
A PG&E crew works on power lines in Paradise, Calif., after the November 2018 Camp Fire, |
As PG&E Corp. and its operating arm, Pacific Gas and Electric Co., hit the potential midpoint of their hoped-for emergence from one of the most complicated and sprawling bankruptcy cases in U.S. history, a distant light has appeared at the end of the tunnel.
The state's largest utility has checked off two big boxes required to become a recapitalized, reorganized and stabilized enterprise. On Sept. 9, the companies filed their official Chapter 11 restructuring plan in the U.S. Bankruptcy Court for the Northern District of California, and on Sept. 13, they disclosed an $11 billion preliminary settlement over insured claims stemming from wildfires linked to Pacific Gas and Electric, or PG&E, power lines.
Another major milestone came into view Sept. 16 when San Francisco Superior Court Judge Teri Jackson approved an expedited jury trial for January 2020 to resolve the contested issue of whether PG&E electric infrastructure ignited the October 2017 Tubbs Fire in Napa and Sonoma counties.
State fire investigators, who blamed PG&E for igniting a series of other fires across Northern California wine country at the same time, found that a private electrical system was likely to blame for the Tubbs Fire, which killed 22 people and destroyed more than 5,600 buildings. Attorneys for individual fire victims disagreed, saying they will present evidence at trial that PG&E was responsible.
Jackson tentatively set Jan. 7, 2020, as the start date for the trial in San Francisco, denying PG&E its request to hold the proceeding in Sonoma. Once the state court jury makes its decision or a settlement is reached, the U.S. District Court for the Northern District of California will complete its proceeding to estimate PG&E's total wildfire liabilities, also scheduled for January 2020.
"Time is of the essence here," Kevin Orsini, an attorney for the debtors, said at a Sept. 16 hearing before Jackson, noting the importance of the state court trial to meeting PG&E's state-imposed June 30, 2020, deadline to exit bankruptcy protection in order to participate in a $21 billion wildfire fund to cover claims from future fires.

Layers of complexity
The debtors optimistically envision emerging from bankruptcy May 1, 2020, according to a recent bankruptcy court filing. That would give them nearly two months of leeway to meet the state's deadline. They will need that cushion, if not more, as their timeline faces significant risk of slipping under the weight of differences in opinion over PG&E's total wildfire liabilities and parallel proceedings spanning multiple federal and state courts and regulatory arenas.
After the federal district court completes its estimate of PG&E's total wildfire liabilities, incorporating the state court jury's finding on the Tubbs Fire, PG&E may need to amend its reorganization plan and fundraising activities based on the outcome. That is because PG&E's plan of reorganization caps wildfire liability payments at nearly $18 billion, which is far short of what attorneys for wildfire victims say their clients are owed.
At an Aug. 27 bankruptcy court hearing, Cecily Dumas, an attorney for wildfire victims, cited potential liabilities of $40 billion to $50 billion.
An additional wildcard for PG&E's financing package is whether California lawmakers approve a bill in 2020 to allow the utility to tap billions of dollars in tax-exempt wildfire recovery bonds. Lawmakers failed to act on the measure at the end of the 2019 session amid allegations that the legislation amounted to a bailout. Nevertheless, if available, PG&E would like to use such bonds to help finance its plan.
While U.S. Bankruptcy Judge Dennis Montali is charged with ultimately issuing an order to approve PG&E's reorganization plan, another layer of complexity is the state's requirement that the California Public Utilities Commission also consent.
Wildfire legislation signed by Gov. Gavin Newsom in July tasked state energy regulators with vetting PG&E's safety and corporate governance culture, capital structure, rates and compliance with state climate policies as part of its own approval of the utility's plan of reorganization. The regulator will also determine any fines and penalties for safety lapses.
Regulators intend to open an investigation into PG&E's bankruptcy plan at the end of September, Alan Kornberg, an attorney representing the PUC, said in bankruptcy court in August.
