Judge OKs $24.5B for fire victims; PG&E faces more hurdles

California governor has issue with company plan to manage bankruptcy.

SAN FRANCISCO — A federal bankruptcy judge on Tuesday approved two Pacific Gas & Electric settlements totaling $24.5 billion to help pay the losses suffered by homeowners, businesses and insurers in the aftermath of catastrophic Northern California wildfires that sent the nation’s largest utility into a financial morass.

The decision by U.S. Bankruptcy Judge Dennis Montali bolsters PG&E’s chances of following its preferred path for getting out of bankruptcy by a make-or-break June 30 deadline. Montali handed the utility another victory by rejecting attempts by a competing group to offer an alternative proposal to the company’s plan.

Despite the strides made Tuesday, PG&E faces huge obstacles.

The most significant is California Gov. Gavin Newsom’s recent conclusion that PG&E’s plan to emerge from bankruptcy doesn’t comply with state law, which the company must do to qualify for coverage in a wildfire fund approved by the California Legislature.

The company’s plan relies on coverage from the fund created last summer to insulate PG&E and other utilities from losses caused by future wildfires that could be ignited by their transmission lines. That specter looms large, given that PG&E’s outdated equipment and managerial neg

ligence has been blamed for the series of deadly wildfires that raged through Northern California in 2017 and 2018, killing dozens.

PG&E sought refuge in bankruptcy in January as it grappled with $36 billion in claims from people who lost homes, businesses and family members in those fires. Those claims will now be settled as part of a $13.5 billion deal that PG&E worked out earlier this month with lawyers representing uninsured and underinsured victims of the past fires. Insurers had been threatening to try to recover the roughly $20 billion in policyholder claims that they believe they will end up paying for losses in those fires. PG&E settled with the insurers for $11 billion.

Newsom’s rejection of PG&E’s plan late last week had threatened to blow up PG&E’s deal with the fire victims because it initially required his approval. But the company and attorneys for the fire victims got around that problem by revising their agreement late Monday so the settlement no longer relied on Newsom’s blessing.

PG&E must still find a way to gain Newsom’s support for its overall plan, but the judge’s approval of the fire victims settlement buys the company more time to win him over. Among other things, Newsom is demanding PG&E replace its entire 14-member board of directors, including CEO Bill Johnson, and make it easier for state and local governments to launch a bid to take over the company and turn it into a customer-owned cooperative if it continues to operate in an unsafe or unreliable manner.