SAN FRANCISCO (CN) — California regulators on Thursday approved Pacific Gas and Electric’s plan for exiting Chapter 11 bankruptcy as the company fought in federal court to block a set of strict new probation terms aimed at preventing wildfires.
The California Public Utilities Commission unanimously approved PG&E’s $57.6 billion reorganization plan with certain modifications that will make the company submit to stricter oversight, change the makeup of its board and create a new regionalized management structure.
“Today’s decision is an important milestone to achieving the completion of the bankruptcy process and the compensation of the wildfire victims impacted by the wildfires of 2017 and 2018,” CPUC president Marybel Batjer said.
The modified plan gives CPUC the power to revoke PG&E’s operating license if it causes another catastrophic wildfire or fails to demonstrate an improved safety record. It also requires that half of the utility's board of directors be California residents.
It further mandates that PG&E hire an independent safety adviser to serve the same role as a federal court-appointed monitor when its criminal probation term ends in January 2022. The company must also form a new independent safety committee that will report directly to its board of directors.
As part of its plan for exiting bankruptcy, PG&E has agreed to pay $25.5 billion in settlements, including $1 billion for 18 public entities, $11 billion for insurers who covered wildfire losses and $13.5 billion in cash and stock for all other wildfire claims.
The next hurdle will be obtaining approval from a federal bankruptcy court. PG&E must get its bankruptcy plan confirmed by a June 30 deadline to gain access to a state-created insurance fund to protect it from future wildfire liabilities.
Also on Thursday, PG&E argued in federal court against a set of new probation terms imposed by U.S. District Judge William Alsup, who oversees PG&E’s probation for felony convictions related to the fatal 2010 San Bruno gas pipeline explosion.
During that hearing, PG&E lawyer Kevin Orsini argued the company’s current inspection program is working as intended to prevent catastrophic wildfires. He said the new probation conditions would only serve to undermine the company’s efforts.
“The enhanced inspections are working and are a fundamental sea of change from what PG&E was doing in the past,” Orsini said.
The new conditions imposed on April 30 would force PG&E to hire its own tree inspectors, design a new inspection program that includes tracking the age of all transmission line equipment and video taping inspections and require all contractors carry adequate insurance to cover wildfire losses.
Orsini argued the court lacks evidence to support its theory that such conditions would improve fire safety. He further insisted that the requirements would interfere with the state’s exclusive power to regulate utilities.
Alsup replied that accepting PG&E’s position would mean the court could never enforce probation terms, including prior conditions that require PG&E to comply with state laws and meet all targets in its 2019 wildfire safety plan. PG&E acknowledged in January that it failed to meet every target in the state-mandated plan.
“You promised the U.S. District Court you would comply with that plan,” Alsup said. “What remedy then do I have to make you comply with the conditions of probation? Don’t I have some authority to make you clean up your act?”
On forcing the company to hire its own inspectors to review tree trimming work done by contractors, Orsini said the company would waste resources hiring the same workers already employed by outside companies that have the expertise, manpower and flexibility to provide that labor.