SAN FRANCISCO (AP) — Pacific Gas & Electric and California Gov. Gavin Newsom announced a deal Friday for the nation’s largest utility to emerge from bankruptcy triggered by massive liabilities from wildfires.
The governor’s office announced that PG&E agreed to overhaul its board and operations, and in addition, it agreed to a process to put the company up for sale if it doesn’t pull out of the most complex bankruptcy cases in U.S. history by June 30.
PG&E will commit billions of dollars in additional spending to prevent wildfires, meeting one of Newsom’s critical demands for the bankruptcy plan.
“This is the end of business as usual for PG&E,” Newsom said in a statement. “Through California’s unprecedented intervention in the bankruptcy, we secured a totally transformed board and leadership structure for the company, real accountability tools to ensure safety and reliability and billions more in contributions from shareholders to ensure safety upgrades are achieved.”
The utility’s outdated system triggered a series of catastrophic wildfires in 2017 and 2018 that killed so many people and burned so many homes and businesses that the company had to file for bankruptcy early last year.
PG&E NEW COMMITMENTS
PG&E shared in a press release that they have made a series of new commitments regarding its governance, operations, and financial structure, all designed to prioritize safety and expedite the company’s success.
According to PG&E, the new commitments include:
- Supporting the CPUC’s enactment of measures to strengthen PG&E’s governance and operations, including enhanced regulatory oversight and enforcement that provides course-correction tools as well as stronger enforcement if it becomes necessary
- Agreeing to host an observer to provide the State with insight into the company’s progress on safety goals before the company exits Chapter 11
- Agreeing that in the unlikely event the Plan is not confirmed, or PG&E does not exit Chapter 11 in a timely manner, an orderly process for a sale of the business to the State or another party will be commenced
- A commitment not to reinstate a dividend for approximately 3 years, which is estimated to contribute an additional $4 billion of equity to pay down debt and invest in the business
- Pursuing 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
- Committing not to seek recovery in customer rates of any portion of the approximately $25.5 billion that will be paid to victims of the 2017-2018 wildfires under the company’s 2 plan when PG&E emerges from Chapter 11 (except through the rate-neutral securitization transaction).
Wildfire Victim Settlements
PG&E previously reached settlements with all wildfire victims’ groups to be implemented pursuant to PGE’s Plan, valued at $25.5 billion.
This includes the following:
- 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 individuals and businesses related to the wildfires.