PG&E critics urge judge to reject utility's bankruptcy plan
Wildfire victims' attorney calls plan a “house of cards"
SAN RAMON, Calif. — Pacific Gas & Electric's proposal to pay $25.5 billion for a series of deadly Northern California wildfires ignited by its equipment faced a final barrage of resistance from critics Thursday, who told a federal judge that the plan will do more to enrich savvy investors than help fire victims rebuild their lives.
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The impassioned arguments unfolded during the closing phase of a two-week trial that will determine whether the nation's largest utility can end its nearly year-and-half bankruptcy by a June 30 deadline. PG&E needs to close the case by that date to qualify for insurance coverage for future wildfires from a $21 billion fund created by the Legislature last year.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| PCG | PG&E CORP. | 21.35 | +0.15 | +0.71% |
PG&E has cleared all the other key hurdles, but now needs U.S Bankruptcy Judge Dennis Montali to approve its complex plan for to settle more than $50 billion in claimed losses from deadly 2017 and 2018 wildfires at a deep discount.
PG&E critic's maintain the bankruptcy process was rigged in favor of Wall Street hedge funds and other investors who are poised to make billions of dollars off the case. By comparison, wildfire victims may not get all of the $13.5 billion promised to them while also having to continue to worry about the risks posed by a utility known for managerial neglect and a fraying electrical grid.
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Critics of the plan said PG&E has not proven it has changed its corporate culture emphasizing profits over the safety of the 16 million people who rely on it for power.
“This plan of reorganization is not feasible because it does not restructure anything that matters for the health of Pacific Gas and Electric," wildfire survivor Will Abrams told Montali.
Jeremiah Hallisey, an attorney representing a handful of wildfire victims, blasted the plan as a “house of cards" that is “manifestly unfair" to the more than 80,000 people who lost family members, homes and other property in the fires.
Some of their arguments echoed those made Wednesday by Tom Tosdal, another lawyer for wildfire victims. “It is fundamentally unfair for there to be profit taking by Wall Street on the back of fire victims," he told Montali.
Although PG&E's plan designates $13.5 billion for the wildfire victims, recurring concerns raised during the past few months note that $6.75 billion of it will be paid in PG&E stock that has wildly fluctuated in recent months along with the rest of the market amid the pandemic-driven recession.
PG&E also is imposing restrictions likely to prevent wildfire victims from selling their stock during this year’s wildfire season and possibly next year’s, too, while other investors will be free to sell their shares whenever they want. Those handcuffs have raised fears that survivors will be left with worthless PG&E stock if the utility causes more huge fires in the next two years.
The San Francisco company and the bankruptcy committee representing wildfire victims are currently negotiating the date when PG&E stock can be sold.
Although Montali hasn’t indicated how he may rule, all signs point to PG&E's plan being approved. Both California power regulators and Gov. Gavin Newsom have already approved it, despite being urged not to do so.
In balloting completed last month, more than 80 percent of the roughly 50,000 wildfire victims voted supported the plan. Montali has repeatedly said he will give great weight to the victims’ opinion.
In arguments Wednesday, PG&E lawyer Stephen Karotkin told Montali that there should be no doubt left about the plan’s merits and warned its rejection would mean wildfire victims might not get any money for years.
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“The deal is indeed a remarkable achievement,” Karokin said.
To pay all the parties in the plan, PG&E will nearly double its debt load to $38 billion. That has raised fears it won't be able to make an estimated $40 million in upgrades to its outdated equipment to minimize the risks of igniting more deadly wildfires amid the increasingly hot and windy conditions during the fall in Northern California.
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Abrams argued that the plan will leave PG&E customers exposed to the risk of even more catastrophic wildfires during the next few years, but Montali expressed doubt whether the utility's safety issues could be fixed in bankruptcy.
“To me, confirming the plan or not confirming the plan doesn't mean it's going to start raining," the judge said.
The case is expected to be submitted to Montali on Friday. The judge is expected to rule sometime ahead of the June 30 deadline.