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BANKRUPTCY FILING
 9 Months Ended
Sep. 30, 2019
Reorganizations [Abstract]  
BANKRUPTCY FILING BANKRUPTCY FILING
Chapter 11 Proceedings

On January 29, 2019, PG&E Corporation and the Utility commenced the Chapter 11 Cases with the Bankruptcy Court. PG&E Corporation and the Utility continue to operate their business as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

Under the Bankruptcy Code, third-party actions to collect pre-petition indebtedness owed by PG&E Corporation or the Utility, as well as most litigation pending against PG&E Corporation and the Utility (including the third-party matters described in Note 10 below) as of the Petition Date, are subject to an automatic stay. Absent an order of the Bankruptcy Court providing otherwise, substantially all pre-petition liabilities will be resolved under a Chapter 11 plan of reorganization to be voted upon by impaired creditors and interest holders, and approved by the Bankruptcy Court. However, under the Bankruptcy Code, regulatory or criminal proceedings generally are not subject to an automatic stay, and these proceedings have been continuing during the pendency of the Chapter 11 Cases.

Under the priority scheme established by the Bankruptcy Code, certain post-petition and secured or “priority” pre-petition liabilities need to be satisfied before general unsecured creditors and holders of PG&E Corporation's and the Utility’s equity are entitled to receive any distribution. No assurance can be given as to what values, if any, will be ascribed in the Chapter 11 Cases to the claims and interests of each of these constituencies. Additionally, no assurance can be given as to whether, when or in what form unsecured creditors and holders of PG&E Corporation’s or the Utility’s equity may receive a distribution on such claims or interests.

Under the Bankruptcy Code, PG&E Corporation and the Utility may assume, assume and assign, or reject certain executory contracts and unexpired leases, including, without limitation, leases of real property and equipment, subject to the approval of the Bankruptcy Court and to certain other conditions. Any description of an executory contract or unexpired lease in this quarterly report on Form 10-Q, or in the 2018 Form 10-K, including, where applicable, the express termination rights thereunder or a quantification of their obligations, must be read in conjunction with, and is qualified by, any overriding rejection rights PG&E Corporation and the Utility have under the Bankruptcy Code.

Significant Bankruptcy Court Actions

First Day Motions

On January 31, 2019, the Bankruptcy Court approved, on an interim basis, certain motions (the “First Day Motions”) authorizing, but not directing, PG&E Corporation and the Utility to, among other things, (a) secure $5.5 billion of debtor-in-possession financing; (b) continue to use PG&E Corporation’s and the Utility’s cash management system; and (c) pay certain pre-petition claims relating to (i) certain safety, reliability, outage, and nuclear facility suppliers; (ii) shippers, warehousemen, and other lien claimants; (iii) taxes; (iv) employee wages, salaries, and other compensation and benefits; and (v) customer programs, including public purpose programs. The First Day Motions were subsequently approved by the Bankruptcy Court on a final basis at hearings on February 27, 2019, March 12, 2019, March 13, 2019, and March 27, 2019.

Exclusivity Period

On May 23, 2019, the Bankruptcy Court entered an order (the “Exclusivity Order”) pursuant to section 1121(d) of the Bankruptcy Code, extending PG&E Corporation’s and the Utility’s exclusive periods in which to file a Chapter 11 plan of reorganization (the “Exclusive Filing Period”) and solicit acceptances thereof (the “Exclusive Solicitation Period” and, together with the Exclusive Filing Period, the “Exclusive Periods”). Pursuant to the Exclusivity Order, PG&E Corporation’s and the Utility’s Exclusive Filing Period was extended to, and including, September 26, 2019, and PG&E Corporation’s and the Utility’s Exclusive Solicitation Period was extended to, and including, November 26, 2019.

On June 25, 2019, the Ad Hoc Committee of Senior Unsecured Noteholders of the Utility (the “Ad Hoc Noteholder Committee”) submitted a motion, pursuant to section 1121(d)(1) of the Bankruptcy Code, for the entry of an order terminating the Exclusive Periods. The Ad Hoc Noteholder Committee annexed to its motion a “Term Sheet for Plan of Reorganization,” which was thereafter amended on July 17, 2019. On July 18, 2019, PG&E Corporation and the Utility filed an objection to the Ad Hoc Noteholder Committee’s motion with the Bankruptcy Court, requesting that the motion be denied.
On July 23, 2019, the Ad Hoc Group of Subrogation Claim Holders (the “Ad Hoc Subrogation Group”) submitted its own motion, pursuant to section 1121(d)(1) of the Bankruptcy Code, to terminate the Exclusive Periods, which included as an exhibit a “Restructuring Term Sheet.” On August 6, 2019, PG&E Corporation and the Utility filed an objection to the Ad Hoc Subrogation Group’s motion with the Bankruptcy Court, requesting that the motion be denied.

