PG&E Prepares for Busy Two Months in Bankruptcy Case

SAN FRANCISCO (CN) – A Pacific Gas and Electric lawyer confirmed Monday that the company has agreed to extend a deadline for filing wildfire claims in its bankruptcy case until the end of this year.

A Pacific Gas & Electric worker walks in front of a truck in San Francisco, Aug. 15, 2019. (AP Photo/Jeff Chiu, File)

After initially offering to change the now-expired claims deadline from Oct. 21 to Dec. 20, the company agreed to push the date back further to Dec. 31 at the request of fire victims’ attorneys.

PG&E lawyer Paul Zumbro, of Cravath, Swaine & Moore in New York, said PG&E and fire victims’ lawyers will submit a joint stipulation to extend the deadline, which must be approved by U.S. Bankruptcy Judge Dennis Montali.

Zumbro made the announcement during a status conference in U.S. District Judge James Donato’s courtroom Monday. Donato is overseeing the process of estimating PG&E’s total wildfire liability for its bankruptcy case.

By the time that deadline comes, several lingering questions hanging over the bankruptcy case may be resolved, including whether PG&E can move forward with a proposed $11 billion settlement with insurers.

Fire victims’ attorneys have asked the bankruptcy judge to reject that deal, arguing their clients have a right to be paid in full before insurers get compensated. They say the insurers’ claims are “subordinate” to fire victims’ claims under state and federal law. They further insist the deal would discriminate against one set of tort claimants while favoring another. A hearing on a motion to approve the settlement is scheduled for Nov. 13.

Another question is whether an investor-owned utility such as PG&E is subject to inverse condemnation, a state legal principle that says a public entity can be liable for damage caused by its property or equipment even if it did not act negligently. Two California appeals courts have held that investor-owned utilities are subject to inverse condemnation, but PG&E says those decisions, issued in 1999 and 2012, occurred before the California Public Utilities Commission ruled in November 2017 that utilities cannot automatically pass inverse condemnation liability costs to ratepayers.

A hearing on whether PG&E is subject to inverse condemnation is scheduled for Nov. 19.

The third issue looming over the bankruptcy case is whether billions of dollars in state and federal government wildfire claims are “liquidated’ and therefore not subject to estimation like other claims.

The federal government seeks $4.18 billion from PG&E, primarily to reimburse aid provided by the Federal Emergency Management Agency following the 2018 Camp Fire and 2017 North Bay fires. California state agencies seek $3.44 billion, including $2.3 billion in aid provided by the Governor’s Office of Emergency Services for the Camp Fire.

Adventist Health, which owns a hospital in the town of Paradise that was severely damaged by the Camp Fire, also seeks $27 million in liquidated damages. A hearing on whether those claims should be estimated or accepted as facts is scheduled for Dec. 17.

A fourth issue in the air – PG&E’s liability for the 2017 Tubbs Fire – will be decided by a state court jury in a trial starting Jan. 7. The outcome will have a major impact on Donato’s total wildfire liability estimate.

Last week, San Francisco Superior Court Judge Teri Jackson, who oversees the state case, said she would grant PG&E’s request for a limited gag order to block lawyers from discussing the cause of the 2017 Tubbs Fire with members of the media.

But a potential settlement with fire victims could also make those issues moot. Last week, California Gov. Gavin Newsom gave PG&E more incentive to reach a deal by floating the idea of a state takeover of the utility if it fails to exit bankruptcy by June 30, 2020. The governor said he would convene a meeting of PG&E executives, shareholders, fire victims and creditors this week to kick start negotiations. The case has also been referred to retired Bankruptcy Judge Randall Newsome, who will serve as mediator.

Outside of bankruptcy court, the federal judge overseeing PG&E’s criminal probation related to the 2010 San Bruno pipeline explosion ordered PG&E on Monday to answer questions about reports of a broken jumper cable that may have caused the Kincade Fire in Sonoma County, which started on Oct. 23 and has burned nearly 78,000 acres and destroyed 374 buildings.

U.S. District Judge William Alsup asked the company to explain when the jumper cable was last inspected and if the public should be concerned about other jumper cables that were inspected in the same manner.

Alsup also asked PG&E to identify how many buildings were destroyed and lives lost “by wildfires arguably caused by PG&E distribution lines” in 2019.

PG&E has until Nov. 29 to respond.

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