California regulator approves PG&E’s bankruptcy exit plan
The California Public Utilities Commission approved PG&E’s bankruptcy reorganization plan Thursday, clearing one hurdle to its exit from Chapter 11.
The investor-owned utility entered bankruptcy in January 2019 weighed down by more than $30 billion in liabilities for a series of wildfires in California that killed more than 100 people and scorched thousands of acres.
The company, which provides natural gas and electric service to 16 million people in northern and central California, said in a statement that the PUC approval is a major step toward bankruptcy exit plan confirmation, emerging from Chapter 11 bankruptcy and paying wildfire victims early and quickly.
"Since the beginning of the Chapter 11 process, our main goal has been to get wildfire victims paid fairly and quickly,” PG&E president and chief executive Bill Johnson said. “Today's vote keeps us on track to do so.”
San Jose Mayor Sam Liccardo, who wanted the utility broken up, is unhappy. He called the PUC’s decision a win for hedge funds and a loss for the ratepayers, and said he will continue the fight on behalf of ratepayers.
“The reorganization plan approved today will force 16 million Californians to depend upon a hobbled PG&E, burdened by nearly $40 billion in debt, for the sale and dependable delivery of power,” Liccardo said in a statement. “The company’s weak finances will have it running to credit markets with a junk bond rating to try to raise tens of billions of dollars in additional debt to fund overdue safety and reliability improvements to the grid.”
All three ratings agencies dropped the utility’s ratings to junk after it reported in December 2019 the billions in wildfire-related liabilities it faced.
As part of the Chapter 11 process, PG&E has previously reached settlements with all wildfire claimants' groups to be implemented pursuant to PG&E's plan, valued at approximately $25.5 billion, according to PG&E.
Working with the governor’s office, and incorporating guidance from a February 2020 ruling from CPUC President Marybel Batjer, PG&E made a series of commitments about its governance, operations, and financial structure, designed in the company's words to further prioritize safety and expedite the company's successful emergence from bankruptcy.
San Jose was among cities, including San Francisco, which had proposals to purchase the segment of PG&E’s system that serves their region. Liccardo had formed a coalition with other municipalities who wanted more control of their own power systems.
The PUC, the utility’s regulator, has said early on in the bankruptcy it was exploring such options as splitting PG&E's gas and electric operations or requiring that regional companies be created.
The seed money for the bond fund comes from up to $10.5 billion in Department of Water Resources bonds to be matched with $10.5 billion from the utilities. It would act as a line of credit for utilities to cover wildfire damages and limit the financial obligations of ratepayers.
U.S. Bankruptcy Judge Dennis Montali could approve the plan by the June deadline with closing arguments on the merits of PG&E's plan slated to start next week.