PG&E scram­bles to rene­go­ti­ate wild­fire deal

Antelope Valley Press (Sunday) - - News - By DAISY NGUYEN

SAN FRAN­CISCO — Cal­i­for­nia Gov. Gavin New­som’s op­po­si­tion to Pa­cific Gas & Elec­tric’s re­struc­tur­ing plan just a week af­ter it struck a $13.5 bil­lion set­tle­ment with fire vic­tims is forc­ing the nation’s largest util­ity to go back to the ne­go­ti­at­ing ta­ble and come up with a solution fairly quickly.

The San Fran­cisco-based com­pany needs to pull a deal off to meet a June 30 dead­line to emerge from bank­ruptcy pro­tec­tion and re­gain its fi­nan­cial foot­ing.

Miss­ing the dead­line would pre­vent PG&E from be­ing able to draw from a spe­cial fund cre­ated by the Demo­cratic gov­er­nor and state law­mak­ers to help in­su­late Cal­i­for­nia util­i­ties from fu­ture fires that many peo­ple be­lieve are bound to erupt as a chang­ing cli­mate con­tin­ues to cre­ate haz­ardous con­di­tions. Util­i­ties are at risk be­cause their ag­ing elec­tric trans­mis­sion lines are ex­pected to take years to up­grade.

On Thurs­day, PG&E filed an amended re­or­ga­ni­za­tion plan with the U.S. Bank­ruptcy Court af­ter reach­ing a set­tle­ment on Dec. 6 with thou­sands of peo­ple who lost homes, busi­nesses and fam­ily mem­bers in a se­ries of dev­as­tat­ing fires.

In his let­ter on Fri­day, New­som said the plan does not com­ply with state law and does not achieve the goal of ad­dress­ing what he con­sid­ers its most im­por­tant el­e­ments: pro­vid­ing safe and re­li­able power to PG&E cus­tomers.

“In my judg­ment, the amended plan and the re­struc­tur­ing trans­ac­tions do not re­sult in a re­or­ga­nized com­pany po­si­tioned to pro­vide safe, re­li­able, and af­ford­able ser­vice,” he said.

The gov­er­nor said PG&E’s plan did not go far enough in im­prov­ing safety, cor­po­rate gov­er­nance and the com­pany’s fi­nan­cial po­si­tion. The com­pany has un­til Tues­day to ap­pease New­som and get him to sign off on the plan.

“We’ve wel­comed feed­back from all stake­hold­ers through­out th­ese pro­ceed­ings and will con­tinue to work dili­gently in the com­ing days to re­solve any is­sues that may arise,” PG&E said in a state­ment.

With­out the added pro­tec­tion of the Cal­i­for­nia wild­fire fund, PG&E would likely find it more dif­fi­cult to bor­row money to pay for the nec­es­sary up­grades and per­haps even fund its on­go­ing op­er­a­tions if it re­mains mired in bank­ruptcy pro­ceed­ings be­yond June 30.

If PG&E can’t get a re­vised deal with the fire vic­tims ap­proved, it also will face the specter of nav­i­gat­ing through two other le­gal gauntlets early next year that would be used as an al­ter­na­tive way to es­ti­mate how much the com­pany owes for the catas­trophic wild­fires in 2017 and 2018 that killed nearly 130 peo­ple and de­stroyed about 28,000 struc­tures in its sprawl­ing ser­vice ter­ri­tory.

One, a Cal­i­for­nia state trial to be held in Jan­uary, will de­ter­mine whether PG&E is li­able for a 2017 fire in Sonoma County that the com­pany hasn’t ac­cepted full re­spon­si­bil­ity for. The trial would also award dam­ages to the vic­tims if PG&E is blamed. A sub­se­quent pro­ceed­ing, known as an es­ti­ma­tion hear­ing, is sched­uled in Fe­bru­ary be­fore a fed­eral judge to de­ter­mine PG&E’s to­tal bill for all the fires that could have been cov­ered in the set­tle­ment that had been worked out with the vic­tims.

At­tor­neys for the fire vic­tims so far have col­lec­tively lodged claims of about $36 bil­lion against PG&E, ac­cord­ing to court doc­u­ments. But that fig­ure could rise even higher af­ter the state trial and es­ti­ma­tion hear­ing, and it if does would likely leave PG&E un­able to meet its fi­nan­cial obli­ga­tions — a de­vel­op­ment that could lead U.S. Bank­ruptcy Judge Den­nis Mon­tali to de­clare the com­pany in­sol­vent.

If that were to hap­pen, it would au­to­mat­i­cally void a sep­a­rate $11 bil­lion set­tle­ment deal PG&E has reached with in­sur­ers who say they are owed $20 bil­lion for the fire in­sur­ance claims they ex­pect to pay their pol­i­cy­hold­ers in the wild­fires blamed on the util­ity. The in­sur­ance set­tle­ment, though, is also be­ing op­posed by New­som, and is still await­ing Mon­tali’s ap­proval.

The gov­er­nor “may have up­set a rather del­i­cate bank­ruptcy process,” said Jared El­lias, a bank­ruptcy ex­pert at Univer­sity of Cal­i­for­nia, Hast­ings Col­lege of the Law.

“We’re go­ing to see how re­silient the deal that comes out of this process is go­ing to be and whether it can ad­just to meet his ap­proval,” he said.

GAVIN NEW­SOM

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