Pacific Gas & Electric intends to file a reorganization plan by Sept. 9, the company told a bankruptcy court on Aug. 12 as the court heard testimony from competing factions in the case.
According to PG&E attorneys, the restructuring proposal would fully pay off the company's pre-petition debts, as well as resolve the wildfire liability claims filed against it in accordance with AB 1054, a wildfire bill enacted on July 12. It would also allow PG&E to participate in California's newly created wildfire fund, without raising costs for its 16 million customers, it said.
More than 20 financial institutions have agreed to fund PG&E's plan with approximately $10.25 billion in commitments—a figure that is expected to rise as negotiations continue, the attorneys said. PG&E hopes to exit bankruptcy by May 1, 2020—two months before the deadline set by AB 1054.
At an Aug. 13 hearing, a PG&E attorney asked U.S. Bankruptcy Judge Dennis Montali to preserve the utility's exclusivity period, during which it holds the sole right to file a reorganization plan. Montali had earlier extended the exclusivity period from May 29 to Sept. 29 (see CEM No. 1540 [13.1]).
Two parties in the proceeding—PG&E's bondholders as well as a group of insurance carriers that hold wildfire-related claims against PG&E—had filed motions with the court asking for the exclusivity period to be terminated, and outlining plans of their own to reorganize the utility.
But PG&E attorneys asked the judge in the Aug. 12 filing not to grant these motions, given the progress made in preparing a reorganization plan. The company is trying to find a consensual resolution of its wildfire liabilities, PG&E attorney Stephen Karotkin said at the hearing.
"Competing plans, your honor—and particularly the competing plans as you're seeing today, which promote the parochial interests of one constituency to the detriment of others—will doom that effort to failure," Karotkin said.
One competing plan submitted by an ad hoc committee of senior unsecured noteholders on June 25 is based on a $30-billion investment, which would allocate $16 billion for past wildfire claimants and retain PG&E's renewable-energy contracts (see CEM No. 1545 ). On July 23, yet another plan was proposed by an ad hoc group of subrogation claim holders, which hold over $20 billion in wildfire claims against PG&E. That plan would set aside $15.8 billion for wildfire claims, 90 percent of which would be equitized (see CEM No. 1549 ).
Abid Qureshi, an attorney for the bondholders, at the Aug. 13 hearing said that proposal was developed while keeping in mind the plight of the Northern California wildfire victims. He noted that Gov. Gavin Newsom and the California Public Utilities Commission had supported the idea of a competitive process for resolving PG&E's bankruptcy, and that the company would require billions of dollars of investment to ensure wildfire victims receive fair and fast compensation.
"And as long as there is no certainty as to where those funds are going to come from—and there absolutely is no such certainty in the debtors' proposal, your honor—I think frankly it is a very significant mistake to say to a group of very credible institutions who are willing to commit north of $30 billion, please go away, you are not welcome," Qureshi added.
But PG&E's Karotkin said it is not surprising that the company has not yet resolved its wildfire liability, given the complexity of its situation. The noteholders' plan, he added, did not represent any consensus with other groups in the bankruptcy but is instead an attempt to acquire PG&E.
"They are not here as altruistic players; they are here to acquire the company at a discount—at a substantial discount—and to enhance their claims," he said.
On Aug. 16, Montali issued an order denying both the ad hoc committee of noteholders motion and the subrogation claim holders motion to terminate PG&E's exclusivity period. "Competing plans are tempting, and no doubt produce a feast for lawyers, accountants, investment bankers and others, not to mention the intellectual challenges to the court," Montali said in the decision. "But the inescapable fact is that the fire victims and their insurers should not need to wait for conclusion of expensive, lengthy and uncertain disputes that only indirectly concern them."
Montali also heard arguments on another crucial aspect of PG&E's bankruptcy case at an Aug. 14 hearing—how to deal with liabilities stemming from the 2017 Tubbs Fire. Damages from the Tubbs Fire prompted more than $5 billion in insurance payouts. However, in January, the California Department of Forestry and Fire Protection issued a report absolving PG&E of any blame in causing the fire.
In July, however, a committee of tort claimants as well as the group of insurance carriers filed motions requesting permission to take up the issue of PG&E's liability related to the Tubbs Fire in California Superior Court. According to the subrogation claimants, there is "substantial evidence" that the fire was caused by PG&E equipment—in particular, video footage that shows a bright flash, coinciding with a recorded electrical fault, not far from where the fire began. The subrogation group noted that the Tubbs Fire could represent as much as two-thirds of PG&E's 2017 liability, and is a "gating issue" for the company's bankruptcy.
But PG&E, in a July 18 motion, outlined its own proposal for estimating its liabilities from the 2017 and 2018 wildfires. The utility pointed out that parties in the proceeding had suggested wildly different figures for its total liabilities—while PG&E has taken charges of $14 billion for the 2017 and 2018 wildfires, the tort claimants committee believes the figure is $54 billion.
PG&E proposed a three-phased approach to conducting the estimation process. In the first, it asked the court to look into the doctrine of inverse condemnation, under which a utility can be held liable for wildfires sparked by its equipment even when it has not been found negligent. In the second phase, PG&E asked the court to address whether it would be held liable for the Tubbs Fire. The third and final phase, which would take place after Oct. 21—the deadline for claims against PG&E—would involve aggregating the value of all the claims.
PG&E attorney Kevin Orsini said the motion would help PG&E and other parties reach a consensus on how much liability the company is currently facing.
"We all understand the reason we're here is because of the tragic 2017 and 2018 fires. We know that entire towns were destroyed, people's lives were changed forever. We can't lose sight of that," he said, adding that the company is in the bankruptcy court right now to try and find the quickest way to address claims from these victims.
Montali did not issue a decision on PG&E's wildfire liability at the hearing.
Separately, PG&E on Aug. 13 announced the appointment of Andrew Vesey as the new CEO and president of the utility. Vesey will be working with Bill Johnson, CEO and president of p ' arent company PG&E Corp. Vesey has 35 years of experience in the utility industry, including a stint at AGL Energy Limited, based in Sydney.
"Beginning day one, my primary focus areas are making sure that we're safely operating our systems every day for our customers and communities, that we're following all of the laws and rules that govern our work, and that we're valuing the diversity of ideas and experiences of our employees to help us improve and innovate," he said in a written statement.