- A preliminary count of votes filed in Pacific Gas & Electric's (PG&E) bankruptcy case indicate that victims of the Northern California wildfires have overwhelmingly accepted the company's reorganization plan, the company's attorney Stephen Karotkin told a bankruptcy judge at a virtual hearing on Tuesday.
- Multiple parties — including the tort claimants committee, which represents the interests of wildfire victims — filed objections against PG&E's plan with the bankruptcy court last Friday. The utility is in "ongoing mediation" with the tort committee and expects to resolve some of the other objections in the coming days, Karotkin said.
- The votes are "not the final piece of the puzzle — although it's an important piece of the puzzle," Jared Ellias, professor and director of the Center on Business Law at the University of California, Hastings College of the Law, told Utility Dive. "In a fast-moving case like this one, and the kind of economic and current political situation we have, you never quite know what's going to happen — but this is a major achievement for the company as it looks to leave bankruptcy."
Creditors in PG&E's bankruptcy — including victims of the wildfires caused by its power lines in Northern California — had to vote on the company's reorganization plan by May 15.
The plan includes a $25.5 billion payout to resolve PG&E's wildfire liabilities, $13.5 billion of which will be channeled into a fund to compensate victims of the fires. According to PG&E, voting materials were sent to around 250,000 parties, including those victims.
Preliminary results from those votes indicate "overwhelming acceptance" of the plan from victims, according to a PG&E press release. Final results will be filed with the bankruptcy court by May 22 and a hearing to consider confirming the plan is scheduled for May 27.
The next steps are for PG&E to finalize its plan documents, get transaction documents in order and dot their i's and cross their t's on financing, Ellias said. Parties that filed objections will be given time to voice their concerns, and then the ball will be in the court of U.S. Bankruptcy Judge Dennis Montali, who is presiding over the Chapter 11 bankruptcy case. Under state legislation, PG&E needs to have its reorganization plan confirmed by the court by June 30 in order to access California's new wildfire insurance fund.
There are a lot of factors pushing in favor of the plan, including the global economic crisis brought on by COVID-19, apparent support from fire survivors and the looming threat of what could be a bad fire season in Northern California.
"This plan has a number of really attractive features — it gets this company out of bankruptcy, it hopefully puts money in the pockets of fire survivors pretty quickly … you're seeing the culmination of hundreds of millions of dollars of attorneys' fees and time spent by everybody getting to this point. If you were to start over with a new transaction, I don't know if it would be possible to get this company out of bankruptcy by the end of the year," Ellias said.
There's a level of discomfort among the fire survivor community with this outcome, Ellias said. But he noted that in general, in Chapter 11 bankruptcy cases, plans that are put out for a vote tend to get voted up.
"People tend to hold their nose and vote for something even if they don't love it, because they want to get out of bankruptcy," he said.
PG&E is in the process of working with parties to address some of the objections raised to their plan and expect to resolve them in the next few days, Karotkin said during the hearing, including protests filed by numerous California state agencies.
The agencies include California Department of Forestry and Fire Protection, California Department of Toxic Substances Control and California Governor's Office of Emergency Services, who raised concerns in a filing Friday that the plan doesn't address regulatory authority issues and should not allow PG&E to "shirk their regulatory obligations."
Another objection filed by the Northern California Power Agency, Transmission Agency of Northern California and Sonoma Clean Power Authority, among others, contended that the plan includes unfair and even illegal provisions that would be binding if it were to be confirmed by the court.
And in its own objection, the tort claimants committee — which reached an agreement with PG&E for a $13.5 billion payout in December — said that PG&E's plan has "whittled away" aspects of that settlement and includes a financing plan that could reduce the value of the company's stock, which will eventually be used to pay the victims.
"We are in meditation and I'm hopeful of either resolving all those issues," or narrowing them down, Robert Julian, an attorney for the committee, said.