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PG&E Has Been Hit With Surprising Demands By Judge, Expert Says

KCBS Radio Midday News
April 02, 2019 - 11:09 am

The federal judge overseeing PG&E while the company is on probation has made a proposal with little precedent to restrict payments to shareholders.

The utility is on probation for the deadly pipeline explosion in San Bruno in 2010. But Judge William Alsup has recently proposed preventing PG&E from resuming dividend payments to stockholders until the company reduces the risk of sparking additional wildfires around the state. 

Alsup's plan has little precedent, according to Wayne State University law professor Peter Henning, and could en up affecting other companies. 

"Essentially, he's punishing the corporation by saying 'Look, you've got to save your money and use it for a better purpose than you have been,'" said Henning. 

A hearing on the dividend restriction is scheduled for noon on Tuesday at the Federal Building in San Francisco.  

PG&E is not making dividend payments until it emerges from bankruptcy, which it recently declared. Company officials have opposed Alsup's plan, saying it will hurt their ability to attract investors to raise money and pay for the safety improvements, such as trimming trees growing near their network of power lines. 

Related: With PG&E Declaring Bankruptcy, Customers May See Higher Bills

Alsup has said that there's a "clear-cut pattern" that PG&E's equipment has started wildfires. Prosecutors in Sonoma, Napa, Lake and Humboldt counties, however, announced recently that the company won't be charged for the series of deadly 2017 fires that spread across the region. 

Judges don't usually get involved in a company's internal business to this degree, Henning said. 

"It is questionable whether PG&E has committed a crime by not properly maintaining the area beneath its power lines," said Henning. "That could be a criminal violation and that gives the judge enormous authority over the company, essentially to order it to do things that it may not really want to do."

PG&E could appeal the judge's decision to the 9th Circuit Court of Appeals.

If the restriction is left it in place, it could affect future corporate criminal cases. 

"It certainly could set a precedent where a judge is looking at a company and going 'Alright, for the future, I'm going to take control of parts of your business,' which is what do you pay out to your investors," Henning said.