California’s largest utility company, Pacific Gas and Electric (PG&E) Corp has won court approval for two wildfire settlements as the firm continues to try to win the state governor’s backing for its restructuring proposal.
A United States bankruptcy judge approved on Tuesday PG&E Corp’s $13.5bn settlement with victims of Californian wildfires, and the company’s stock rallied as the utility gained momentum to emerge from bankruptcy in June as planned.
“I don’t think we’ve heard a single person say it’s a bad settlement,” US Bankruptcy Judge Dennis Montali said during a six-hour hearing in San Francisco.
The settlement provides cash and PG&E stock to a trust for the benefit of individual wildfire victims.
Montali also approved an $11bn agreement with insurance companies, locking up the last and two most significant creditor groups.
Adding momentum to PG&E’s plan, lawyer Nancy Mitchell, who was representing California Governor Gavin Newsom told Montali the governor viewed the wildfire settlement as fair. “We don’t want to stand in the way of that,” Mitchell said.
The governor had on Friday rejected the PG&E reorganisation plan and said the company would need a new board of directors and stronger finances to comply with a recently enacted wildfire law, known as AB 1054.
The settlements are key to PG&E’s efforts to emerge from bankruptcy by June 30 next year after having been forced into bankruptcy in January when its equipment was found to have ignited deadly wildfires through 2017 and 2018, saddling it with an estimated $30bn in liabilities.
PG&E’s shares jumped about 13 percent in after-hours trading to $10.91, regaining most the ground lost after Newsom’s rejection of the company’s bankruptcy plan.
In a separate development, the California Public Utilities Commission (CPUC) and PG&E proposed a $1.68bn settlement for the company’s role in the 2017 and 2018 wildfires.
PG&E Corp said that it had it submitted a multi-party settlement agreement related to the wildfires in Northern California to the CPUC.
The settlement agreement prohibits the bankrupt company from seeking $1.625bn in wildfire-related costs from customers in the form of higher rates, according to a statement from PG&E.
It also proposes that the energy utility pay $50m for shareholder-funded system enhancements, specifically on the company’s electric transmission and distribution system.
The system enhancements include hiring an independent wildfire safety auditor, quarterly public reporting on electric maintenance work and developing a vegetation management oversight pilot, among other measures, the company said.
The deal still needs to be approved by utility commissioners. PG&E said that it has requested that the CPUC approve the settlement on an expedited basis by the end of February 2020.
“We remain deeply sorry about the role our equipment had in tragic wildfires in recent years, and we apologise to all those affected. None of us wants to see another catastrophic wildfire in the communities we call home. This settlement agreement underscores our commitment to learning from the past and doing what’s right for safety in the future,” said of PG&E Chief Executive Officer and President, Bill Johnson.
“We recognise our fundamental obligation to operate our system safely. We share the same objectives as the Commission and other state leaders – namely in reducing the risk of wildfire in our communities, even in a rapidly changing environment. While we have taken unprecedented actions to do so, we recognise that more must be done,” he said.
This proposed multi-party settlement agreement is separate from PG&E’s other significant financial commitments announced by the company pertaining to the 2017 and 2018 wildfires, the company said.