investigators found. The California Department of Forestry and Fire Protection (Cal Fire) also blamed PG&E equipment for starting 21 of the wine country fires of October 2017, which combined killed 20 people.

“I came to California with one basic purpose,” Johnson said. “Let’s make sure we don’t kill anybody in our operations. And I think we achieved that this year. I understand the hardship. I apologize for it. But for me, safety has to come first.”

PG&E responded to the governor’s ultimatum and the mayors’ takeover bid in written statements.

“We share the Governor’s focus on reducing wildfire risk across California and understand PG&E must play a role in these efforts,” the utility said. “We welcome the Governor’s and the State’s engagement on these vital matters and share the same goal of fairly resolving the wildfire claims and exiting the Chapter 11 process as quickly as possible.”

PG&E’s reaction to the mayors’ proposal was more dismissive, echoing statements it made earlier this year when it rejected San Francisco’s $2.5 billion offer to buy PG&E’s grid in the city. (San Francisco’s mayor did not sign Monday’s letter, but the city has said it still wants to create a municipal utility.)

“We are aware of proposals by various government agencies to acquire PG&E assets or to convert parts of the company to what is being described as a mutualized entity,” PG&E said. “We study and analyze each proposal. However, PG&E’s facilities are not for sale, and changing the structure of the company would not create a safer operation.”

“We remain firmly convinced a government or customer takeover is not the optimal solution that will address the challenges and serve the long-run interests of all customers in the communities we serve,” it said.