Under increasing pressure from Gov. Gavin Newsom, the utility’s own bondholders and a consortium of municipalities trying to take over the company, PG&E said it would spend an additional $6.6 billion on wildfire claims, a move that could give the troubled utility a greater likelihood of surviving bankruptcy with its business intact.
The new offer puts the total amount earmarked for fire claims at $25.5 billion, according to a filing the company made with the Securities and Exchange Commission. That includes previously announced payouts of $11 billion to insurance companies and $1 billion to local governments, leaving $13.5 billion for other claims from the devastating 2017 and 2018 fires.
That appears to match the sum offered by a group of bondholders seeking to seize ownership of PG&E, although advocates for fire victims said it wasn’t clear if the two offers line up exactly.
In addition, the SEC filing indicates that PG&E has lost some of its financial backing for its bankruptcy plan, raising questions as to whether the utility can deliver on its promises to fire victims and other creditors. The filing says its investors have committed $7.4 billion for the company’s exit plan; they previously had committed $14 billion. The company said in its filing that it expects to raise the commitment level to $12 billion by Dec. 6.
In a prepared statement, the company said it still has “strong financial backing” that puts PG&E “on track to achieve confirmation of our plan.”
The filing by PG&E comes as the company tries to fend off a takeover attempt by a group of hedge funds that own billions in PG&E bonds, as well as efforts by two-dozen municipalities to convert PG&E into a customer-owned utility.
Newsom wants restructured PG&E
Meanwhile, Newsom has demanded a radical restructuring of PG&E, and has teased out the possibility of a state takeover. Last week the governor’s lawyers filed papers in U.S. Bankruptcy Court attacking PG&E’s proposal to pay $11 billion in claims to insurance companies, saying the insurers shouldn’t get paid before individual wildfire victims.
Newsom is also increasingly frustrated about a series of massive blackouts imposed by the company last month as it sought to avoid new fires. Even with the blackouts, the utility says its equipment may have caused the Kincade Fire in Sonoma County and several smaller fires in the East Bay.
Late Sunday, Pacific Gas and Electric Co. said as many as 250,000 homes and businesses could be subject to another “public power safety shutoff” this week as high winds are forecast. But its top executive said PG&E is working to keep the shutoffs to a minimum.
“Repeatedly turning off power for millions of people in one of the most advanced economies in the world, even in the interest of safety, is not a sustainable solution to the wildfire threats we face,” PG&E Chief Executive Bill Johnson told a state Senate committee hearing on blackouts Monday. “So I want to assure you of this: We do not expect an annual repeat of what we went through this October and what we put our customers and others through. That just cannot happen again.”
Johnson denied accusations by senators that PG&E failed to maintain its grid. “No amount of tree clearing can prevent catastrophic wildfires or windblown debris from hitting and impacting our equipment.”
By raising its offer to wildfire victims, PG&E has taken a significant step toward settling those claims and making a successful exit from bankruptcy and fending off hostile takeover efforts, said Jared Ellias, a bankruptcy law expert at the UC Hastings College of Law.
“It increases the chances that the company ends up winning,” he said.
Ellias said it also makes it less likely that municipalities or the state could engineer a takeover. If PG&E’s offer is OK’d by fire victims, “this company is going to start to gather some speed and it’ll be tough to stop it,” Ellias said.
Lawyers for fire victims — who had previously aligned themselves with the company’s bondholders — couldn’t be reached for comment.
Patrick McCallum, a Sacramento lobbyist who runs a fire victims’ group called Up from the Ashes, said it wasn’t clear if PG&E’s offer matches the bondholders’ offer, in part because some of PG&E’s money may have to be spent paying claims filed by FEMA, the Federal Emergency Management Agency. The bondholders previously offered fire victims $13.5 billion.
In any event, McCallum acknowledged that PG&E’s new offer means “we’re turning a corner towards a solution.”
PG&E is under a tight deadline. It must resolve all wildfire claims and exit bankruptcy by June 30 in order to participate in a giant wildfire insurance fund created by the Legislature.
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