PG&E Exits Bankruptcy, Pays $5 Billion Into Wildfire Fund

Pacific Gas & Electric officially emerged from a contentious bankruptcy saga that began after its long-neglected electrical grid ignited wildfires in California, killing more than 100 people.

The nation's largest utility on Wednesday announced its exit from Chapter 11 bankruptcy, and paid $5.4 billion in initial funds and more than 22% of its stock into a trust for victims of wildfires caused by its outdated equipment.

“This is an important milestone, but our work is far from over,” Bill Smith, PG&E's interim CEO, said in a statement. “Our emergence from Chapter 11 marks just the beginning of PG&E’s next era — as a fundamentally improved company and the safe, reliable utility that our customers, communities and California deserve.”

A federal judge last month approved a $58 billion plan for the company to emerge from bankruptcy by June 30, the deadline it was required to meet to qualify for coverage from a $21 billion wildfire insurance fund created by California last year.

U.S. Bankruptcy Judge Dennis Montali's decision cleared the way for PG&E to pay $25.5 billion for losses from devastating fires in 2017 and 2018.

Dozens of lawsuits were settled during the ordeal, with $13.5 billion earmarked for more than 80,000 people who lost family, homes, businesses and other property in the fires.

In a rare outcome, half of the settlement funds have been paid into the fire victims' trust in the form of PG&E stock.

"Everybody expects this stock to go up, and it has been going up," said attorney Gerald Singleton, who represents 7,000 fire victims. "We're hoping that when it's time to sell, it's going to be $14 or $15 billion and that our clients will get more. There's no way to tell and that was the risk that we took."

In the run-up to its exit from bankruptcy, PG&E began making sweeping organizational changes. The company is searching for a new CEO to replace Bill Johnson, who stepped down June 30 after just 14 tumultuous months on the job. In June, the company also overhauled its board of directors, including 11 members who were just recently appointed, and announced plans to sell its downtown San Francisco headquarters and relocate to Oakland to lower costs.

Additionally, it committed to slicing up its sprawling territory into regional units to be more responsive to the different needs of the 16 million people who rely on it for power.

Financing the plan requires PG&E to nearly double its debt, saddling the company with a burden its critics fear will make it more difficult to raise the estimated $40 billion for improvements it still needs to make to its electrical grid.

This marks the second time in 16 years the utility has navigated a complex bankruptcy case. The last time it emerged from bankruptcy, in 2004, electricity rates soared and management focused even more on boosting profits instead of upgrading its power supply.

This report includes reporting from KQED's Lily Jamali and The Associated Press.