Judge OKs California utility’s debt-refinancing deal

SAN FRANCISCO — A federal judge on Tuesday approved a settlement that moves Pacific Gas and Electric closer to getting out of bankruptcy, but the troubled utility still must navigate obstacles being put up by the state of California.

U.S. Bankruptcy Judge Dennis Montali signed off on a deal to refinance billions of dollars in debt to pay off Pacific Gas and Electric bondholders. The bondholders had threatened to cause problems for the nation’s largest utility. As part of the deal, the bondholders agreed to abandon an alternative plan for getting the utility out of bankruptcy and support the company’s blueprint instead.

In the past few months, Pacific Gas and Electric has also negotiated settlements totaling $25.5 billion to appease homeowners, businesses, insurers and government agencies that had claimed more than $50 billion in losses from a series of wildfires blamed on the utility’s dilapidated electrical grid and managerial negligence.

The company now appears to be well-positioned to emerge from bankruptcy by June 30, but it still faces one major stumbling block: staunch opposition from California Gov. Gavin Newsom and other elected officials. They have threatened a government-backed takeover of the company unless far more dramatic changes are made.

Pacific Gas and Electric, which provides power to about 16 million people, last week expressed confidence that it will be able to satisfy Newsom by the June 30 deadline to emerge from bankruptcy.

The Democratic governor is demanding that the utility replace its entire 14-member board of directors, including Chief Executive Officer Bill Johnson, and revise other elements of its plan to reduce its debt load so it has enough financial flexibility to pay for $40 billion to $50 billion in improvements to its outdated electrical system, reducing the chances of igniting more wildfires.

The San Francisco company pledged to bring in new directors, without specifying how many, but it hasn’t said whether it will tweak its financial plan.

Newsom, state lawmakers and a key regulatory agency in California hold unusual leverage over Pacific Gas and Electric because of a wildfire insurance fund the state created. Obtaining funding from the state program is a key component in the reorganization, but the company must get state approval by the June deadline to qualify.

Just days after Pacific Gas and Electric announced its attempt to placate Newsom, a California lawmaker announced a formal proposal to authorize borrowing billions of dollars so California taxpayers could buy the utility, currently valued around $9 billion.