PG&E Trucks at Courthouse

PG&E crews work in San Francisco near the Phillip Burton Federal Building and U.S. Courthouse.

U.S. Bankruptcy Judge Dennis Montali on April 9 approved Pacific Gas & Electric's bankruptcy contingency plan, which allows for the sale of the utility to either private or public entities if it does not meet certain deadlines in its reorganization process.

PG&E's contingency plan is a "proper exercise" of the utility's rights, Montali said in court on April 7, while PG&E lawyer Stephen Karotkin said the plan is the "final piece of the puzzle."

But lawyers for the tort claimants committee, which represents about 70 percent of wildfire victims' claims, said in an April 5 filing that PG&E's contingency plan allows the utility's current management to run a sale process of up to 15 months, which would double the length of the bankruptcy case and expose stakeholders to the risks of the 2020 and 2021 fire seasons without the full protection of the state's wildfire bill, AB 1054 [6627].

"Time is of the essence for fire victims," the TCC said. "Many of them are in desperate straits because they have lost their homes or loved ones. This is compounded by the current circumstances related to COVID-19, and the impact it is having on the victims, many of whom live paycheck to paycheck."

"The money will never replace what we lost," Camp Fire victim Tammy Sprilock said in a letter to the court. "If you were to ask every survivor what they want the most, they would tell you that they want their loved ones back and their old lives back."

PG&E's contingency plan would kick in if the utility's reorganization plan is either not confirmed by June 30 or is not in effect by Sept. 30. The contingency process includes bidding and sales procedures, along with the following requirements, among others:

  • Completion of the sale by Sept. 30, 2021
  • Permission for the State of California or a bidder supported by the state to participate as a bidder in the process
  • No extension of the process past Sept. 30, 2021, unless an extension is consented to by the governor's office or approved by the bankruptcy court
  • No termination of the sale process without the consent of the governor's office or the approval of the bankruptcy court [6398].

Under extreme circumstances, the California Public Utilities Commission could revoke PG&E's certificate of public convenience and necessity, which is its license to operate as a public utility, the utility said [6398]. If this revocation happens, the state would have the option to purchase all of PG&E's issued and outstanding equity interests.

In a related argument at the April 7 hearing, TCC lawyer Robert Julian requested Montali approve a letter that would be sent to wildfire victims in order to inform them of new problems with PG&E's reorganization plan, including how COVID-19 has affected utility stocks. Julian said PG&E "breached their obligation to provide $6.75 billion" in stock to the fire victim trust fund and that this shortage is being amplified "by the coronavirus."

The coronavirus' economic ripple effect is a significant risk to the victim trust fund, the TCC wrote in a filing on April 6 [6636-2]. But Julian added that some victims, regardless of what is happening to the trust fund, might be "so destitute they just vote yes" on PG&E's reorganization plan, hoping to receive some portion of compensation sooner rather than later.

Montali denied Julian's request to have the court endorse the letter. The court already approved PG&E's disclosure statement that was sent to wildfire victims last month, the judge said. Virtually all of the issues raised by the TCC in the proposed letter were well known at the time of the final hearing on the disclosure statement, according to Montali [6692].

The TCC can still send the information out to victims if it wants to, but would do so without the court's approval or disapproval, Montali said.

The TCC's letter says there is concern about a formula that will be used to calculate the value of PG&E stock in the fire victim trust fund. In the formula, the value of PG&E's stock could change according to market conditions, so the TCC requested PG&E guarantee that the stock issued to the fire victim trust will be funded with PG&E stock valued at $6.75 billion. PG&E has declined to guarantee this, the TCC said.

Separately, the TCC on April 7 filed a limited objection to PG&E's request to pay its $4-million settlement with Butte County out of the fire victim trust fund. The settlement was reached in March after PG&E admitted to 84 counts of involuntary manslaughter in the 2018 Camp Fire. The TCC said that paying victims out of the victim fund "could violate the law and certainly violates public policy" [6690].

PG&E said the $4 million would be paid out of the trust fund, but would come from income earned on the distribution to be made to subrogation claimants under its reorganization plan. However, the TCC said this would result in a "double trust duplicative payment" and is an intentional move to receive an improper advisory opinion from Montali that the definition of "fire claim" includes criminal fines and penalties.

Staff Writer

David Krause is an energy reporter covering the California Energy Commission and Air Resources Board. He writes about transportation, climate change, utilities, and wildfires. He has an MFA in Writing, an MA in English, and a BS in Civil Engineering.