Pacific Gas & Electric (PG&E) wants to cap its liabilities from damages caused by California wildfires at about $18 billion, according to the reorganization plan filed by the bankrupt utility September 9 in federal court in San Francisco. The amount is less than half what creditors, including insurance companies and wildfire victims, say they are owed.
PG&E said it plans to raise a combination of debt and equity to cover its liabilities after the company’s equipment was blamed for starting wildfires in 2017 and 2018 that left more than 100 people dead and caused billions of dollars in property damage. PG&E, the state’s largest utility, filed for Chapter 11 bankruptcy protection in January.
Jason Wells, the company’s chief financial officer, told Bloomberg on Monday, “We currently believe that the caps being outlined in our plan of reorganization are sufficient to satisfy the claims against the company.” Wells did say the company could refile its reorganization plan after the courts involved in the wildfire cases determine PG&E’s liabilities.
Several Groups at Odds over Plan
Claims against the company are part of a court process separate from the bankruptcy proceedings. Estimates of PG&E’s liabilities vary widely, with the utility saying they could be less than $10 billion. Insurance companies have said the utility owes them about $18 billion. Attorneys for victims of the fires have said the figure could be more than $40 billion.
The filing of the reorganization plan is the latest move in the largest bankruptcy ever of a U.S. utility, a case that has several groups—including shareholders, ratepayers, legislators, activist investors, and wildfire victims—debating PG&E’s future. The liability figure is key in large part because, under U.S. Bankruptcy Code, damage claims from victims of the wildfires would be paid first, which could leave the company’s shareholders with nothing.
Those shareholders, along with other creditors, have said they want to present their own plans to U.S. Bankruptcy Judge Dennis Montali, who last month said he did not expect PG&E’s initial restructuring plan to be the final version, because details such as the liability figure were not finalized. Montali said PG&E’s plan needed to be “credible,” adding that he could accept proposals from other groups with financial interest in the case.
A group led by Pacific Investment Management Co. (Pimco) and Elliott Management Corp. has floated a reorganization plan that would mostly wipe out the stakes of current shareholders, with Pimco and Elliott taking control of the company.
PG&E wants to exit bankruptcy by June 2020 so it can take part in a statewide wildfire fund, signed into law in July, that would provide $21 billion to help the state’s public utilities pay claims from future wildfires related to their equipment.
A bill in the state legislature that would have allowed PG&E to use tax-free state bonds to pay wildfire claims was pulled from consideration on Sept. 6, though its sponsor said it could be re-submitted next year.
San Francisco Offers to Buy City Power Grid from PG&E
The city of San Francisco, where PG&E is headquartered, last week submitted on offer letter to PG&E, saying the city is willing to pay $2.5 billion to buy the utility’s power lines and other related infrastructure serving the city, though it does not include any of PG&E’s gas assets. City officials said they have considered buying PG&E infrastructure since the utility filed for bankruptcy. Those officials have said such a move would eliminate “layers of costs and fees,” saving ratepayers money.
The San Francisco deal would create California’s third-largest government-owned electric utility, behind the Los Angeles Department of Water and Power, and the Sacramento Municipal Utility District.
As part of its restructuring, PG&E hired former Tennessee Valley Authority executive William “Bill” Johnson as its new CEO earlier this year, replacing former CEO Geisha Williams, who was ousted from her role two weeks before the company’s bankruptcy filing.
(Read more about how PG&E’s bankruptcy is a unique situation, and whether utilities should be responsible for wildfire damages.)
—Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).