PG&E bankruptcy, LAUSD strike—and it’s only Gavin Newsom’s second week

Good morning, California. Choose your crisis.

California’s largest school district is set to strike, California’s largest utility is signaling bankruptcy and President Trump is threatening to divert emergency aid from California to fund his border wall.

Can PG&E be saved?

PG&E crews remove fire-damaged power lines in Paradise.

Expect Gov. Gavin Newsom to respond quickly if, as seems likely, Pacific Gas & Electric Co. issues a 15-day notice today that it may go into bankruptcy.

  • Newsom had planned to announce appointments to the California Independent System Operator, which oversees the electric grid, and perhaps the California Public Utilities Commission, which regulates utilities including PG&E.
  • PG&E added urgency over the weekend as its representatives notified Capitol officials it was considering issuing the 15-day notice, as required by a state law. On Sunday evening, CEO Geisha Williams stepped down.  

The San Francisco Chronicle: “Bankruptcy would not cause an interruption in service to customers, and employees would continue to work and be paid. But bondholders and shareholders would suffer losses, as would creditors like wildfire victims awarded payouts.”

What Newsom can do to avoid a repeat of PG&E’s 2001 bankruptcy:

  • Reassure markets by showing he and legislative leaders are open to allowing PG&E to spread costs from the 2018 wildfires including the Camp Fire, the deadliest in California history. The Legislature has already let PG&E spread 2017 fire costs.
  • Ask some key questions: Why now? PG&E has been amassing cash, and could sell assets.

PG&E faces tens of billions of dollars in liability if state fire inspectors conclude it had culpability in fires that hit Santa Rosa in 2017 and killed 86 people in the Paradise region in November.

  • Moody’s Investors Service and S&P Global Ratings downgraded PG&E last week, making it difficult for the utility to borrow money.
  • To reassure PG&E’s suppliers, the Independent System Operator issued a notice Friday saying it has required PG&E to post “collateral” to ensure it can “cover its outstanding and upcoming obligations.”

Here’s an easy-to-understand primer by CALmatters’ Judy Lin on what happens if PG&E goes bankrupt.  

Meanwhile in court …

U.S. District Judge William Alsup of San Francisco, overseeing  the Pacific Gas & Electric Co. criminal probation from the deadly 2010 San Bruno gas explosion, is moving to all but seize control of the utility’s electric operation.

  • Clearly impatient, Alsup last week directed PG&E’s representatives to come to court by Jan. 30 to explain why he should not order the company to re-inspect all 100,000 miles of its lines to ensure they are safe.

Alsup: “In light of PG&E’s history of false reporting, PG&E may not rely upon its earlier inspection reports as substitutes for the new inspections.”

Alsup proposes to:

  • Go beyond state requirements by remove”any tree or branch” that threatens utility lines.
  • Fix all lines and conductors that might spark.
  • Shut off power to any part of its grid not yet rated as safe if wind reaches 30 miles an hour.

The judge: “Reliability is important but safety must come first. Profits are important but safety must come first. Only safe operation will be allowed.”

Left unstated: Alsup is moving to act while the California Public Utilities Commission, the state agency that regulates utilities, follows its process, which is protracted and ponderous.

Los Angeles Unified School District Strike

LAUSD teachers plan to strike Monday.

Teachers in California’s largest school district will strike this morning, having declared an impasse between their union, United Teachers Los Angeles, and Los Angeles Unified School District.

  • The walkout—which would also establish blue California’s solidarity with teachers who walked out in red states such as Arizona, West Virginia, Kentucky and Oklahoma—is partly over money but also an expression of the long, bitter fight between UTLA and rich L.A. charter school advocates.

What happens in L.A. is unlikely to stay in L.A., CALmatters’ Ricardo Cano has written. Here are the key points.

  • Impact: More than a half-million students and more than 30,000 teachers, counselors, librarians and school nurses.
  • Issues: The union wants a 6.5 percent raise, retroactive for a year, significantly more school counselors, librarians and nurses, major classroom size reductions and less standardized testing. UTLA’s leader has also called for a cap in the district on charter schools.
  • Flashpoints: The district’s last offer was a 6 percent raise, spread over two years of a three-year contract; 1,200 new teachers; a full-time nurse in every elementary school; a cap of 35 students per class in grades 4-6, and a cap of 39 students per class in high school.

