PG&E Judge Demands Details on Potential Wildfire Payout Conflict

Time is running out for PG&E Corp. to end the biggest-ever U.S. utility bankruptcy, so the company must set reorganization deadlines and explain a potential conflict in its multi-billion dollar payout proposal, a federal judge said Wednesday.

U.S. Bankruptcy Judge Dennis Montali ordered the company to give him details about how a pair of proposed trust funds can compensate wildfire victims along with state and federal agencies while honoring the utility’s promises to creditors and complying with state law.

By pushing PG&E for more information, Montali is wading into a potential fight for cash between California residents who say PG&E caused the fires that killed their loved ones and burned their homes and federal and state agencies demanding compensation for their fire recovery efforts.

“It should not go unnoticed that January 29, 2020 will mark exactly one year since these chapter 11 cases were filed,” Montali wrote in his memorandum.

The demand for details comes as PG&E is reportedly close to ending a long-standing conflict with noteholders who hold more than $11 billion in the utility’s unsecured bonds. Should that settlement materialize, it would mark a major step forward in the bankruptcy case, leaving California Gov. Gavin Newsom as the only major player who hasn’t signed onto the company’s reorganization proposal.

A committee representing wildfire victims and a group of insurers has pledged to back PG&E’s bankruptcy-exit proposal in return for cash and stock. But federal and state agencies have filed billions of dollars worth of claims that may compete for $13.5 billion pledged to the fire victims.

PG&E did not immediately respond to a request for comment on the judge’s order. The company has previously said it opposes fire claims filed by the Federal Emergency Management Agency.

In his memorandum, which was filed in federal court in San Francisco, Montali also said he will not put off a status conference in which the company would help him set deadlines for the process of approving the proposed bankruptcy plan. That hearing must take place on either Jan. 21, or Jan. 29, Montali wrote.

“The court is unwilling to continue the confirmation status conference beyond January 29, 2020, even if the parties and their counsel need further time to deal with the possible resolution of various disputes,” Montali said.