PG&E: California governor lends support to restructuring plan changes

By Caroline Salls

Pittsburgh, March 20 – PG&E Corp. has secured the support of California governor Gavin Newsom for its proposed Chapter 11 reorganization plan, according to a statement filed Friday with the U.S. Bankruptcy Court for the Northern District of California.

Through discussions regarding changes to the plan that Newsom said were “necessary to meet the state’s goals,” the governor said the PG&E debtors submitted constructive responses to a ruling issued by the California Public Utilities Commission and agreed to incorporate related changes in the plan.

Specifically, Newsom said in Friday’s statement that PG&E committed to an enhanced regulatory and enforcement process that provides the CPUC greater visibility into the reorganized utility’s operations and course correction tools, and stronger enforcement tools if they become necessary; increased oversight and risk management, including more effective and targeted uses of public safety power shutoffs; a number of safety-oriented governance initiatives that include changes at the board level and independent oversight; and financial commitments that include additional shareholder investment in the reorganized entity.

In a press release on Friday, PG&E detailed out more of the new commitments, including:

• The possibility of an orderly process for a sale of the business to the state or another party if PG&E does not exit Chapter 11 in a timely fashion;

• A commitment not to reinstate a dividend for approximately three years, estimated to contribute an additional $4 billion of equity to pay down debt and invest in the business;

• Pursuance of a rate-neutral $7.5 billion securitization transaction after PG&E emerges from Chapter 11 to reduce the cost of financing for customers and to accelerate payments to wildfire victims; and

• Commitment not to seek recovery in customer rates or any portion of the approximately $25.5 billion that will be paid to victims of the 2017-2018 wildfires under the company’s plan upon emergence.

Newsom said entry of an order approving PG&E’s motion for a case resolution contingency process “is a critical component of the governor’s willingness to support the plan.”

The governor said the proposed process answers concerns he previously raised regarding PG&E’s plan by granting the state visibility into the safety and operational improvements being made in advance of the next fire season through an operational observer, providing for the appointment of a chief transition officer to oversee, and take responsibility for, operational safety issues if the company’s exit from Chapter 11 is delayed, creating an organized process for a sale of the business before the 2021 fire season in the unlikely event the plan cannot be completed and allowing the state to participate in the sale process if necessary.

Previously, PG&E reached settlements with all wildfire victims’ groups, valued at approximately $25.5 billion, including:

• A $1 billion settlement with cities, counties and other public entities;

• An approximately $13.5 billion settlement resolving claims by individual victims and others relating to the 2015 Butte fire, 2017 Northern California wildfires (including the 2017 Tubbs fire), and the 2018 Camp fire; and

• An $11 billion agreement with insurance companies and other entities that paid claims by individual and businesses related to the wildfires.

The electric and natural gas utility is based in San Francisco. The company filed bankruptcy on Jan. 29, 2019 under Chapter 11 case number 19-30088.

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