After an autumn marked by mass blackouts and wildfires, Pacific Gas & Electric is racing to craft a plan to escape bankruptcy, the New York Times reported. That plan needs to satisfy fire victims and state officials who are threatening to take over PG&E, California’s largest utility, unless executives improve its safety record. If PG&E doesn’t reach an agreement with victims and other creditors by early next year, the utility might not be able to participate in a new state wildfire fund. A federal bankruptcy judge could also strip control from its management and board, or allow it to be broken up, with the pieces sold to the highest bidder. These tensions surfaced in a court hearing yesterday, in which PG&E asked a bankruptcy judge to limit its liability for wildfires, and at a legislative hearing that featured the company’s chief executive on Monday in Sacramento. Another big problem for PG&E: California’s fire season isn’t over yet. A dangerous combination of high winds and dry conditions is expected as early as today, and PG&E has said that it could cut power to up to 150,000 customers. That works out to about 400,000 people — when accounting for shared addresses — in 16 counties across Northern California, including wine country and the Sierra foothills. Read more.
In related news, victims of wildfires linked to PG&E Corp.’s equipment said property insurers with billions of dollars on the line aren’t at the negotiating table, lowering the chances of a comprehensive deal to end the bankruptcy, the Wall Street Journal reported. “They took the cash. There’s no cash left,” fire victim lawyer Robert Julian said yesterday at a hearing in the U.S. Bankruptcy Court in San Francisco, referring to a proposed deal that provides $11 billion cash to insurers that paid off fire damage claims. Insurers have yet to collect the money, because the proposed settlement hasn’t been approved by the judge overseeing PG&E’s bankruptcy. After repeated delays, it is now slated for review in early December. PG&E filed for chapter 11 protection in January, trying to tackle an estimated $30 billion in damage claims from years of wildfires linked to its equipment. The utility filed a chapter 11 exit plan that disappointed victims and has been caught up in court fights over how much must be set aside for fire claims, with the insurance settlement a particular sore spot. While the legal wrangling continues, PG&E, the fire victims and other creditors are involved in a mediation that could ease a path out of bankruptcy. That mediation doesn’t include the insurers, and their requirement for a cash payment is limiting PG&E’s ability to negotiate, according to Julian. Matthew Feldman, a lawyer for the insurers, declined to discuss the mediation at yesterday’s hearing. The group he represents includes both insurers that paid claims directly and investment funds such as the Baupost Group LLC that bought insurance claims in the secondary market. Insurance creditors want Judge Montali to approve the $11 billion settlement Dec. 4 and allow a lawsuit filed by fire victims challenging the deal terms to take its course. Read more. (Subscription required.)
