SAN FRANCISCO (CN) — Pacific Gas and Electric emerged from Chapter 11 bankruptcy Wednesday, depositing its first payment into a wildfire victims’ compensation trust and ensuring it can take part in a crucial insurance fund to protect it from future wildfire liabilities.
“Today’s announcement is significant for PG&E and for the many wildfire victims who are now one step closer to getting paid,” said PG&E interim CEO Bill Smith. “Compensating these victims fairly and quickly has been our primary goal throughout these proceedings, and I am glad to say that today we funded the Fire Victim Trust for their benefit.”
Smith, a former AT&T executive, assumed the role of interim chief executive after outgoing CEO Bill Johnson resigned at the end of June.
In accordance with its plan, the company unloaded its first $5.4 billion cash deposit into a trust for victims of wildfires sparked by the company’s equipment. The trust will also get 22.19% of stock in the reorganized PG&E to be liquidated at a future date. PG&E is obligated to deposit another two payments of $1.35 billion into the trust in 2021 and 2022. The company said it would accelerate a $700 million payment scheduled for 2022 if state regulators approve its application to issue bonds to cover wildfire costs.
Wildfire victims were supposed to obtain approximately $13.5 billion in compensation through a mixture of stock and cash, but a 19% drop in PG&E’s stock price over the last month has raised doubt as to whether victims will get the full $6.75 billion in stock that was expected.
PG&E also paid out an $11 billion settlement for insurers that covered wildfire losses and $1 billion to 18 regional and local government entities.
PG&E’s announcement comes one day after Gov. Gavin Newsom signed into law Senate Bill 350, which would allow the state to revoke PG&E’s operating license and take over the company over if it fails to achieve safety targets or causes another catastrophic wildfire.
“No more business as usual for PG&E,” said Newsom. “As we head into wildfire season amid a pandemic, Californians need to have confidence that their utility is focused on customer safety — preventing wildfire sparks and making critical safety upgrades. SB 350 marks a critical step in the transformation of PG&E into a utility that is accountable to those it serves — the people of California.”
The company’s official exit from bankruptcy also ensures it can partake of a multibillion-dollar insurance fund created by Assembly Bill 1054. The insurance account will be equally funded by private utility shareholders and ratepayers through a $2.50 surcharge on monthly utility bills through 2036.
As part of its bankruptcy plan, PG&E also formed a new 14-member board of directors, 11 of whom are new. The new board members include a retired Navy admiral, former Federal Emergency Management Agency administrator and erstwhile energy company executives.
In its May 28 approval of PG&E’s bankruptcy plan, the California Public Utilities Commission (CPUC) required that at least half of PG&E’s board consist of California residents unless appointing certain qualified non-California residents “would result in a more qualified board overall.” Six of the board’s 14 members reside in California.
The CPUC also required that the company appoint an independent safety monitor to take over the role of a federal court-appointed monitor when PG&E’s criminal probation term expires in January 2022. PG&E is currently on probation for felony convictions related to the fatal 2010 San Bruno gas pipeline explosion.
Last month, the company also pleaded guilty to 84 counts of manslaughter and one count of recklessly starting the Camp Fire, the most deadly and destructive fire in California history. A Butte County grand jury investigation found the company repeatedly ignored warning signs about its antiquated power equipment, failed to learn from past tragedies and conducted inadequate inspections as it focused on profits over safety.
Interim CEO Smith said PG&E is committed to comprehensive and meaningful change.
“This is an important milestone, but our work is far from over,” Smith said. “Our emergence from Chapter 11 marks just the beginning of PG&E’s next era — as a fundamentally improved company and the safe, reliable utility that our customers, communities and California deserve.”
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