Pacific Gas and Electric will be able to avoid two major legal obstacles — ones that could have tripped up its efforts to bounce back from bankruptcy — if its $13.5 billion settlement offer to victims of catastrophic fires is approved by California's governor and a federal judge.
PG&E provided more details about the deal in a Monday regulatory filing, revealing that the settlement will allow the utility to skip a January civil trial intended to determine whether it was liable for the 2017 Tubbs fire in Northern California's wine country that killed 22 people.
The deal would also scrap plans for a federal court hearing that was supposed to estimate the company's total bill for all the fires between 2015 and 2018 linked to its power systems.
Facing potential damages of up to $30 billion, PG&E filed for bankruptcy last January.
If a judge had deemed the liabilities much higher in a trial, the company could have been rendered insolvent, which would have blown up its plan to reorganize its finances and resume normal business operations after emerging from bankruptcy protection next summer.
"This is exciting news for PG&E. They didn't want to have anything to do with going before a jury," said Jared Ellias, a professor at UC Hastings College of the Law who has been closely following the bankruptcy case.
Investors also seemed relieved: PG&E's stock climbed nearly 16% Monday to close at $11.18.
For now, both the state and federal court hearings are on hold and expected to be shelved entirely, as long as the settlement with fire victims gets the required approvals within the next two weeks.
Gov. Gavin Newsom has until this Friday to sign off on the settlement, which meets his demand that PG&E increase the $7.5 billion it had previously earmarked for fire victims.
U.S. Bankruptcy Court Judge Dennis Montali has until Dec. 20 to approve it.
The governor's office said Newsom is reviewing the settlement to ensure it meets his goal of treating both the fire victims and PG&E employees fairly while also putting the utility on more stable financial footing to make extensive upgrades to its grid.
Both the company and the lawyer representing the bankruptcy committee for fire victims declined to comment on Monday.
The deal with the fire victims will make it easier for PG&E to meet a June 30 deadline set by the state to get out of bankruptcy in order to be partially protected from future fire losses by a special fund.
But it still isn't all smooth sailing for the state's largest utility. The San Francisco company still must defeat a competing plan for its reorganization submitted by a group of its bond holders. The proposal lost its previous support from fire victims as part of the $13.5 billion settlement.
