The giant investor-owned utility’s proposal revealed last month to provide at least $235 million in bonuses to its employees drew incredulity both from attorneys for wildfire victims suing PG&E and from those closely monitoring its Chapter 11 bankruptcy. A decision on the request could come Tuesday from U.S. Bankruptcy Judge Dennis Montali.

Gov. Gavin Newsom also again made clear that he would not be nearly as accommodating as predecessor Jerry Brown, who said little about the utility even as its scandals mounted in recent years. Newsom took strong exception to a proposal by PG&E to fill some vacancies on its board of directors with hedge-fund executives, which goes against his demand that the board focus on safety, not protecting PG&E’s bottom line. PG&E proceeded with the plan last week despite the governor’s criticisms.

Bankruptcy judge: Will probation be revoked?

But this criticism didn’t keep the utility from scoring a court victory that’s crucial to its plan of using Chapter 11 proceedings to reorganize its assets, adequately compensate creditors, then emerge at some future date with relative fiscal and management stability. That’s what happened in 2004 after PG&E went through three years of Chapter 11 proceedings triggered by its inability to pay $9 billion in debt stemming from the winter 2000-01 state energy crisis, in which utilities were forced to pay far more on the spot energy market than they were allowed to charge customers because of a flawed 1996 energy deregulation law.

Montali recently decided to allow PG&E to access all the $5.5 billion in financing it had lined up from major banks to give it liquidity as it pursued bankruptcy. The decision normalized the Chapter 11 process – crucial to PG&E’s stock price and to its hope for a return to status-quo operations.

As recently as a month ago, this seemed far from a sure thing.

At a March 13 hearing on PG&E’s request to gain full use of the financing it had lined up in January, the bankruptcy judge noted that the utility also faced the possibility of severe sanction from another judge in San Francisco’s federal courthouse. U.S. District Judge William Alsup is serving as PG&E’s de facto probation officer, overseeing the utility’s actions after its 2016 conviction on six federal felonies for its lax oversight and stonewalling of investigators after a 2010 gas pipeline explosion (pictured) in San Bruno killed eight people. PG&E has admitted to new problems with gas-line safety inspections – including records being falsified – since the 2010 disaster.

Montali raised the prospect that Alsup would appoint a trustee to run the utility. The observation raised the hopes of lawyers for wildfire victims, who believe that the circumstances of PG&E’s recent behavior require that it not get the usual Chapter 11 treatment. One key argument: Would JP Morgan Chase, Bank of America, Barclays and Citigroup ever have agreed to the loans had the banks known PG&E would lose effective control of its management?

Banks agree to go slow if trustee takes over utility

But after meeting with lawyers for those suing PG&E for a long variety of claims, the bankruptcy judge concluded that for now, PG&E’s Chapter 11 proceedings could unfold on the conventional track.

According to the Chronicle, a key to Montali’s decision was the reassurance offered by lenders that the appointment of a trustee by a federal judge would not trigger the banks to declare a default within seven days, as they could have done under the previous agreement. Instead, they will wait at least 21 days. This would give more breathing room for the loans to be renegotiated on terms more favorable to the banks.

PG&E stock closed at $19.37 a share on Friday. That’s down nearly 60 percent from November.

A California Public Utilities Commission report that Pacific Gas & Electric failed to fulfill its responsibilities to properly maintain

On Dec. 21, the CPUC released a dramatic statement saying it would consider drastic steps to address the “serious safety problems” it says the utility has long condoned. The commission said a break-up of the agency into smaller regional utilities or a state takeover would be among the possible changes it examined.

“This process will be like repairing a jetliner while it’s in flight. Crashing a plane to make it safer isn’t good for the passengers,” said CPUC President Michael Picker. “This is not a punitive exercise. The keystone question is would, compared to PG&E and PG&E Corp. as presently constituted, any of the proposals provide Northern Californians with safer natural gas and electric service at just and reasonable rates.”

CPUC looking at seven possible major changes

The CPUC statement said seven possible changes would be considered.

– Having “some or all of PG&E be reconstituted as a publicly owned utility or utilities.”

– Replacing some members of PG&E’s Board of Directors with members “with a stronger background and focus on safety.” 

– The replacement of existing corporate management.

– Adoption of a new corporate management structure with regional leaders overseeing regional subsidiaries.

– Linking PG&E’s “return on equity” – the profits it shares with its investor-owners – to its safety performance.

– Breaking the utility’s natural gas operations and its electric transmission operations into separate companies.

– Ending the arrangement in which PG&E is controlled by a holding company so it becomes “exclusively a regulated utility.”

Picker’s statement was a remarkable turnaround from his comments on Nov. 15, when his upbeat remarks about the ability of PG&E to survive its fourth consecutive year of devastating wildfires in Northern California led the utility’s stock price to spike.

It reflected the anger among CPUC officials over a staff report released Dec. 14 that found the utility had systematically neglected natural gas infrastructure despite being fined $1.6 billion and convicted of six felonies in federal court over the 2010 disaster in San Bruno, a suburb of San Francisco.

Utility facing 500 lawsuits relating to fires it may have caused

Even if PG&E survives in something like its present form after the CPUC’s review, its future is still very cloudy.

Because of claims that PG&E was responsible for the devastating Camp Fire that killed 85 people in Butte County in November, U.S. District Judge William Alsup announced he was reviewing whether PG&E had violated terms of its federal probation in the San Bruno case.

PG&E also disclosed to the U.S. Securities and Exchange Commission that it is facing roughly 500 lawsuits with more than 3,100 plaintiffs over claims the utility was responsible for many of the dozens of wildfires in Northern California since 2016.

It is also facing wildfire-related lawsuits from the state Office of Emergency Services, Cal Fire, Calaveras County and other government agencies.

But while the CPUC is apparently ready for major changes at the utility, it’s not clear yet how state lawmakers feel.

On Nov. 19 – even as criticism of PG&E swelled as confirmed deaths grew in the Camp Fire – Assemblyman Chris Holden, D-Pasadena, was reported to be considering introducing legislation to help the utility deal with wildfire costs.

Holden helped pass a law earlier this year that allowed PG&E to spread out the costs from the liabilities it faced from 17 wildfires in 2017.