PG&E loses sole right to plan reorganization

Pacific Gas and Electric Co. must now wrestle with competing plans from rival groups to emerge from bankruptcy, according to a court order filed Wednesday.

As PG&E cut power to millions of customers as a part of its court-mandated wildfire safety protocol, U.S. Bankruptcy Judge Dennis Montali cleared the way to allow two unlikely allies to propose a blueprint for the utility to emerge from Chapter 11 reorganization.

Montali’s decision to terminate PG&E’s formerly exclusive right will pit the utility against groups representing wildfire victims and bondholders, led by Elliott Management Corp.

The two plans will compete with each other over which can secure the most favorable financing to pay off billions of dollars in wildfire liability and other money owed.

The bondholders’ plan primarily uses PG&E equity to pay off debts while the company supports raising debt and equity financing.

Cecily Dumas, representing the wildfire victims in the bankruptcy proceedings, argued PG&E’s proposal protects shareholders.

The utility has maintained the opposing plan is designed to “unjustly enrich Elliott and the other ad hoc bondholders and seize control of PG&E at a substantial discount,” PG&E spokesman James Noonan said in a company statement Wednesday.

The bondholders’ plan resolves all wildfire claims, including those by insurance companies, for $24 billion, according to court filings. PG&E, which reached an $11 billion settlement with insurers last month, valued wildfire victims’ claims at $8.4 billion, according to its proposal submitted Sept. 9.

Montali and the California Public Utilities Commission must confirm a plan by June 2020 for PG&E to participate in AB 1054’s multibillion-dollar wildfire mitigation fund.

PG&E was previously allowed to retain its sole right to come up with a proposal after arguments from bondholders at an Aug. 13 hearing that competing proposals would result in a more “competitive process.”

Montali reversed course in his Wednesday order, finding that “A dual-track plan course going forward may facilitate negotiations for a global resolution and narrow the issues which are in legitimate dispute.”

A joint proposal from the two groups will be submitted by Oct. 17.