PG&E Corp.’s proposal to resolve its bankruptcy case includes setting aside nearly $18 billion to pay claims from the devastating wildfires started by its power lines in recent years, but less than half of that is intended for individual victims.
The company wants to create two trusts to pay wildfire costs, according to the plan of reorganization it and subsidiary Pacific Gas and Electric Co. filed Monday with the U.S. Bankruptcy Court for the Northern District of California.
One trust would be capped at $8.5 billion, and it would pay the insurance companies with wildfire claims against PG&E. The other trust would pay the individual people who lost homes and family members in deadly blazes PG&E is responsible for, and the company wants it to be capped at $8.4 billion.
PG&E’s plan would also pay $1 billion to various local governments, per the terms of a settlement the company announced in June.
The cap for individuals is likely to be challenged by wildfire victims’ attorneys who believe their clients are owed far more. PG&E said when it filed for bankruptcy in January that its liabilities could exceed $30 billion, but that estimate — part of its rationale for seeking protection from creditors — did not indicate how much the company ultimately would pay.
In an interview, PG&E Corp. Chief Financial Officer Jason Wells described the company’s filing of its reorganization plan as a “critical step in a multistep process.”
“We will continue to develop and update the plan of reorganization as additional details are finalized,” Wells said.
“Their proposal is replacing just a fraction of what is needed to rebuild wildfire victims’ lives,” said Patrick McCallum, who lobbies for victims through an organization called Up from the Ashes. “We look forward to the day that PG&E affords victims of its wrongdoing the same respect it gives to shareholders and bondholders.”
He called the company’s proposal to pay victims through a trust capped at $8.4 billion “a nonstarter.”
UC Hastings law Professor Jared Ellias, who has been following the PG&E bankruptcy, said the company’s proposal struck him as being “very rigid.” But he also said PG&E is in a tough spot trying to address so many different interests while wrapping up the case on a timeline set by a new state wildfire law.
“PG&E has to drink two glasses of water on a balance beam right now,” Ellias said.
The bankruptcy plan’s filing came three days after the city of San Francisco offered to buy PG&E’s local power lines and other electric equipment for $2.5 billion. City officials want the offer, which came in a letter from the mayor and city attorney, considered as part of the bankruptcy reorganization.
But PG&E did not address it in the filing. PG&E previously told The Chronicle that it doesn’t think San Francisco creating a fully-government-run electric utility is in its customers’ “best interests,” but the company is “committed to working with the city and will remain open to communication on this issue.”
Also, the amount of PG&E’s obligations to wildfire victims is currently the subject of two court proceedings.
Victims’ attorneys are preparing for a state court trial about whether PG&E is responsible for the 2017 Tubbs Fire, even though state investigators said a private electrical system was to blame. PG&E is trying to prevent the trial from happening. And U.S. District Court Judge James Donato is beginning proceedings to estimate how much money the company owes victims of all past fires, including the 2018 Camp Fire.
The outcomes of all those proceedings will ultimately influence the exact amount of money PG&E has to reserve for wildfire victims.
PG&E would fund its bankruptcy exit plan in part with a $14 billion investment from current stockholders, Wells said. The company could also offer new shares to the public and plans to raise new debt financing.
One way the company has sought to raise funds for its wildfire costs is through as much as $20 billion in tax-free bonds. But the company’s effort to get the Legislature’s approval, which is required, will not bear fruit this year, advocates said last week. Lawmakers could take it up when they return in January.
Wells said PG&E’s reorganization plan is “not predicated on approval of AB235,” the bill that would authorize the bonds, which the company says it would pay off by diverting shareholder profits.
PG&E wants to continue working with wildfire victims and insurance companies to resolve their claims and is “encouraged that the bill may be picked up at the start of the legislative session next year,” Wells said.
PG&E says its plan will not raise customers’ rates and will keep the company on track to resolve its bankruptcy by June 30. PG&E must meet that deadline in order to access a new fund that will protect it from future wildfire costs.
The company’s shares closed Monday at $11.19, up 10.14% from Friday.
Source: San Francisco Chronicle