Dec. 17--SAN FRANCISCO -- PG&E Corp., trying to regain momentum in its efforts to emerge from bankruptcy from a stinging rejection from Gov. Gavin Newsom, pledged Tuesday to fix the plan to address the governor's objections.
A lawyer the embattled utility, appearing in U.S. Bankruptcy Court, urged Judge Dennis Montali to approve a crucial element of PG&E's bankruptcy plan: a $13.5 billion settlement agreement with lawyers for victims of the 2017 wine country fires and 2018 Camp Fire.
The fires destroyed thousands of homes and killed more than 120 people combined; the settlement would pay for damages not covered by insurance. The Camp Fire alone killed 85 people, more than any wildfire in California history, and destroyed much of the town of Paradise.
The lawyer, Stephen Karotkin, said he believes PG&E can find a way to satisfy Newsom's myriad objections to PG&E's Chapter 11 reorganization proposal. Newsom wants a thorough restructuring of the company's operations and other changes.
"We have been engaged in constructive discussions with the governor's staff," starting with a meeting last Saturday at the Capitol, just hours after Newsom rejected PG&E's plan in a biting letter to the utility's CEO, Karotkin said.
A lawyer for Newsom, Nancy Mitchell, said the governor doesn't object to PG&E cutting a deal with wildfire victims, but is adamant that the utility must undergo a substantial overhaul before he signs off on PG&E's larger plan to exit bankruptcy.
Last Friday night, Newsom said PG&E's plan falls far short of meeting the goals of AB 1054, a new state law that creates a $21 billion insurance pool to cover liabilities from future wildfires caused by California's major utilities. The pool is to be funded by shareholders and ratepayers, with ratepayer contributions coming from a $2.50-a-month surcharge that's been in place since the energy crisis and otherwise would expire next year.
"AB 1054 is not a rubber stamp and we have to get to the changes that are necessary," Mitchell told the judge.
Among other things, Newsom told PG&E Chief Executive Bill Johnson last Friday that the bankruptcy plan relies too heavily on new debt that will make it impossible for PG&E to invest in wildfire safety upgrades. He also wants a new board of directors, subject to state approval, and the right to seize control of PG&E's operations if he feels the company is falling short on safety.
Karotkin said the utility gets the message. "We intend to file a plan that is AB 1054-compliant," he told Montali.
In order to participate in the insurance fund, PG&E must exit bankruptcy by June 30 in a way that's acceptable to state officials
Late Monday, the company announced it had amended the settlement with wildfire victims so it's no longer contingent on Newsom quickly accepting PG&E's overall plan for leaving bankruptcy. The original deal, announced Dec. 6, would have expired Tuesday morning.
Montali planned to rule later Tuesday on PG&E's request to approve the victims' settlement. The more than 70,000 victims would still have to vote on the plan.
The $13.5 billion settlement fund would also be used to pay approximately $4 billion in claims filed by FEMA, Cal Fire and the state Office of Emergency Services.
It will also pay claims from the 2015 Butte Fire in Amador and Calaveras counties. However, it won't include damages from the 2016 Ghost Fire catastrophe in Oakland; Montali agreed to let those victims pursue a court trial against PG&E and other defendants. However, those damages will be covered by PG&E's insurers and won't come out of PG&E's pocket.
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