This week has seen a whirlwind of developments in the Pacific Gas & Electric saga, highlighting the deadline-driven stakes for competing Wall Street financial concerns seeking control of the state’s biggest utility as it seeks to emerge from bankruptcy.
Meanwhile, the looming long-term challenge of creating a utility that can reverse a broken safety culture, renovate under-maintained infrastructure, and deploy cutting-edge technologies to combat grid-caused wildfires and keep customers safe during fire-prevention power outages, remains very much a work in progress.
These short-term and long-term problems were reflected in California Gov. Gavin Newsom’s Friday letter rejecting the utility’s bankruptcy reorganization plan, and demanding key safety and accountability changes before it will comply with AB 1054. That’s the law that created the $21 billion wildfire fund that PG&E will be able to access for long-term financial stability, if it can emerge from bankruptcy by June 2020, making Newsom’s demands an existential threat.
But analysts were quick to point out that Newsom’s letter included some potential deal-breakers for PG&E, from both short- and long-term perspectives. In response, PG&E simply undid its promise to get Newsom’s approval of its $13.5 billion settlement with wildfire victims – a self-imposed requirement meant to gather political support – before submitting it to U.S. Bankruptcy Judge Dennis Montali, the true master of PG&E’s fate.
In a Tuesday hearing, Montali approved the settlement, a critical success for PG&E since it matches the bondholders’ offer to fire victims. He also approved an $11 billion settlement with insurers, which along with a previously approved $1 billlion deal with cities and counties, checks off the key creditor groups PG&E must satisfy as it moves into the next stage of bankruptcy. But as the hearing made clear, the key parties to these settlements are still very much at odds over the issues raised by Newsom’s letter – and ready to change their minds if things change.