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Calls to transition the troubled Pacific Gas and Electric Co. into a public utility intensified Sunday, as nearly 1 million customers lost power throughout California and the Kincade Fire blazed through Sonoma County.
A day earlier, Gov. Gavin Newsom told Bloomberg he would encourage Warren Buffett’s Berkshire Hathaway to make a bid for PG&E.
“We would love to see that interest materialize, in a more proactive, public effort,” he said Saturday.
Berkshire Hathaway’s energy subsidiary is heavily invested in the utility business, in California and elsewhere. It owns multiple solar farms, including a 550-megawatt facility in San Luis Obispo County that is among the world’s largest.
PG&E’s stock price plunged by nearly one third Friday, to $5 a share, after the utility told regulators that a transmission line malfunctioned near where the fire started in Geyserville late Wednesday.
Jared Ellias, a bankruptcy law expert at the UC Hastings College of Law, said the Kincade Fire might scare off either of the two big groups wrestling for control of PG&E.
“Whether it’s turning the power off, or not turning the power off, PG&E can’t do anything right,” he said. “That’s a much riskier investment than any of these guys thought.”
He added Newsom’s hope that Berkshire Hathaway steps in could be wishful thinking.
“It feels a bit like longing for a savior when there isn’t an obvious solution or a cheap solution ... there isn’t a white knight,” Ellias said.
He said it’s crazy to think Berkshire has “hundreds of billions of dollars to invest in safety without raising rates or taxes.”
“The bankruptcy court can’t fix these problems and Warren Buffett can’t fix them either,” he said.
John Geesman, a Bay Area consultant and former executive director of the California Energy Commission, said that despite Buffett’s strong reputation, the state shouldn’t count on him riding to the rescue.
“I don’t know that Warren Buffett is blind enough to plunge into this circumstance,” Geesman said.
He said one alternative is municipal takeovers, in which cities like San Francisco or San Jose could step up and take over portions of PG&E’s grid, with California acquiring the rest.
“The state is potentially a residual buyer of all the pieces that nobody else wants,” he said. “That’s usually the position the state finds itself in.”
PG&E’s management and major shareholders are struggling to fend off a hostile takeover attempt by the company’s bondholders – a collection of hedge funds that have struck an alliance with lawyers for wildfire victims.
But both of the competing groups, the shareholders and the bondholders, could decide to back out.
Each side has promised to inject billions of dollars into the troubled company to pay old wildfire claims and other debts. But their reorganization plans submitted to the U.S. Bankruptcy Court both contain out clauses. They can withdraw their proposals if PG&E is found culpable for a fire that destroys more than 500 homes.
A source close to the bondholders told The Bee on Friday that his group wasn’t bailing out of the takeover bid. So far the fire has destroyed 79 homes and other buildings.
Newsom has issued relentless criticism of the utility in recent weeks, blasting PG&E for decades of what he said is failed leadership. The mismanagement has led to blackouts that disadvantage and, at times, put California customers in peril, Newsom said.
“What’s interesting about the fires at this moment is that it’s rather normal,” Newsom said during a press conference Saturday. “Doesn’t feel that way, but this is not abnormal, this moment in our state’s history. What’s not normal is the power shutoffs.”
Local leaders and state lawmakers have echoed Newsom’s recent calls for local jurisdictions to bid for the company’s existing infrastructure as it battles bankruptcy.
“Please tell me when having a for-profit corporation in charge of a necessary public service (utilities, hospitals, schools) has served the people well,” said Assemblywoman Lorena Gonzalez, D-San Diego, on Twitter. “The conflict of serving shareholder profits seems to undermine the public good/concern we expect from these companies...”