Bankruptcy judge maintains PG&E exclusivity and allows Tubbs fire victims to sue

Aug 20,2019 By Robert Walton

Dive Brief:

  • U.S. Bankruptcy Judge Dennis Montali on Friday rejected motions to terminate Pacific Gas & Electric's (PG&E) period of exclusivity, meaning the utility's plan of reorganization will be considered ahead of creditors' competing proposals.
  • Separately, Montali ruled victims of the 2017 Tubbs fire will be allowed to sue PG&E, despite a determination by the California Department of Forestry and Fire Protection (Cal Fire) that the utility was not to blame for the deadly blaze.

  • PG&E filed for Chapter 11 in January, facing up to $30 billion in potential wildfire liabilities. The utility says it will file a reorganization plan by Sept. 9 that will be rate-neutral for its 16 million customers.

Dive Insight:

The 2017 Tubbs fire was one of the largest and most destructive wildfires in the state, and Cal Fire's January determination that PG&E was not at fault was welcome relief for the embattled utility. But Montali said in a memorandum Friday that moving ahead with a trial to determine any liability is the best way to help the company through bankruptcy.

"Commencement of a trial on the Tubbs fire moves toward liquidating these tort claims and helps with the imperfect method of estimating claims as must be done here in the bankruptcy court," the judge wrote. "In sum, although a handful of plaintiffs proceeding to trial does not resolve many claims in this case, it advances the goals of this bankruptcy far better than stayed, stagnant proceedings."

Montali also noted that pressure to adjudicate the claims "in a prompt fashion comes from bankruptcy considerations, moral duties and even legislative deadlines."

PG&E must have a confirmed reorganization plan by June 30 in order to meet state legislative deadlines required to access a new wildfire fund that will assist utilities with fire-related liabilities. While Montali's decision is a victory for fire victims, it could also slow the utility's reorganization.

"Regardless of the next legal steps, Cal Fire has already determined that the cause of the 2017 Tubbs Fire was not related to PG&E equipment," the utility said in a statement. "We intend to cooperate with the state court in order to help achieve the June 30, 2020 deadline to participate in the new state Wildfire Fund."

Montali's decision to deny creditors' bid to end the utility's exclusivity period, when only it can propose a reorganization plan, is a win for the utility though.

"Competing plans are tempting, and no doubt produce a feast for lawyers, accountants, investment bankers and others, not to mention the intellectual challenges to the court," Montali wrote. "But the inescapable fact is that the fire victims and their insurers should not need to wait for conclusion of expensive, lengthy and uncertain disputes that only indirectly concern them."

The California Public Utilities Commission last week began consideringwhether to require utilities to charge customers to pay into the wildfire fund. Customer contributions to the fund will come via a $2.50 monthly charge on bills that has been in place since the state's energy crisis, and was scheduled to expire at the end of 2021.

Under the current legislation, customers and utility shareholders would contribute equally to the $21 billion fund. Opening comments are due at the commission by Aug. 29, with replies due Sept.6.


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