Can Newsom help? The lower class size offer was a result of a budget proposal by Gov. Gavin Newsom that freed up operating money by using state funds to pay down teacher pension liability statewide.

  • Cano reports that Newsom’s plan, if lawmakers approve it, will free about $50 per student in school districts’ budgets—a welcome, if modest, infusion.
  • At LAUSD, that translates to $40 million—or not: UTLA says the district is lowballing the savings, even from Newsom’s plan. The district says meeting the union’s demands will bankrupt the district.

Politics: A Newsom spokesman said Friday the governor has been talking informally with both sides, but won’t get involved publicly in the negotiations. Newsom won his seat with significant union backing after charter school advocates threw millions of dollars into the gubernatorial primary—behind other candidates.

Trump’s CA flood control hit list

Trump would end flood control at Lake Isabella to pay for his border wall.

President Donald Trump’s threat to divert money from California flood control projects to pay for his border wall may come to naught, but what’s striking is what he does and doesn’t target, Congressman John Garamendi tells The L.A. Times.

  • Targets include Republican districts—and allies: House Minority Leader Kevin McCarthy of Bakersfield, Devin Nunes of Tulare, Tom McClintock, whose district includes much of the Sierra, and Doug LaMalfa, who represents the northern part of the state devastated by fire.
  • Notably, LaMalfa was quick to publicly denounce the threat. McCarthy offered a tepid response.

Targeted California projects total $2.46 billion, including repairs to the dam at Lake Isabella in Kern County, and another $2.5 billion worth of projects in hurricane-ravaged Puerto Rico.

  • Missing from the list: Any diversions of disaster money being spent the red states of Texas or Florida. Nor is he targeting aid in his home state of New York.

Transition watch: Natural Resources Agency

Natural Resources Secty. Wade Crowfoot

Environmentalist and water expert Wade Crowfoot was announced Friday as Gov. Gavin Newsom’s  new Natural Resources Secretary, a job that places him at the center of decision-making about the future of the Sacramento-San Joaquin River Delta.

Among his prescriptions: Rebuild aquifers and pay farmers to use their land as floodplains.

Crowfoot: “Failure to compromise will lead to regulatory action and likely litigation, more water supply uncertainty, and further environmental decline.”

CSU Stockton

A Cal State Stockton could be an economic game-changer.

Gov. Gavin Newsom’s proposed budget earmarks $2 million for a study to make good on a campaign promise to potentially open a new California State University campus in Stockton.

But the $2 million downpayment was cause for celebration in a city that a few years ago was at the center of the mortgage meltdown, was mired in bankruptcy and was ranked as one of the nation’s most dangerous cities.

  • Bankruptcy is over and its murder rate is way down. A CSU campus could help with the revival of the city of 315,000 people 40 miles south of Sacramento.

Stockton Mayor Michael Tubbs: “We’ll have $2 million to help plan for and figure out what will a CSU in Stockton look like.”

A basic question: Does building and operating a new campus make sense when much of higher education is moving online?

Lt. Gov. Eleni Kounalakis, a CSU trustee: “We’ll only know if makes sense if we do some work, if we study question.”

Technology is changing higher ed, she said. But state universities  turned away 32,000 students for lack of room, Stockton is the largest city in the state not directly served by a public university, and “we need more post-secondary degrees,” Kounalakis said.

Commentary at CALmatters

Yosemite National Park

Lauren Williams: Yosemite was a refuge where I could momentarily escape thoughts of petty politics and news of the day that typically consume most of my waking hours as a journalist. This time, though, a political stunt encroached into this natural refuge.

Dan Walters, Calmatters: Gov. Gavin Newsom has recognized California’s high living costs, but government is a major driver of those costs.

Please email or call with tips, suggestions and insights,, 916.201.6281. Shawn Hubler, shawn@calmatters.orgedits WhatMatters. Thanks for reading, please tell a friend and sign up here.

See you tomorrow.

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