By Hudson Sangree
Pacific Gas and Electric has cleared another hurdle in its bid to exit bankruptcy, but the latest comes with a caveat: If the company can’t win court approval of its Chapter 11 reorganization plan by June 30, the state or a third-party bidder could buy the utility under a fast-track process outlined Friday.
The sale process will “be implemented in the unlikely event the debtors fail to meet certain dates regarding the administration of these Chapter 11 cases,” PG&E said in a motion filed with the U.S. Bankruptcy Court in San Francisco, seeking rapid approval of its “case resolution contingency process.”
The plan is part of a deal the company struck last week with Gov. Gavin Newsom, under which Newsom dropped his objections to PG&E’s bankruptcy proposal in exchange for a series of concessions.
In addition to agreeing to sell itself, PG&E said that it would allow a state-appointed observer to monitor its safety operations until it exits bankruptcy and that it would refrain from paying shareholder dividends over the next three years.
On March 13, the state’s largest utility largely agreed to greater oversight by the California Public Utilities Commission and a process of escalating enforcement that could result in PG&E losing its electric monopoly — its certificate of public convenience and necessity — in extreme circumstances. (See CPUC President Wants More Control over PG&E.)
Newsom’s opposition to PG&E’s plan to issue billions of dollars in new debt and equity appeared to be one of the last major obstacles to PG&E leaving bankruptcy by June 30. That is the deadline for PG&E to participate in a state wildfire insurance fund created by Assembly Bill 1054, a measure Newsom pushed through the legislature last July.
Wildfire victims and other stakeholders must still vote on PG&E’s bankruptcy plan, and the CPUC must approve it under an investigation it opened in September.
PG&E filed for bankruptcy protection in January 2019 after a series of devastating wildfires in 2017 and 2018 saddled it with billions of dollars in liabilities to those who lost family members, homes and businesses.
Its stock plummeted from more than $46/share in October 2018 to $7.23/share immediately after it filed for bankruptcy. PG&E’s share price has been on a roller coaster since, and the stock market meltdown caused by the COVID-19 coronavirus outbreak sent its stock from $17.92/share on Feb. 21 back to $7.22/share on Friday.
Amid the uncertainty about its financial future, the utility is eager to resolve Newsom’s concerns as quickly as possible. In its court papers filed Friday, PG&E urged federal Judge Dennis Montali to hear and approve its agreement with Newsom on April 1.
“Approval of the case resolution contingency process will facilitate the debtors’ ability to timely exit these Chapter 11 cases, provide a positive signal to the financing markets and further solidify support for the plan and the likelihood of a smooth and largely consensual resolution of these Chapter 11 cases,” the utility’s lawyers said.
Montali, however, disagreed that the matter was as urgent as PG&E contended. In an order signed Friday, he set April 7 as the hearing date.
“The relief requested … does not appear to require imminent action by the debtors, the CPUC, the governor’s office or others,” the judge wrote. “[N]othing suggests that the governor’s office insisted on court approval as quickly as debtors request.”
The hearing will be conducted by telephone because the federal courthouse in San Francisco is closed due to the virus, Montali noted. The health crisis justifies giving opponents additional time to file briefs and not to rush things at PG&E’s insistence, he said.
“The world-wide coronavirus pandemic is reason enough [to] make sure there is sufficient cause to act so quickly,” the judge said.