By Hudson Sangree

On the one-year anniversary of its bankruptcy filing, Pacific Gas and Electric appeared to be closing in on its goal of exiting Chapter 11 reorganization, while lawyers representing shareholders, fire victims and the government wrangled in court to secure a share of the multibillion-dollar pot the utility will have to pay out.

At the same time, California Gov. Gavin Newsom persisted in his threats to take over PG&E if it doesn’t leave bankruptcy “transformed.”

“If PG&E can’t do it, we’ll do it for them,” Newsom told an audience at the Public Policy Institute of California in Sacramento on Wednesday.

In San Francisco, lawyers argued in U.S. Bankruptcy Court over the division of a $13.5 billion trust that PG&E has promised fire victims. Because the details of the trust have yet to be made public, some potential beneficiaries were concerned they might not get their share.

Attorneys representing more than 1,000 victims of the Camp Fire — which killed 86 people and destroyed 18,800 structures in the town of Paradise in November 2018 — tried unsuccessfully to convince bankruptcy Judge Dennis Montali to unseal terms of PG&E’s settlement with some victims of the Tubbs Fire, which killed 22 people and leveled a large part of the city of Santa Rosa in October 2017.

The lawyers argued that the confidential settlement with 19 elderly and infirm victims of the Tubbs Fire could jeopardize payments to Camp Fire victims because all must draw on the same fixed amount that PG&E has promised to put in the trust account.

Camp Fire victims “will soon be asked to vote on a restructuring plan that purports to provide $13.5 billion in funds for wildfire victims, including themselves. But that $13.5 billion figure is literally meaningless if an outsized portion has already been set aside for a select few claimants, the lawyers argued in a court filing.

Montali overruled their objection Wednesday, saying it was outweighed by PG&E’s agreement to settle the entire Tubbs case, which otherwise had been set to go to trial this month with an uncertain outcome. State investigators found a private landowner’s faulty wiring, not PG&E equipment, had started the fire.

A group of PG&E shareholders who had filed a securities fraud class-action lawsuit against PG&E argued they had been denied sufficient notice of the claims procedure in the bankruptcy case. Montali seemed skeptical of the argument, while agreeing with PG&E attorney Stephen Karotkin that a decision in the shareholders’ favor could “gum up” the case.

Montali heard briefly from lawyers representing federal and state agencies that are trying to recoup nearly $4 billion in funds dispersed to deal with catastrophic fires ignited by PG&E equipment in recent years. The agencies, primarily the Federal Emergency Management Agency, are concerned that their payment may come from the $13.5 billion to be set aside for fire victims and are asking the judge to help sort out the situation. (See FEMA Wants $4 Billion from PG&E in Bankruptcy.)

Montali said he would hear more from the government lawyers at the next bankruptcy hearing Feb. 4.

Newsom Repeats Takeover Threat

As the bankruptcy hearing played out in San Francisco, Newsom repeated his threat of a state takeover and said he had been talking with legislative leaders, readying a plan, several news outlets reported.

“It has to be a completely reimagined, transformed company,” Newsom said, according to the Associated Press. “Its culture has to change; its mindset has to change; its framework away from short-termism and situational thinking has to be replaced with a culture that focuses on you and me, not just shareholders.”

The governor said his staff had been in talks with PG&E to work out a solution, Bloomberg reported. He has called for PG&E to replace its entire board, adding more Californians, and to provide the state a mechanism for a quick takeover, should it be needed.

If a deal can’t be reached within the next few weeks, Newsom said he will lay out a detailed plan for a takeover.

PG&E filed for bankruptcy on Jan. 29, 2019, following two years of devastating blazes caused by its equipment. In recent months, the company has reached settlement agreements with most fire victims, insurance companies and local governments.

The utility most recently settled with bondholders that had offered their own reorganization plan for PG&E, amounting to a hostile takeover bid. The bondholders, led by several hedge funds, agreed to drop their plan in exchange for PG&E agreeing to pay or refinance its long- and short-term debts. (See PG&E Settles with Bondholders; Governor Objects.)