
The sun shines on a Pacific Gas and Electric Co. street cover in downtown San Francisco. The embattled utility faces major |
Regardless of whatever Chapter 11 bankruptcy restructuring plan that PG&E Corp. and its operating arm Pacific Gas and Electric Co. propose by Sept. 9, California's largest utility may have to go back to the drawing board months later based on the results of parallel proceedings in three separate courts that ultimately will determine how much the debtors owe victims of wildfires linked to the company's electric infrastructure.
For now, wildfire victims and Pacific Gas and Electric, or PG&E, are potentially $40 billion apart or more, their attorneys acknowledged at an Aug. 27 hearing before the U.S. Bankruptcy Court for the Northern District of California in San Francisco, highlighting the uncertainties around the ultimate financing package the utility will require to exit bankruptcy.
Moreover, PG&E's preferred timeline for pinning down a precise figure for its wildfire-related liabilities by mid-January 2020 may be slipping. That raises fresh questions around whether the utility can successfully navigate the gauntlet of state and federal courts, including a possible jury trial over a contested 2017 wildfire for which a date has not yet been set, in addition to finalizing a major settlement with and earning final plan consent from state regulators, all before June 30, 2020.
A new state law signed by Gov. Gavin Newsom in July set that deadline for the utility to emerge from Chapter 11 for it to participate in an estimated $21 billion fund to cover future wildfire claims, aimed at stabilizing the state's investor-owned utilities. The law also requires the California Public Utilities Commission to vet PG&E's corporate governance and safety culture, rates and compliance with state climate policies as part of its approval process for the restructuring plan.
Depending on the result of ongoing and future investigations, regulators could even demand a breakup of the utility, which would throw any reorganization plan into disarray. As part of a settlement, the PUC also will determine any fines and penalties for PG&E's conduct in the devastating 2017 and 2018 wildfires that forced it into bankruptcy protection in January, citing potentially in excess of $30 billion in wildfire liabilities.
Lots to do, little time
Given those complexities, the question of whether 10 months would be enough time to coordinate all the moving parts filled the court, which presiding U.S. Bankruptcy Judge Dennis Montali finally addressed.
"It sounds like a very tight schedule and a difficult path," Montali said before the packed courtroom. "At the moment, nobody is saying it can't be done. It's just a challenge."
"I think the key issue is, when will the company be in a position to file that amended plan that has benefited from the results of the estimation proceeding and the finalization of the financing package?" said Alan Kornberg, an attorney representing the PUC. "The commission is committed to doing its job before the June deadline, but, as everyone has noted, this is a fluid situation and the estimation results, or hopefully a negotiated settlement, are a very, very important condition to getting that work completed."
While attorneys for PG&E had proposed wrapping up the liability estimation process by Jan. 17, 2020, and a Feb. 21 vote on the plan of reorganization, it is uncertain whether that interim timeline will hold. Montali already said he would push back a hearing on PG&E's restructuring plan and indicated he might move back PG&E's proposed date for completing the estimation process to February.
In the meantime, Montali asked Kornberg if state regulators could work with "a range" of PG&E's wildfire liabilities.
"I am not sure a range would work," Kornberg said. Ultimately, the commission will require "a definitive, confirmable plan to facilitate the deliberations and make the required rulings concerning the plan," he said.
