SAN FRANCISCO (CN) — Pacific Gas and Electric will increase the amount of stock going to wildfire victims as part its plan to exit bankruptcy by the end of June, the company announced Friday.
PG&E will provide 22.19% of stock in the reorganized company, up from the previously pledged 20.09% as part of a half-cash, half-stock settlement worth approximately $13.5 billion. The cash portion of that settlement 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 cash and liquidated stock will go into a trust for compensating victims of wildfires sparked by the company’s equipment in 2015, 2017 and 2018.
The announcement follows months of acrimony between the utility and fire victims’ attorneys, who argued in April that pandemic-related market turmoil presented a “significant risk that the shares of stock will not have the value necessary to match the $13.5 billion that PG&E has stated would be available to pay fire victim claimants.”
Another point of contention centered on when the fire victims’ trust would be allowed to liquidate stock to obtain cash for paying fire survivors. The Tort Claimants Committee, which represents fire victims, filed an objection last month arguing that the trust should be allowed to sell stock under the same favorable terms offered to financial backers funding the utility’s exit from bankruptcy.
After months of negotiations, PG&E filed an agreement in bankruptcy court Friday morning detailing restrictions on the fire victims’ trust’s sale of PG&E stock. The agreement specifies no dates on when stock can be sold but forbids selling stock “in an amount that would cause an adverse effect” as determined by an investment banking firm to be selected by PG&E and approved by the trust.
Also on Friday, the city of San Francisco filed an objection with the state’s utility regulator over PG&E’s plan to borrow $7.5 billion to help fund its exit from bankruptcy. The city argues the loan will add an extra charge to customers’ utility bills.
“PG&E wants to add a new charge to ratepayer bills with no guarantee that customers will be paid back,” San Francisco City Attorney Dennis Herrera said in a statement Friday. “PG&E wants ratepayers to take on all the risk.”
Responding to the city’s objection, PG&E spokesman James Noonan said the financing proposal is designed to be rate-neutral and ensure that PG&E can operate in a safe and financially sound manner as it works to compensate all victims of past wildfires.
“The total impact on customer bills is expected to result in a rate reduction through a credit to customers on their bills that is funded by PG&E shareholders. PG&E forecasts that the shareholder contributions will be sufficient to equal or exceed the customer charges over the period the Recovery Bonds are outstanding, thereby providing rate neutrality for customers,” Noonan said.
San Francisco previously offered to buy PG&E’s power lines for $2.5 billion to start its own public utility, an offer the company rejected in October last year.
Separately on Friday, the CPUC filed a brief in a criminal case over PG&E’s role in the fatal 2010 San Bruno gas pipeline explosion. The utility regulator urged U.S. District Judge William Alsup not to impose new probation terms that would require 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.
The CPUC said those conditions could impose higher costs on PG&E ratepayers without a public hearing to address the “efficacy and practicability” of the new requirements.
“Derailment of PG&E’s focus on the CPUC’s integrated plans to mitigate wildfires, and tension that PG&E might face if having to choose between a federal court order and the CPUC’s orders, would ill serve public safety and impose additional costs on ratepayers without a public vetting,” CPUC lawyer Christopher Nolan wrote.
Alsup put the probations conditions on hold after a May 28 hearing, saying he would wait to receive further input from the CPUC, PG&E, federal prosecutors, and the court-appointed monitor overseeing PG&E’s probation compliance.
As part of its plan for exiting bankruptcy, PG&E has agreed to pay $25.5 billion in wildfire settlements, including $1 billion for 18 public entities, $11 billion for insurers who covered wildfire losses and approximately $13.5 billion in cash and stock for all other wildfire claims.
PG&E must exit bankruptcy by June 30 to gain access to a state-created insurance fund to cushion it from future wildfire liabilities. The $21 billion insurance trust will be funded jointly by California ratepayers and private utility shareholders.
The California Public Utilities Commission approved PG&E’s bankruptcy plan last month but added certain revisions that will make the company submit to stricter oversight, change the makeup of its board of directors and create a new regionalized management structure.
The only hurdle remaining is approval from U.S. Bankruptcy Judge Dennis Montali, who wrapped up a four-day bench trial on confirmation of PG&E’s bankruptcy plan Monday.