SAN FRANCISCO (CN) – A major milestone in Pacific Gas and Electric's bankruptcy case was reached Tuesday when a federal bankruptcy judge approved two settlements worth $24.5 billion to resolve virtually all wildfire claims against the embattled utility giant.
U.S. Bankruptcy Judge Dennis Montali approved an $11 billion settlement with insurers who covered wildfire losses and a $13.5 billion settlement for all other wildfire claims, in addition to a $1 billion deal with 18 government entities reached earlier this year. That puts the total tab for PG&E wildfire settlements at $25.5 billion.
In approving the two deals Tuesday, Montali overruled objections that the settlements required insurers and fire victims to only support PG&E's preferred bankruptcy plan. That plan will allow existing PG&E shareholders to retain control of the company. Creditors argued those "lockup" provisions would hinder competition in the reorganization plan process and make it harder to advance a competing plan that might be better for fire victims or future safety improvements.
Despite those objections, Montali said it would be imprudent for him to decide what is best for fire victims after they worked diligently to negotiate a deal with PG&E.
"I don't think I have the wisdom or knowledge to second-guess those victims whose lawyers want to go with the [PG&E] plan," Montali said.
Montali also said Tuesday he will allow victims of the Ghost Ship Warehouse fire in Oakland to put PG&E on trial this May to determine whether it bears any liability for the fire that killed 36 people in 2016.
A hearing to schedule a trial date in that case is set for this Friday in Alameda County Superior Court.
The $13.5 billion deal for uninsured wildfire claims includes $5.4 billion in immediate cash, $650 million to be released in January 2021, and $700 million to be released in January 2022. The remaining $6.75 billion will come in the form of stock in the reorganized PG&E corporation, with a guarantee that a trust fund for fire victims will own no less than 20.9% of the restructured company.
Fire victims' attorney Cecily Dumas said lawyers representing more than 70% of wildfire victims agreed to support the $13.5 billion settlement and PG&E's preferred restructuring plan.
Last week, California Governor Gavin Newsom rejected PG&E's proposed reorganization plan, finding it did not comply with the requirements of Assembly Bill 1054, a new state law establishing a multibillion-dollar insurance fund for future wildfires, partially funded by ratepayers and private utilities.
After Newsom rejected the proposed $13.5 billion deal Friday, PG&E and the committee representing fire victims agreed to eliminate a condition in the settlement terms that required the governor's approval.
Governor Newsom's lawyer, Nancy Mitchell, said in court Tuesday that her client is not opposed to the $13.5 billion settlement, but the governor is demanding PG&E commit to significant changes to its corporate structure. The governor said in his Dec. 13 letter that he wants a "more qualified and independent" board of directors, more capital to invest in fire risk reduction and stricter enforcement mechanisms to ensure PG&E meets safety improvement goals.