SAN FRANCISCO (CN) — After 17 months of feuding and negotiating with creditors, a federal bankruptcy judge Saturday approved Pacific Gas and Electric’s $59 billion plan for exiting Chapter 11 bankruptcy, setting the stage for billions in compensation to start flowing to wildfire victims.
U.S. Bankruptcy Judge Dennis Montali overruled the bulk of objections against the plan in a 31-page opinion issued Wednesday. In that ruling, Montali said he saw no viable alternatives to approving the plan.
“If the court does not confirm the plan, the only option appears to be leaving the debtors where they have been for the last 17 months,” Montali wrote. “Leaving tens of thousands of fire survivors, contract parties, lenders, general creditors, allegedly defrauded investors, equity owners and countless others with no other options on the horizon is not an acceptable alternative.”
One objector had argued that individual wildfire victims were treated unfairly because they were the only group to be compensated in a half-stock, half-cash $13.5 billion settlement. Montali dismissed that complaint, noting that the Tort Claimants Committee that represents fire victims agreed to those terms, and more than 85% of fire victims who cast ballots on the plan voted in favor of it.
“The impaired classes have voted for the present plan, and to sustain these objections would be to ignore the wishes of that very strong majority,” Montali wrote.
The judge surmised that the real objection insists on a better outcome for fire victims, one with “more money, more stock, less involvement by hedge funds or even liquidation.”
Montali said he already overruled many of those proposed modifications.
The judge also dismissed the objections of Tubbs Fire survivor and Santa Rosa resident William Abrams, an ardent critic of PG&E’s plan for exiting bankruptcy. Abrams has argued that PG&E’s plan fails to ensure it will adequately reduce the risk of future fires to ensure the company stays financially stable going forward.
Montali replied that those issues are outside his purview.
“Mr. Abrams’ desire for a better PG&E, for a better environment and a better Northern California, safe from wildfires, while aspirational and well-intended, is not something the Bankruptcy Code or this court can deliver,” Montali wrote.
The California Public Utilities Commission and a different federal judge overseeing PG&E’s criminal probation are the ones supervising PG&E’s compliance with wildfire safety regulations and probation requirements.
The confirmation of PG&E’s plan frees up $25.5 billion in settlements, including $1 billion for 18 local and regional government entities, $11 billion for insurers who covered wildfire losses and $13.5 billion in cash and stock for all other wildfire claims.
Last week, PG&E agreed to increase the amount of stock provided to fire victims amid concerns that pandemic-related market turmoil could cause fire victims to receive less than the promised $6.75 billion in stock as part of the deal.
The $13.5 billion settlement for wildfire victims includes $5.4 billion in immediate cash, $650 million to be released in January 2021, and $700 million to be released in January 2022.
Approximately $6.75 billion will come from liquidated stock. The fire victims trust will own 22.19% of stock in the reorganized PG&E. An agreement reached last week forbids the trust from selling stock “in an amount that would cause an adverse effect” as determined by an investment banking firm selected by PG&E and approved by the trust.
PG&E declared bankruptcy on Jan. 29, 2019, as it faced a potential $30 billion or more in wildfire-related liabilities. The company was accused of negligent maintenance of equipment and trees near power lines that caused at least 19 wildfires in 2017 and 2018 that killed more than 100 people.
PG&E was under pressure to get its bankruptcy plan confirmed by a June 30 deadline to gain access to a $21 billion insurance fund for future wildfire liabilities. The insurance account, created by California Assembly Bill 1054, will be equally funded by private utility shareholders and ratepayers through a $2.50 monthly surcharge on utility bills. A federal judge on Thursday dismissed a lawsuit challenging the legality of that surcharge.
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.
PG&E also pleaded guilty this week to 84 counts of manslaughter for its role in causing the most deadly and destructive wildfire in California history, the 2018 Camp Fire. The company received the maximum penalty, a $3.5 million fine, which a Butte County judge acknowledged was an inadequate punishment for the crime.
In a statement released Saturday, outgoing PG&E CEO William "Bill" Johnson called confirmation of the company's bankruptcy plan "a critical milestone" that brings it one step closer to quickly and fairly compensating wildfire victims.
He noted that the company heard fire victims share traumatic stories of losing loved ones in the 2018 Camp Fire during PG&E's sentencing hearing this week, and he vowed that the company is devoted to ensuring its equipment never causes another catastrophe.
“PG&E is committed to emerging from Chapter 11 as a fundamentally improved and transformed utility that meets the highest safety, governance, and operational standards,” Johnson said.
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