PG&E’s $58B Bankruptcy Plan Moves Closer to Approval
We’ve reported here and here on the January 2019 bankruptcy filing by Pacific Gas and Electric (“PG&E”), which was primarily the result of potential liability stemming from catastrophic California wildfires. Since then, PG&E has proposed an approximately $58 billion-dollar reorganization plan that includes settlements exceeding $25 billion to resolve claims by wildfire victims and regulatory agencies.
The plan anticipates relying in part on “critical protections” and support from Assembly Bill 1054 (“AB 1054”), which established a fund to help compensate covered wildfire victims. However, in order to participate in the state wildfire fund, PG&E must resolve its insolvency proceedings by June 30, 2020, obtain approval of the reorganization plan from the bankruptcy court – in particular that “the plan of reorganization fairly satisfies pre-petition wildfire claims”, and obtain approval from the California Public Utilities Commission by demonstrating that PG&E meets certain criteria.
Since our last update, PG&E has continued to make progress towards eligibility for AB 1054 and an eventual exit from bankruptcy. On May 22, 2020, the wildfire victims to whom PG&E would owe $13.5 billion under the plan voted to approve the proposed plan. More than 88% of wildfire victims were in favor of the proposed plan, which calls for $6.75 billion of the $13.5 billion to paid in cash and approximately $6.75 billion in stock.
After receiving approval from the wildfire victims, PG&E’s plan was also unanimously approved by the California Public Utilities Commission after PG&E. To move forward with the plan and participate in the state wildfire fund created by AB 1054, PG&E now requires approval from the Bankruptcy Judge. The Bankruptcy Court confirmation hearings started on May 27, 2020, and closing arguments will likely run through June 5, 2020. PG&E, through counsel, noted that the plan has received support from major stakeholders, that it is financially prepared for contingencies, and that a denial of the plan would mean that PG&E misses the important June 30, 2020 deadline to participate in AB 1054’s wildfire victim fund, which would result in further delays in payments to wildfire victims.
 Mark Chediak, PG&E Wins California Approval of Bankruptcy Plan, Bloomberg Business, May 28, 2020, updated May 29, 2020 (accessed June 3, 2020). News
 Gavin Newsome, Re: Draft Amended Plan of Reorganization for PG&E Corporation (“Corp”) and Pacific Gas and Electric Company (the “Utility” and, collectively with Corp, “PG&E”) dated as of December 6, 2019 (the “Amended Plan”), Office of the Governor, December 13, 2019.
 Nicholas Iovino, Fire Victims Vote in Favor of PG&E Bankruptcy Plan, Courthouse News Service, May 22, 2020 (accessed June 3, 2020).
 Nicholas Iovino, Fire Victims Vote in Favor of PG&E Bankruptcy Plan, Courthouse News Service, May 22, 2020 (accessed June 3,
 Nicholas Iovino, PG&E Predicts Doom If Bankruptcy Plan is Rejected, Courthouse News Service, June 3, 2020 (accessed June 4, 2020). Some wildfire victims expressed reservations about being paid in stock, given the potential volatility of the value of PG&E stock, but this issue is not expected to be a bar to confirmation.
 Business Wire, CPUC Approves PG&E’s Chapter 11 Plan of Reorganization, May 28, 2020 (accessed June 4, 2020).
 Nicholas Iovino, PG&E Predicts Doom If Bankruptcy Plan is Rejected, Courthouse News Service, June 3, 2020 (accessed June 4, 2020).
 Mark Chediak, PG&E Lawyer Asks for Bankruptcy Confirmation in Closing Argument, Bloomberg News, June 3, 2020 (accessed June 4, 2020).