Following his letter from last week, Governor Newsom on Monday submitted a filing before U.S. Bankruptcy Court Judge Dennis Montali in which he said that PG&E’s reorganization ignored his concerns and offered a restructuring plan that is “more about creating an illusion of momentum” than a true reorganization plan. Notwithstanding Newsom’s filing, the court afforded a win to the utility this week.
In response to the governor, and perhaps aiding the court’s decision, PG&E quickly amended its restructuring support agreement with representatives of the wildfire victims to reaffirm the parties’ support of the $13.5 billion settlement. In addition, PG&E said it fully intends to comply with the provisions of AB 1054 and would continue to address the concerns in Governor Newsom’s letter.
The Court Reacts
On Tuesday, Montali handed PG&E a win by approving nearly $25 billion in settlements for wildfire victims and insurers, and allowing the utility to move forward with reorganization.
“I don’t think that I have the wisdom or the knowledge or, frankly, my role, to second-guess the decisions of those victims who have told their lawyers this is how we want to go with the plan,” Montali said.
He also said that his approval wasn’t a power play to say that he knows more than the governor does, but that he believed the governor has “bigger fish to fry” in protecting the public interest, rather than the bankruptcy court’s primary purpose of financial and legal rehabilitation. He added that, even if PG&E’s settlements include the radical governance changes that critics have called for, that aspect of the company’s plan wasn’t up for debate.
The utility plan leaves PG&E’s current board of directors in place, and allows Abrams Capital Management, Knighthead Capital Management and Redwood Capital Management to retain control.
The settlements include $13.5 billion for wildfire victims and their attorneys, plus another $11 billion in claims. It also includes a lock-out provision preventing negotiations with hedge funds that own billions in PG&E bonds.
PG&E and lawyers representing fire victims told Montali that avoiding a costly trial over the utility’s liability in the 2017 Tubbs Fire offered their clients the most certainty.
Governor Newsom’s attorney, Nancy Mitchell, said Newsom would not stop PG&E’s settlement, but the reorganization plan, as it stands, doesn’t meet the criteria for accessing a new state wildfire fund.
The California Public Utilities Commission (CPUC), whose members are appointed by the governor, must also approve the reorganization.