Dive Brief:

• U.S. Bankruptcy Judge Dennis Montali on Wednesday allowed Pacific Gas & Electric (PG&E) to move forward with a confidential settlement with a group of victims of the 2017 Tubbs Fire, litigation that was previously scheduled for a state court trial.
• The utility last week also reached an agreement with a group of its bondholders, who had proposed a competing reorganization plan for the company. If approved by the court, PG&E's bankruptcy is "on a smooth path towards confirmation within the timeline of [Assembly Bill] 1054 — June 30," PG&E attorney Stephen Karotkin said.​
• But California Gov. Gavin Newsom has not ruled out a state takeover of the utility, he indicated in comments made at an event at the Public Policy Institute of California on Wednesday, "because if PG&E can't do it, we'll do it for them."

Dive Insight:

If the bondholder agreement is approved by the bankruptcy court, PG&E has achieved "a comprehensive global consensus" with stakeholders in the proceeding, Karotkin said at the Wednesday hearing​. The company intends to file an amended reorganization plan incorporating the latest agreement by the end of the week.

PG&E has been having "what I believe are constructive discussions" with the governor's office, according to Karotkin, and believes it can resolve his concerns about their reorganization plan. Newsom has repeatedly said the plan doesn't comply with AB 1054, passed by California lawmakers last year. The law requires PG&E to meet several conditions to access the state's new wildfire insurance fund, including emerging from bankruptcy with a governance structure that the California Public Utilities Commission (CPUC) deems acceptable in light of its safety record.

If Newsom disagrees with the utility on whether its plan complies with AB 1054, the CPUC would have to make a decision, Karotkin said. 

The tort claimants committee, which represents victims of the wildfires, is "very happy" that the major constituents in PG&E's bankruptcy have reached agreement, lawyer Cecily Dumas told Montali.

"We see that as a path forward," she said.

Montali's approval of the Tubbs Fire settlements brings PG&E "another step closer to getting victims paid so they can rebuild their lives," utility spokesperson James Noonan said in an emailed statement. As for its broader reorganization plan, "we remain engaged in active and constructive dialogue with stakeholders. We will continue to move forward with proceedings on our plan in the Bankruptcy Court and at the California Public Utilities Commission."

The origin of the Tubbs Fire is a matter of debate — the California Department of Forestry and Fire Protection in early 2019 concluded that the fire was caused by a private electrical system, but lawyers for some of the fire victims "have other theories," PG&E said in its motion requesting approval of the settlement. As per the agreement, PG&E will pay the Tubbs Fire plaintiffs along with all the other fire victims from a trust, outlined in its bankruptcy plan.

The settlement amount has been kept confidential —​ a fact that raised objections from a group of victims of the 2018 Camp Fire, the most destructive in California's history. In a filing with the court last week, attorneys for the Camp Fire victims said they could not evaluate how the payouts would affect their own settlements.

"My clients have to vote on a plan of reorganization and they're presented with a situation in which they have no insight into this group of settlements," attorney Rafey Balabanian said at the hearing. 

But Judge Montali approved the proposal because it represented "a significant next step in the process of getting the survivors of these horrible fires taken care of."

PG&E's path to a confirmed reorganization plan could still be jeopardized by Newsom, who on Wednesday called the bankruptcy "an extraordinary opportunity for this state." AB 1054 laid out several expectations from PG&E, Newsom said, and his administration is driving the bankruptcy process toward meeting those goals.

"But if they don't, if they cannot —​ we have not just rhetorically discussed a break-the-glass scenario, a plan B, but we have laid out in detailed terms what that will look like and we're working with legislative leaders to advance it in real time," he said.

More broadly, Newsom envisions decentralized generation as the vision for California's energy landscape —​ a mix of rooftop solar, deep investments in storage and creating a smart grid. He acknowledged that PG&E —​ which operates in 48 counties, serves 16 million customers and runs 150,000 miles of lines — will have a tough time both hardening its current infrastructure and implementing this new vision.

But "if they can't do it, again, we have no choice but to do it for them" because of the economic and environmental costs, he said.

PG&E's is committed to emerging from bankruptcy by June 30 "in a manner that will allow us to help lead California toward the clean energy future our customers expect and deserve," Noonan said in a statement responding to Newsom's comments.

The company's plan "complies with Assembly Bill 1054, and over the last several months, PG&E has made substantial progress toward emerging from bankruptcy by resolving all wildfire victim claims and reaching agreements to retain our represented workforce and restructure our finances," he said.