California Regulator Approves PG&E Bankruptcy Plan With Oversight Conditions
The California Public Utilities Commission approved Pacific Gas & Electric Company’s bankruptcy reorganization plan with conditions, including changes to the company’s governance structure, enhanced oversight, and creation of local operating regions, according to a May 28 press release. Under a new oversight framework, PG&E’s operating permit will be subject to an ongoing review as part of an enforcement process focused on the company’s safety performance. The plan provides for establishment of a $13.5 billion trust fund to pay wildfire victims. PG&E must receive federal bankruptcy court approval by June 30, the deadline set forth by legislation enacted last year, to participate in a wildfire fund.
The decision allows for a modest reduction of ratepayer costs by replacing about $12 billion of existing long-term debt with lower interest rates, offset by the company’s associated financing fees. Last month, the commission approved a settlement imposing $1.937 billion in penalties against the utility for its role in causing the catastrophic wildfires in 2017 and 2018. The decision permanently suspends the utility’s obligation to pay a $200 million fine, so that the payment does not reduce the funds available to satisfy wildfire victims’ claims. Tax savings from the operating expenses related to the agreement, which PG&E estimates at $425.5 million, will be returned to the utility’s customers.
The oversight provisions would re-orient the governance structure to create further safety accountability and better representation of customers; and require local operating regions to bring management closer to customers. The oversight tools and changes to the reorganization plan are designed to ensure that PG&E will emerge from bankruptcy as a fundamentally changed company that has a commitment and ability to provide safe and reliable service while improving measures to mitigate wildfire risk and achieve the state’s climate goals.