PG&E Wins Court Approval for $23B Bankruptcy Financing Plan As Coronavirus Roils Markets

Pacific Gas & Electric on Monday
won court approval
for its $23 billion plan to emerge from
bankruptcy by mid-summer, after California Gov. Gavin Newsom agreed
to drop his opposition to it in the face of plunging stock markets
and the economic impacts of the coronavirus. 

In a Monday telephone hearing, U.S. Bankruptcy Court Judge
Dennis Montali approved PG&E’s plan for $11 billion in debt
commitments and $9 billion in new equity, along with $3 billion to
be raised by issuing new shares. That funding will help meet the
utility’s promise to pay out $25.5 billion in settlements with
the wildfire victims, insurers and county and local governments
damaged by the fires caused by PG&E’s equipment in 2017 and
2018. PG&E’s role in those fires, including the deadly
November 2018 Camp Fire, drove it into bankruptcy early last
year. 

Newsom has opposed
PG&E’s plan
 for its reliance on debt, which he has said
could leave it unable to raise the estimated $40 billion it will
need to repair and modernize its grid to prevent it from causing
more disastrous wildfires. But in Monday’s hearing, a
representative of Newsom agreed to lift those objections, after a
PG&E attorney said the plan’s passage was critical to secure
its commitments from Wall Street investors in the midst of a
coronavirus-induced dive in financial markets, the Associated
Press
 reported.

PG&E needs to emerge from bankruptcy by the end of June to
access the $21
billion
 state wildfire insurance fund meant to protect it and
other California utilities from future wildfire-driven
bankruptcies. Newsom can’t directly block the plan from being
approved in bankruptcy court. But the state government can demand
that PG&E’s plan meets requirements set by the California
Public Utilities Commission (CPUC) to gain access to the wildfire
insurance fund. 

While Newsom has lifted his opposition to the financing portion
of PG&E’s plan to emerge from bankruptcy, other disputes
between the utility and state government remain.

These disagreements center on demands from state lawmakers and
the public for major safety improvements at a utility responsible
for deadly disasters including the 2010 San Bruno gas pipeline
explosion and the 2017 and 2018 fires, as well as the massive

fire-prevention power outages
 that caused chaos in Northern
California last fall, and are expected to continue as a last-resort
protective effort for years to come. 

Newsom’s demands include replacing all 14 members of
PG&E’s board of directors with directors more aligned with
state policy and safety goals. PG&E has said it will replace
some, but not all, of its board. 

Newsom has also called for a new governance structure that
could allow the state to take over PG&E if it fails to meet
future safety commitments. State lawmakers have introduced a
bill, SB
917
, that could convert PG&E into a public utility — a
move that would be unprecedented in scope, and could expose the
state to the same risks now faced by PG&E.

Last month, along with a record $2.14 billion fine against
PG&E, the CPUC issued a proposed
decision
 that could meet many of Newsom’s key demands on
this front through changes to PG&E’s financial and
operational structure. Those changes would include a regional
restructuring to decentralize leadership and “bring management
closer to the customers,” and the ability to adjust PG&E’s
rates up or down by as much as 4 percent, based on whether or not
it achieves key safety benchmarks.

It also includes an “Enhanced Oversight and Enforcement
Process,” with steps that could allow the CPUC to punish
PG&E for wildfire mitigation or safety failures by demanding
immediate remedial action, increasing CPUC oversight of
PG&E’s activities, or placing it under state receivership.
As a final step, the CPUC could revoke PG&E’s certification to
operate as a utility in the state. While the proposal hasn’t been
approved yet, it could become the framework for PG&E to meet
Newsom’s accountability demands without ceding more control to
the state,  according to Rob Rains, analyst with Washington
Analysis. 

“While onerous, we think this likely represents the outer
limits of what PG&E is willing to live with to remain in
private hands,” Rains wrote in a February note. “It also gives
Gov. Newsom the political cover to declare to voters that a more
robust system of accountability is in place.” 

Source: FS – GreenTech Media
PG&E Wins Court Approval for B Bankruptcy Financing Plan As Coronavirus Roils Markets