By Tom Kleckner
PG&E Corp. on Monday filed a reorganization plan in U.S. Bankruptcy Court that includes $16.9 billion to pay for wildfire claims, the first step in what is expected to be a protracted battle between wildfire victims and other creditors over the utility’s future.
The San Francisco-based company said the Chapter 11 reorganization plan is designed to enable its debtors to “fairly and expeditiously” treat wildfire claims made before the filing “in full compliance” with recently passed legislation (AB 1054). The law creates a $21 billion insurance-like fund to pay for wildfire damages and is bankrolled by California’s three big investor-owned utilities and ratepayers. (See Calif. Wildfire Relief Bill Signed After Quick Passage.)
The plan would create two trust funds, one capped at $8.4 billion to wildfire victims who were unable to cover all their losses and a second capped at $8.5 billion to reimburse insurance companies for their payouts.
The plan also would cover $1 billion previously announced to fully settle the wildfire claims of public entities.
CEO Bill Johnson said in a statement that the plan “will meet our commitment to fairly compensate wildfire victims and we will emerge from Chapter 11 financially sound.”
“I am confident that we can, and will, provide better service to our customers and communities, and our plan of reorganization is another step in this process,” Johnson said. He said the company will remain focused on reducing the risk of wildfires and continue supporting the state’s clean-energy goals.
PG&E said the plan will achieve a rate-neutral solution for customers and meet AB 1054’s June 30, 2020, timeline to become eligible to participate in an insurance fund for future wildfire claims. The company also said it will honor all pensions and collective bargaining agreements.
Under the plan, PG&E would also assume, or remain responsible, for all power purchase agreements and community choice aggregation servicing agreements. Court documents indicate the utility holds almost 400 PPAs with more than 350 companies, worth about $42 billion.
It remains to be seen whether the wildfire victims will accept PG&E’s offer. In addition, a group of hedge funds seeking to recoup billions of dollars from PG&E are attempting a hostile takeover of the company.
Meanwhile the city of San Francisco made an offer Friday to buy the utility’s city electric operations for $2.5 billion. (See related story, PG&E Ends Bond Bid as SF Makes Wires Offer.)
PG&E said it intends to work with financial institutions over the next several weeks to obtain up to $14 billion in equity financing commitments. Those proceeds will be used to pay wildfire victims and help fund PG&E’s contributions to the state wildfire fund.
The company filed for bankruptcy in January after two years of devastating wildfires that are likely to cost the utility billions of dollars in damages. The fires included the November 2018 Camp Fire, the deadliest and most destructive in state history.
The U.S. Bankruptcy Court in San Francisco, where PG&E made the filing, canceled a hearing scheduled for Tuesday.
