On Thursday, the California Public Utilities Commission (CPUC) approved PG&E’s Chapter 11 plan of reorganization, paving the way for the utility company to come out of bankruptcy before the June 30th deadline.
CPUC approves PG&E’s plan on leaving Chapter 11 bankruptcy
PG&E has been in financial trouble for over a year. Following the 2018 Camp Fire, which killed 85 people in and around the town of Paradise and destroyed much of the surrounding area, PG&E entered bankruptcy due to the billions of damage liability claims set against it. PG&E was found to be completely liable later in the year, and also began issuing planned blackouts throughout entire swaths of the state to reduce the chances of wildfires. The resulting furor and lowering of quality of life caused Governor Gavin Newsom to threaten a state takeover and spurred on increased payments to wildfire victims and fines.
The approval by CPUC came with numerous stipulations for PG&E to adhere to. Approved wildfire victim settlements would have to be adhered to, including over $13 billion in settlements for the 2015 Butte Fire, the 2017 Tubbs Fire, and the 2018 Camp Fire. $1 billion in local municipal settlements and $11 billion in insurance company claims and settlements will also have to be paid.
PG&E also has to keep commitments with California and CPUC over increased regulatory oversight, having a state overseer watch their progress of getting out of Chapter 11, picking new members of the PG&E board, increased safety measures, increased duties for the Chief Risk Officer and Chief Safety Officer, having executive pay be tied to safety performance and meeting customer needs, not issuing a stock dividend until debt is significantly down, and not raising customer rates to pay for any of the problems the company has caused or ignored.
PG&E will also need to help with wildfire prevention in the future, with the company investing billions of dollars into a Wildfire Mitigation Plan.
Mixed reactions over CPUC’s approval
CPUC’s approval was positively received by many involved in the proceedings, including PG&E itself.
“PG&E’s most important responsibility remains the safety of our customers and the communities we serve, and we are committed to doing right by the communities impacted by wildfires,” stated PG&E CEO and President Bill Johnson after the CPUC meeting. “We have heard the feedback in today’s decision and know we must do better as a company.
Since the beginning of the Chapter 11 process, our main goal has been to get wildfire victims paid fairly and quickly. Today’s vote keeps us on track to do so. We have supported recommendations from the Governor’s Office, CPUC President Batjer and the other Commissioners, and many other stakeholders to hammer out a Plan that will help PG&E become the utility that our customers and communities expect and deserve.”
There was also notable disapproval by many victims and cities affected by the events of the past several years. San Jose Mayor Sam Liccardo, who had proposed making PG&E into a customer owned utility last year, was especially vocal on Thursday.
“The reorganization plan approved today will force 16 million Californians to depend upon a hobbled PG&E, burdened by nearly $40 billion in debt, for the safe and dependable delivery of power,” stated Mayor Liccardo in a press release. “The company’s weak finances will have it running to credit markets with a “junk bond” rating to try to raise tens of billions of dollars in additional debt to fund overdue safety and reliability improvements to the grid. Today, the hedge funds won, but we’ll continue our fight on behalf of millions of ratepayers who deserve better.”
PG&E bankruptcy hearing continue
Earlier this month, PG&E had passed more hurdles to clear bankruptcy, including Federal Energy Regulatory Commission approval on May 12th.
The last major checkpoint before leaving Chapter 11 is the bankruptcy court itself. Fire survivors and representatives of destroyed property have repeatedly tried to hold up the Bankruptcy Court. While the company’s plan was overwhelmingly approved by wildfire victims last week, an attempt to hold up the case from proceeding was attempted Wednesday. The issue, which questioned the voting last week as being altered by questionable counting practices, was the first of many anticipated attempts to block the trial.
Despite the anticipated blocks, PG&E is currently on track to get out of bankruptcy by the end of June. If the company doesn’t meet the deadline, they will be ineligible for state wildfire funds, which would throw their recovery plan into disarray. PG&E could also be taken over by the state should that occur.
The Bankruptcy Court hearing began Wednesday and is expected to go into June.
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