Judge to rule on bankruptcy plan, PG&E to be sentenced with $4M fine following deadly fire

A U.S. bankruptcy judge in San Francisco on Wednesday tentatively approved PG&E's $58 billion plan for exiting its Chapter 11 bankruptcy.

U.S. Bankruptcy Judge Dennis Montali said in a memorandum decision that he plans to issue a final decision confirming the financial reorganization plan on Friday, after holding a hearing on possible revisions to the wording of his tentative ruling.

PG&E filed for Chapter 11 bankruptcy protection, temporarily suspending its debts, in the face of billions of dollars of claims from victims of North Bay and Butte County wildfires in 2017 and 2018 that were caused by breaks in PG&E's electrical lines and equipment.

Approval of the plan by Friday will enable PG&E to begin obtaining financing and to meet a June 30 deadline for being eligible for a state wildfire insurance fund. Half of the fund of up to $21 billion will be paid by shareholders and the other half by customers of PG&E and the state's other two largest investor-owned utilities.

PG&E said in a statement, "We continue to work diligently to obtain final approval for our plan of reorganization by the bankruptcy court as soon as possible, so victims will be paid fairly and quickly.

"Throughout the Chapter 11 process, our focus has remained on getting wildfire victims paid, continuing to deliver safe and reliable energy to our customers, and implementing needed changes across our business to improve our operations for the long term," the company said.

A number of objections to the plan by various creditor groups were settled during the past few days in negotiations between lawyers for PG&E and the creditors as the June 30 deadline for participation in the wildfire fund approached. Montali overruled some remaining objections in Wednesday's decision, saying that confirming the plan is an "important step toward facilitating the process of paying those victims and creditors."

Rejecting the plan would mean leaving PG&E in bankruptcy without any immediate prospect of resolution, Montali wrote.

"Leaving tens of thousands of fire survivors, contract parties, lenders, general creditors, allegedly defrauded investors, equity owners and countless others with no other options on the horizon is not an acceptable alternative," the judge wrote.

The utility's financial reorganization plan allocates $25.5 billion to fund wildfire claims, $22 billion to pay pre-bankruptcy debts, and payments of some other costs. Much of the funding would come from new financing and new debt.

People who lost family members, houses and businesses in the fires and who have not been paid by insurance companies would be compensated from a trust of up to $13.5 billion, half in cash and half in company stock. Insurance companies would receive $11 billion for paid claims and government agencies would receive $1 billion.

Montali's tentative decision came on the same day as a sentencing hearing for PG&E in Butte County Superior Court for its guilty plea Tuesday to 84 counts of the involuntary manslaughter of people who were burned to death in the 2018 Camp Fire.

The company also pleaded guilty to one count of illegally starting the fire, which ignited when a worn suspension hook on a nearly 100-year-old transmission tower broke, allowing a high-voltage electric line to hit the metal tower and send sparks to dry grass below on Nov. 8, 2018.

Pushed by strong winds and fueled by drought-dried vegetation, the fire swept from the community of Pulga, on the west slope of the Feather River Canyon, southwest through Butte County, killing 84 people, burning 153,336 acres and destroying nearly all of the city of Paradise.

Under a plea agreement between PG&E and Butte County District Attorney Mike Ramsey, PG&E will be sentenced to a $4 million penalty, the maximum allowed by law. Ramsey said he expected Judge Michael Deems to sentence the utility Thursday morning, following a final victim impact statement at 9 a.m.

The victim impact statements by family members of people who died began on Wednesday.

The agreed-on penalty will be about $3.5 million in fines and court costs and $500,000 to compensate Ramsey's office for its investigation.

On Tuesday, following PG&E's guilty plea, Ramsey unsealed a 92-page investigative report detailing the evidence weighed by an investigative criminal grand jury.

The report prepared by Ramsey's office alleges PG&E engaged in "reckless and negligent decisions to unreasonably ignore risk" in the monitoring and maintenance of its equipment.

"The evidence developed during this investigation clearly established that the reckless actions of PG&E created the risk of a catastrophic fire in the Feather River Canyon, that PG&E knew of that risk and PG&E ignored the risk by not taking any action to mitigate the risk," the report alleges.

PG&E said on Tuesday, "We have accepted responsibility for the fire and are working hard to honor the terrible losses endured by the community by improving the safety of our operations and ensuring victims get paid fairly and quickly upon emergence from Chapter 11."

Cal Fire announced last year that it had determined the fire was caused by electrical transmission lines owned and operated by PG&E in the Pulga area, but gave no details and sent its undisclosed investigation report to Ramsey for his criminal probe.

The report released by Ramsey on Tuesday describes the evidence gathered by Cal Fire as well as by county investigators.

The broken hook and other pieces of transmission equipment were examined by metallurgists at an FBI laboratory in Virginia, the report said In another development on Wednesday, U.S. District Judge William Alsup of San Francisco ordered PG&E to respond to Ramsey's report by July 1.

Alsup ordered PG&E to state whether it denies any of the statements in the report, and if so, the reason for the denial.

He said the company will be deemed to have admitted to any statements it does not deny. Alsup is supervising PG&E's probation in a criminal pipeline safety case stemming from the fatal explosion of a natural gas transmission pipeline in San Bruno in 2010.