As the Legislature was deciding to put AB 235 on ice, PG&E filed an $18 billion formal reorganization plan in U.S. Bankruptcy Court this week (9/9) that proposes to pay for all wildfire claims. The filing represents the first formal step in what might be a protracted struggle between wildfire victims, insurance companies and other creditors over the future of PG&E. The plan requires approval from creditors, the bankruptcy judge and the CPUC.
It’s far from certain that the wildfire victims and insurers will accept PG&E’s offer. At the same time, a group of hedge funds are owed billions of dollars by PG&E are mounting a hostile takeover plan to seize control of the company.
In a statement following the filing, PG&E’s Chief Financial Officer, Jason Wells offered the following:
“It’s a framework for compensating wildfire victims and other stakeholders. Our proposal is rate-neutral for customers.”
Wells added that the plan is designed to lift PG&E out of bankruptcy by June 30, 2020. That’s the deadline set by the Legislature to make PG&E eligible to participate in an insurance fund to pay claims for future wildfires (AB 1054).
But it’s the existing wildfire liabilities that loom as PG&E’s biggest hurdle to getting out of bankruptcy.
PG&E filed its reorganization plan just days after the Legislature postponed, at least until January, action on legislation that would have given PG&E access to low-interest, tax-free state bonds to raise money for wildfire claims. AB 235, would have given PG&E a big advantage over the hedge funds trying to take the company over.
Despite not having the benefit of the additional funding form AB 235, PG&E said it has alternative funding sources and that the company is prepared to pay claims using billions of dollars in fresh capital that has been pledged by a separate group of hedge funds that control about half of PG&E’s stock.
Importantly, PG&E said its reorganization plan pays all other debts in full and honors the billions of dollars in contracts the company has signed with providers of solar, wind and other forms of renewable energy. The commitment to renewable power is crucial because California officials have insisted PG&E stick with clean energy, and the company had gone to court to get legal authority to sever some of those contracts.
Still, the big unknown is how wildfire creditors will view the PG&E plan. In its plan, PG&E said it will create two trust funds: One with $8.4 billion to pay wildfire victims and the other for $8.5 billion for insurers that had to pay claims from deadly Northern California blazes in 2017 and 2018. Another $1 billion would go to local governments.
PG&E Chief Executive Bill Johnson:
“Under the Plan we filed today, we will meet our commitment to fairly compensate wildfire victims, and we will emerge from Chapter 11 financially sound and able to continue meeting California’s clean energy goals.”
Lobbyist Patrick McCallum, who barely escaped the Tubbs fire and represents wildfire victims group Up From The Ashes:
“What they’re proposing is just a fraction of what’s needed to rebuild wildfire victims’ lives. They’re not serious about making victims whole.”
The bankruptcy court hasn’t yet begun the process of sorting out total wildfire liabilities, and PG&E said the reorganization plan could be amended “as additional details are confirmed.”
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. 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.