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paid $5.4 billion in initial funds and more than 22% of its stock into a trust for victims of wildfires caused by its outdated equipment.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.
The lackluster performance of those shares has reduced the value of the trust considerably; its estimated worth is now closer to $11 billion.
"What has happened really is that PG&E and the major shareholders have sold fire victims a bill of goods," said attorney Tom Tosdal, who represents Camp Fire victim Kirk Trostle. In March, Trostle was one of three people who stepped down in protest from the official committee representing fire victims so he could speak out against the deal.
"What's really being delivered in terms of stock value will be more than $2 billion less than what was promised," Tosdal said.
Longtime supporters of the deal remain optimistic.
That value, however, could change if PG&E shares make gains. The company's participation in the state wildfire insurance fund may help the stock weather what is expected to be a particularly risky fire season.
PG&E officials have also noted that the stock portion of the settlement agreement is expected to eventually be sold, which could maximize the value of trust assets used to satisfy wildfire claims.
"The ultimate value of the stock component of the settlement therefore is not known at this time and could exceed $6.75 billion over time," PG&E spokesperson Lynsey Paulo said in an email.
"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.
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