- As Pacific Gas & Electric's (PG&E) bankruptcy case nears its June 30 deadline for participating in California's wildfire insurance fund, some victims of the Northern California wildfires are raising concerns about the implications of the company's Chapter 11 reorganization plan to U.S. Bankruptcy Judge Dennis Montali.
"I believe that PG&E will be worse off with this plan confirmed," William Abrams, a survivor of the 2017 Tubbs Fire, told the judge during closing arguments in the case. It's time, he said, that stakeholders "rolled up their sleeves and talked about how they can align investor interest and investor money to mitigate wildfires."
PG&E attorney Stephen Karotkin told the judge that not confirming the plan would cause "draconian" results, including delaying payments to fire victims by months or even years, and preventing PG&E from participating in California's newly created fire insurance fund.
More than 85% of the victims of fires caused by PG&E's power lines in 2015, 2017 and 2018 who voted on PG&E's reorganization chose to approve, the utility announced in late May. The California Public Utilities Commission also approved the plan in a unanimous vote last month, paving the way for the utility's exit from bankruptcy.
Montali is now faced with the prospect of either confirming or rejecting the plan, which would pay out $25.5 billion to resolve PG&E's fire liabilities. That includes a $13.5 billion fund to compensate victims, which will comprise equal parts cash and company stock.
But the plan and process have been criticized by some fire victims, who say that it doesn't address PG&E's larger exposure to wildfire risk, and note that the utility is still negotiating an agreement that will dictate how long victims will have to hold on to company stock. Without that agreement in place, victims might not be able to liquidate their stock for five to six years, according to Robert Julian, an attorney for the tort claimants committee.
PG&E's plan isn't feasible because it doesn't change the overall health of the company, Abrams said in his closing argument.
"It's primary goal is to ensure that entrenched investors can cash out and exit the stock to leave victims and the public living among the PG&E lines, exposed to risks of fire, and risks associated with the fires that they cause," he said.
Abrams pushed back on PG&E's notion that the 2019 wildfire season had been a success, saying it caused more wildfire "ignitions" that year than in preceding fire seasons, and it was only because of the efforts of fire departments that these did not further impact communities.
"I had to evacuate because of the Kincade Fire, after being burned out of my house in 2017," he said, adding, "2019 was not a success."
It is fundamentally unfair to push the risks of the plan on to fire victims, Tom Tosdal, an attorney representing some of the victims, said. He also raised concerns that parties are still in the midst of negotiating an agreement that will dictate how long it will be before the PG&E stock in the victims' trust can be sold — an aspect of the plan that victims were not aware of when they voted.
"Is there in the works a deal whereby the fire victims are going to have to hold on to their stock for a period of time before they can sell it?" he questioned.
Mary Wallace, a victim of the Camp Fire, echoed some of these concerns.
"Can you tell me when I will see my payment, and what future payments will be? These questions have been answered for almost everyone else," she said.
One group of fire victims also filed a motion with the court alleging "irregularities" in the process of voting for the plan, and asking the judge to appoint an examiner to look into it. They said that many fire victims had not received ballots, or had received them after the deadline to vote had passed and asked for an "independent investigation of any fraud, neglect, incompetence misconduct, mismanagement or irregularity." Montali has yet to issue an order on that motion.
Meanwhile, an attorney for PG&E told the judge that the plan is "a remarkable achievement," given the complexity of the bankruptcy proceeding, and that confirming it is critical to meeting the June 30 deadline laid out by state lawmakers. All the financing necessary for the plan is fully committed, he added.
Karotkin also argued against appointing an examiner to look into the alleged irregularities in the voting process, questioning why it wasn't brought forward before the eve of confirmation.
"There is zero evidence in the record that anything went wrong with PrimeClerk," which was the administrator of the voting process, he said.
Other stakeholders remained supportive of PG&E's plan, including a group of bondholders who last year had put forward a competing plan of their own to take control of the company. PG&E reached an agreement with the bondholders in January, after which they withdrew their proposal. David Botter, an attorney for the bondholders, acknowledged that the proceeding has been "extremely hard fought and at times, contentious."
"Through the painstaking process that has unfolded over the last 16 months, however, the pieces are now in place to confirm this plan," he said.