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PG&E provides glimpse of restructuring plan, keeping all energy contracts

Embattled California utility Pacific Gas and Electric Co. has provided a glimpse into its forthcoming reorganization plan, which the company intends to file in the coming weeks as part of its Chapter 11 bankruptcy proceeding with parent PG&E Corp.

Under the restructuring plan, which assumes "a substantial infusion of cash raised from existing equity holders" and "equity financed securitized bonds," Pacific Gas and Electric, or PG&E, would pay all court-approved pre-bankruptcy claims from wildfire victims, employees, trade and other creditors and will approve all pension obligations and collective bargaining agreements, according to an Aug. 6 court filing. The filing also said the plan would not cause customers' rates to rise.

The debtor's plan also would assume "all power purchase agreements" and service agreements with community choice aggregators, which have overtaken a large share of the utility's power procurement responsibility, according to the filing. In that filing, PG&E objected to a recent proposal by a group of major insurers holding more than $20 billion in unsecured claims to prematurely end the debtor's exclusivity period in order to present their separate plan. PG&E in July also objected to a similar request from a group of bondholders who are seeking to advance a $30 billion plan.

In the court papers, the utility said it is "refining" its own restructuring plan, which was previously valued at about $31 billion. However, uncertainty remains about the utility's total wildfire liabilities, estimated at between $14 billion and more than $30 billion. California's recent passage of wildfire legislation helped the plan's timetable by clarifying its funding needs and the conditions that must be met for PG&E to participate in a $21 billion insurance fund to pay future wildfire claims, the utility said.

PG&E's proposed assumption of all power purchase agreements comes amid requests by the utility and developers of six solar and energy storage projects to allow either renegotiated or cancelled deals. In a July 18 court filing, attorneys for PG&E explained that under the restructuring plan, the utility would only make changes in contracts based on "voluntary modification."

The company has listed $42 billion in commitments with 350 counterparties holding 387 contracts for 13,668 MW, more than half of which is renewable energy.

"We want to be clear, we will not propose to reject these agreements as part of our plan of reorganization," said PG&E spokeswoman Lynsey Paulo. "We stand ready to help the state reach its ambitious clean energy goals in a way that keeps bills as low as possible for our customers, ensures the electric reliability and gas safety that they expect and deserve, and creates a model program for others to follow."

Some analysts had suggested that PG&E likely would reject some of its legacy renewable energy contracts signed at above-market prices, while several developers and the Federal Energy Regulatory Commission have been engaged in a drawn-out battle over the bankruptcy court's claim of jurisdiction over possible contract rejections.

The proposals from bondholders and insurers to end PG&E's exclusivity period to file its restructuring plan, which extends into late September, will be heard August 13 in the U.S. Bankruptcy Court for the Northern District of California in San Francisco.