California Gov. Gavin Newsom is stepping up pressure on Pacific Gas & Electric to fork over billions more in cash to pay thousands of people who lost homes in wildfires that drove the utility into bankruptcy.
The rising tensions were scheduled to be aired out in a bankruptcy court hearing Wednesday, but it was abruptly postponed on Tuesday to Nov. 19.
The delay could allow the sides to negotiate a compromise on PG&E’s blueprint for its financial revival.
If PG&E doesn’t make changes, Newsom is threatening to try to turn the utility into a customer-owned cooperative run by the state and local governments.
In an objection filed Saturday, Newsom’s lawyers accused PG&E and other parties of protecting their own financial interests instead of focusing on a fair resolution before July 2020 — a deadline that California lawmakers have set for the utility to emerge from bankruptcy.
PG&E disputed Newsom’s characterization of its plan, asserting in a statement that it “remains committed to working with the individual claimants to fairly and reasonably resolve their claims and will continue to work to do so.”
The fissure centers on a $11 billion settlement that PG&E reached in September with most of the insurers covering victims of deadly wildfires that tore through Northern California during 2017 and 2018.
That deal envisions PG&E paying the insurers in cash, a provision that raises the risk that there won’t be enough money left to pay uninsured and underinsured victims. That potential liability could be substantial, given that 70,000 claims have already been filed against PG&E, according to court documents. Even more are expected to flood in before a new established Dec. 31 deadline in the bankruptcy case.
The value of those claims still must be determined by a federal judge in hearings scheduled to begin next year.
PG&E’s plan is competing against an alternative proposal from a group of bondholders seeking to gain control of the San Francisco company. The bondholders are pledging to set aside $13.5 billion in cash for wildfire victims, an amount that Newsom appears to be trying to get PG&E to match.
Newsom and attorneys for wildfire victims contend PG&E’s current plan doesn’t earmark enough cash to cover all the claims, raising the risk that they will be paid with stock in a utility with little or no appeal on Wall Street. Since a deadly 2017 wildfire first exposed PG&E’s potential liability for dangers caused by its outdated transmission lines, the company’s market value has plunged by more than $30 billion as its stock price dropped by 70 percent.
On the flip side, investors who bought PG&E’s stock after it emerged from its bankruptcy in 2004 saw their holdings nearly triple in value between then and the utility’s peak price in 2017.
But few analysts so far are as optimistic about PG&E’s future prospects this time around in bankruptcy, making it even more important all wildfire victims have their claims paid in cash rather than in a risky stock, said one of their lawyers, Robert Julian.
“It is time to call this settlement what it is: a mistake,” Julian wrote in a brief objecting to PG&E’s deal with the insurers. “(The utility has) given away all their cash and placed the wildfire victims in a position of full risk in this case.”
The insurers are defending their right to the money. They say the $11 billion will only cover about half of the $20 billion in liabilities stemming from fires they believe were caused by PG&E. By making that concession, the insurers described themselves in a statement as “a major facilitator of a comprehensive solution” to PG&E’s plight.