By Strider Kachelein
On February 27, 2020, the California Public Utilities Commission (CPUC), pursuant to a settlement agreement, imposed a $2.137 billion fine on Pacific Gas and Electric Company (PG&E) to cover state expenditures and corrective actions with respect to the role its electrical facilities had in igniting fires in its Service Territory in 2017, as well as the Camp Fire in 2018. In light of PG&E’s pending bankruptcy proceeding, however, Federal bankruptcy Judge Dennis Montali must approve all imposed fines, settlements, and restructuring agreements before the utility can exit bankruptcy. See In re PG&E, Case No. 19-30088-DM (Bankr. N.D. Cal.); [24:2 CRLR 223-224] At this writing, the Court has yet to approve this penalty.
PG&E must exit bankruptcy by June 30, 2020, in order to access the Wildfire Fund created in AB 1054 (Holden) (Chapter 79, Statutes of 2019). Exiting requires both Court and CPUC approval. While an endorsement from Governor Newsom is unnecessary, it is influential, in part, because the CPUC’s President, Marybel Batjer, is his appointee.
On March 20, 2020, PG&E announced in a press release that it had reached an agreement with Governor Newsom after offering new commitments as part of its proposed reorganization plan that would allow the utility to exit bankruptcy. PG&E filed the new plan with the Bankruptcy court that day, and Governor Newsom filed a statement in support of the plan with the Court on the same day as well. In December 2019, Governor Newsom sent a letter to PG&E criticizing its original reorganization plan and filed a statement in the bankruptcy proceeding urging Judge Montali not to approve PG&E’s proposed reorganization plan, arguing that it fell “woefully short” of addressing needed leadership changes, safety metrics, and enforcement processes.
Of note, the revised plan includes PG&E’s commitments to support 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; agreement to host an observer to provide the state with insight into the company’s progress on safety goals before the company exits Chapter 11; an agreement that it will conduct an orderly process to sell its business if it does not exit Chapter 11; a commitment not to reinstate a dividend to shareholders for three years; and 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 2017–18 wildfires under the company’s plan when PG&E emerges from Chapter 11 bankruptcy.
The plan also proposes to pay out $13.5 billion for damages not covered by insurance to victims of the 2015 Butte Fire in Amador and Calaveras counties, the 2017 wine country fires, the 2018 Camp Fire, and the 2016 Ghost Ship fire in Oakland—a compromise reached in December 2019 between PG&E and the lawyers representing the wildfire victims. The proposal, however, includes a partial payment (totaling $6.75 billion) to victims in PG&E stock, which has been fluctuating in the wake of the economic downturn in recent weeks due to the COVID-19 pandemic. The victims will vote on PG&E’s plan in the coming weeks.
Meanwhile, on March 23, 2020, PG&E agreed to plead guilty to 84 counts of involuntary manslaughter and a single count of unlawfully causing a fire in connection with 2018 Camp Fire. The plea resulted in a fine of $4 million. After initially proposing to pay this fine out of the $13.5 billion for wildfire victims, PG&E reversed course and announced on March 30, 2020, that the $4 million will not reduce the funds available to the wildfire victims, and that it would be funding it from other sources.
Ultimately, the bankruptcy court will rule on PG&E’s latest governor-approved reorganization plan, whether or not the victims agree, at a hearing set for May 27, 2020.