By Hudson Sangree

The federal judge overseeing Pacific Gas and Electric’s bankruptcy named a mediator Monday to help the embattled utility and its bondholders negotiate a reorganization plan.

Lawyers for PG&E Corp. and its utility subsidiary Pacific Gas and Electric Co. have been pleading for a mediator for weeks to help them resolve differences with bondholders trying to take over the company. (See Attorneys Clash over PG&E Reorg, Blackouts Resume.)

Judge Dennis Montali, with the U.S. Bankruptcy Court in San Francisco, finally acquiesced, saying he hoped mediation would work now as it had in the utility’s 2003 bankruptcy, when a mediator helped PG&E and the California Public Utilities Commission hammer out a compromise.

“Now, more than sixteen years later in the utility’s second case (this time with parent company), the need for mediation is far more obvious and the stakes unbelievably higher,” Montali wrote in an order. “After presiding over every hearing in these Chapter 11 cases over the past nine months, the court is convinced that mediation should be attempted once again.”

Montali named retired bankruptcy Judge Randall J. Newsome as the mediator. Newsome, who works now for JAMS, the nation’s largest private mediation and arbitration firm, served on federal bankruptcy courts in Ohio and Northern California before retiring in 2010. He joined JAMS’ San Francisco office in 2011, according to a biography posted by the National Conference of Bankruptcy Judges.

Online biographies for Newsome do not list any utility-related experience, but Montali gave him authority to “recommend the appointment of one or more additional mediators who possess needed requisite expertise and experience to join him in his efforts.”

PG&E and its bondholders have been fighting for control of the company for months. On Oct. 9 the judge ended PG&E’s period of exclusivity — the time it had to propound its own reorganization plan without competition — and allowed the bondholders to submit their plan for potential confirmation. (See Judge Admits Takeover Plan as PG&E Starts Blackouts.)

PG&E argued Montali’s action hadn’t helped advance the bankruptcy process and asked again for a mediator.

“As we predicted at the exclusivity hearing, termination of exclusivity has not worked to promote a consensus,” PG&E lawyer Stephen Karotkin told Montali during an Oct. 23 hearing. “[W]e say to your honor, now is the time to promptly appoint a mediator. That is the way to move these cases forward.”

The competing plans differ in their sources of financing and the amounts they would set aside for victims of wildfires sparked by PG&E’s equipment. The bondholders plan allocates roughly $5 billion more to fire victims in cash and PG&E stock. The bondholders also claim to have more than $29 billion cash in hand, versus promises by PG&E’s creditors to provide more than $34 billion for its reorganization efforts.

The bondholders, a group of high-risk hedge funds and institutional investors, want to wipe out the equity of PG&E’s current shareholders and give themselves control of the company.

PG&E sought bankruptcy protection in January after a series of devastating blazes threatened the company with insolvency. They included the wine country fires of October 2017 and the Camp Fire in November, the deadliest and most destructive wildfire in California history.

Seeking to avoid additional wildfires, PG&E has turned off power to millions of California residents three times in the past week during dry, windy weather conditions. The latest round of shutoffs to roughly 600,000 customers began Tuesday.

PG&E’s stock sunk to record lows of less than $4/share Monday on news it’s equipment may have started the Kincade fire, which had burned more than 75,000 acres and destroyed 124 structures in Sonoma County as of Tuesday morning, according to the California Department of Forestry and Fire Protection.

Montali’s appointment of a mediator and other factors caused PG&E’s stock price to jump more than 20% during trading Tuesday to nearly $5/share. It traded at about $70/share prior to the October 2017 fires.