PG&E Corp.’s key lenders offered a $30 billion plan Tuesday to compensate wildfire victims, pull the utility out of bankruptcy — and give the tarnished company a new name.
The proposal, filed in U.S. Bankruptcy Court by PG&E’s major bondholders, would set aside $16 billion to $18 billion to pay claims on the 2017 and 2018 wildfires. While that’s well short of the $30 billion PG&E has estimated is needed to satisfy its wildfire liabilities, one advocate for wildfire victims called the proposal a promising step.
The plan offered by PG&E’s leading bondholders comes four days after Gov. Gavin Newsom proposed a $24 billion package to deal with the costs of future wildfires, paid for by ratepayers and shareholders of PG&E and the other two big electric utilities in California.
Newsom’s plan pointedly doesn’t offer any cash for PG&E’s existing liabilities but would revise state law to give utilities more certainty about recovering costs from ratepayers — enough stability that Newsom believes it will allow PG&E to borrow the money needed to pay existing claims.
The bondholders’ proposal, which they described in court papers as a “fresh capital commitment of unprecedented scale,” is an attempt to deal with the tens of billions PG&E owes to wildfire victims and other creditors, including the bondholders themselves. The bond debt, totaling more than $10 billion, would be paid in full under the plan.
The plan would compete with an alternative proposal that PG&E is reportedly considering. Normally PG&E would have an exclusive window for proposing a plan for exiting bankruptcy, but the bondholders are trying to muscle the utility’s executives aside. In their court filing, they said PG&E has “wasted crucial time needlessly” since filing for bankruptcy in January, and noted that Newsom’s plan gives PG&E until June 2020 to repay fire victims and get out of bankruptcy.
The bondholders include some of the biggest investors on Wall Street, including Elliott Management, Pimco and Apollo Global Management. They have been quietly floating a PG&E restructuring plan for weeks in conversations with legislators, Newsom’s aides and others. Tuesday’s court filing marks the first time they’ve taken the proposal public.
“Substantial new capital must be infused into the company,” the bondholders said in their court filing.
Like the governor’s plan, the proposal is “ratepayer neutral” — meaning, customer rates wouldn’t go up to pay the costs of getting PG&E out of bankruptcy. But ratepayers would help pay for it, just as they would under Newsom’s proposal: A $2.50 monthly charge that’s been on PG&E bills since the 2001 energy crisis would be extended for several years to help raise dollars for a wildfire insurance fund proposed by Newsom last week. That fund would help pay claims for future fires.
In addition, the bondholders’ said their investment depends on a “satisfactory conclusion” to a rate-hike request PG&E filed last year to help pay for enhanced wildfire safety programs. If granted in full, the request would raise rates more than $10 a month for electric and gas customers.
The bondholders also want to rebrand PG&E, whose popularity has sunk after the 2010 San Bruno pipeline explosion, the 2017 wine-country fires and last November’s Camp Fire, which killed 85 people and destroyed much of the town of Paradise.
The proposed name: “Golden State Power Light & Gas Co.” The parent company would be known as “GSPL&G Corp.” However, the bondholders said they’d be open to suggestions from PG&E employees.
The bondholders are attempting to enlist support from key constituencies, including the state. The agency running the governor’s wildfire insurance fund would get to nominate someone to the board of directors, subject to shareholder approval. The Utility Reform Network, a consumer advocacy group, and Local 1245 of the International Brotherhood of Electrical Workers, which represents thousands of PG&E employees, would each get to pick a board nominee.
It’s uncertain how the offer of $16 billion to $18 billion will be received by existing fire victims. Dario de Ghetaldi, a Bay Area lawyer who represents fire victims across Northern California, called it “nowhere near enough.”
But Santa Rosa resident Patrick McCallum, who lost his home in the 2017 Tubbs Fire and runs an advocacy organization called Up from the Ashes, said the plan, while still inadequate, “is a positive step forward.” He noted that last week PG&E began privately circulating a plan, reported by Bloomberg, that would offer $14 billion for fire victims.
“Things are moving in the right direction to try to get a rapid settlement for these victims who are struggling,” McCallum said. The bondholders’ plan includes about $1.5 billion to pay claims from the Tubbs Fire, even though Cal Fire said it wasn’t caused by PG&E.
Asked about the bondholders’ plan, PG&E said it is “committed to working together with our stakeholders through the Chapter 11 process to fairly and expeditiously resolve our liabilities resulting from the 2017 and 2018 Northern California wildfires, develop a more sustainable business model, and continue delivering safe and reliable service. We can assure our customers and communities that we are looking at all options when it comes to working with the Governor and all stakeholders.”
Aides to Newsom weren’t immediately available for comment.
The centerpiece of the governor’s plan is a $21 billion insurance fund to handle the costs of future fires caused by utility equipment. If the state Public Utilities Commission decides the utilities acted “prudently,” they can tap into the fund without having to pay it back. If the commission decides the utilities behaved recklessly, company shareholders would have to reimburse the fund. The three major utilities — PG&E, Southern California Edison and San Diego Gas & Electric — would pay for the fund, with ratepayers and shareholders contributing equally.
The PG&E bondholders said they would contribute to that fund. Newsom’s plan hasn’t yet established how much each company would contribute.
The bondholders also promised to honor the billions of dollars in contracts PG&E has to buy solar, wind and other renewable energy — a pledge that is sure to please state policymakers. PG&E has said many of those contracts are overpriced and won a court order giving it the right — subject to court approval — to unwind some of those deals.