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California government defends PG&E bailout law in court

AB 1054 allowed PG&E to be certified as a “safe” utility despite multiple criminal investigations for deadly, destructive wildfires.

SACRAMENTO, Calif — On January 14, the state of California sent PG&E a letter officially certifying the company as a “safe” utility, even though PG&E had already been convicted of 91 felonies for causing deadly disasters and was under criminal investigation for sparking two more wildfires.

The safety certificate was issued because of the terms of AB 1054, a law designed to bail out PG&E which was signed by Gov. Gavin Newsom in 2019.

A panel of three federal judges at the Ninth Circuit Court of Appeals heard arguments Monday in a lawsuit designed to invalidate AB 1054.

The law requires PG&E to demonstrate safety practices on paper but does not factor in whether the company actually causes fires when awarding safety certificates.

It’s about more than a piece of paper: it’s about dollars. The certificate allows PG&E to participate with other utilities in the state’s wildfire fund, which is meant to help pay civil damages to victims of wildfires.

Newsom accepted campaign contributions toward his 2018 campaign from PG&E after its first six felony convictions in 2016. So did eight out of ten members of the state legislature.

While some of the judges expressed sympathy to the case against AB 1054, all three expressed concern that the federal Johnson Act prohibits them from ruling in the case.

The Johnson Act, named after the late California Governor and US Senator Hiram Johnson, is designed to prevent federal courts from resolving state-level disputes on utility rates.

The California Public Utilities Commission, which issued PG&E’s safety certificate, argued that the federal judges should defer to the state government’s handling of the wildfire crisis.

“This is a police power of the most important kind,” said CPUC attorney Chris Nolan. “[AB 1054] is the legislature fashioning a response to that. And this is an area where federal intervention should be treaded very lightly.”

The CPUC has used its police powers to investigate PG&E, but also waived the company’s $200 million fine for safety violations as a way of helping the company to exit bankruptcy.

“This is a company that’s guilty of 85 felony manslaughters… the Camp Fire,” said Mike Aguirre, a former federal prosecutor who represents PG&E customers. “[PG&E is allowed to] automatically get money from the state to pay those damages. That is not justice. That’s not what Hiram Johnson had in mind when he put together the Johnson Act.”

Aguirre’s suit was dismissed by the lower federal court.

The judges are expected to issue a written ruling on his appeal at a later time.

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