On August 16, 2019, the Bankruptcy Court issued a decision in which it denied the Ad Hoc Noteholder Committee’s and the Ad Hoc Subrogation Group’s motions to terminate exclusivity. As discussed in Note 10, on the same date, the Bankruptcy Court granted the motions to lift the automatic stay as applied to certain claims arising out of the 2017 Tubbs fire to allow a state court jury trial on those claims (the “Lift Stay Decision”).

On September 19, 2019, the TCC and the Ad Hoc Noteholder Committee filed a joint motion to terminate PG&E Corporation’s and the Utility’s Exclusive Periods, which included as an exhibit a “Term Sheet for Plan of Reorganization.” On September 25, 2019, PG&E Corporation and the Utility filed a motion seeking a further extension of their Exclusive Periods pursuant to section 1121(d) of the Bankruptcy Code. Also on September 25, 2019, the TCC and Ad Hoc Noteholder Committee filed an amended plan term sheet, which amended the term sheet previously annexed to their joint motion. The term sheet was further amended on October 4, 2019. PG&E Corporation and the Utility filed an objection to the motion of the TCC and the Ad Hoc Noteholder Committee on October 4, 2019, requesting that the joint motion be denied. The hearing on the joint motion to terminate exclusivity filed by the TCC and the Ad Hoc Noteholder Committee was held on October 7, 2019. Following the hearing, on October 9, 2019, the Bankruptcy Court entered an order granting the motion of the TCC and the Ad Hoc Noteholder Committee to terminate the Exclusive Periods as to the TCC and the Ad Hoc Noteholder Committee (the “Exclusivity Termination Decision”). On that same date, the Bankruptcy Court entered an order denying the motion filed by PG&E Corporation and the Utility seeking a further extension of their Exclusive Periods. On October 17, 2019, the TCC and the Ad Hoc Noteholder Committee filed their competing Chapter 11 plan of reorganization (the “TCC/Ad Hoc Noteholder Plan”). See “TCC/Ad Hoc Noteholder Plan of Reorganization” below.

Upcoming Legal Briefings

A status conference on the TCC/Ad Hoc Noteholder Plan and the Proposed Plan (as described below) was held on October 23, 2019, at which the Bankruptcy Court established a tentative briefing schedule on certain legal issues and postponed consideration of PG&E Corporation’s and the Utility’s motion to approve the RSA (as described below) to November 13, 2019. On October 31, 2019, the Bankruptcy Court entered an order setting the final briefing and hearing schedule on certain legal issues in the Chapter 11 Cases. The hearings on the various legal issues are scheduled as follows:

•on the application of the doctrine of inverse condemnation: November 19, 2019;

•on the issue of post-petition interest rate applicable on unsecured claims: December 11, 2019;

•on whether the claims asserted by the U.S. Government, certain California state agencies and certain other entities are unliquidated and subject to estimation under section 502(c) of the Bankruptcy Code: December 17, 2019;

•on whether holders of the Utility’s funded debt claims are entitled to any make-whole or optional redemption or similar amounts: January 14, 2020; and

•on whether the Subrogation Claims that are settled and allowed as provided in the Subrogation Claims Settlement (described below) are impaired: January 14, 2020.
Bar Date

On July 1, 2019, the Bankruptcy Court entered an order approving a deadline of October 21, 2019, at 5:00 p.m. (Pacific Time) (the “Bar Date”) for filing claims against PG&E Corporation and the Utility relating to the period prior to the Petition Date. The Bar Date is subject to certain exceptions, including for claims arising under section 503(b)(9) of the Bankruptcy Code, the Bar Date for which occurred on April 22, 2019. The Bankruptcy Court also approved PG&E Corporation’s and the Utility’s plan to provide notice of the Bar Date to parties in interest, including potential wildfire-related claimants and other potential creditors. On October 18, 2019, the TCC filed with the Bankruptcy Court a motion for entry of an order extending the Bar Date for individual wildfire-related claims. On October 28, 2019, PG&E Corporation and the Utility announced that they had offered to extend the Bar Date for individual wildfire-related claims from October 21, 2019 to December 20, 2019. On the same day, during a meet and confer between PG&E Corporation and the Utility and the TCC, and at the request of the TCC, PG&E Corporation and the Utility agreed to further extend the Bar Date for individual wildfire-related claims to December 31, 2019. On November 4, 2019, PG&E Corporation and the Utility and the TCC announced that they have reached agreement to an extension of the Bar Date for individual wildfire-related claims to December 31, 2019, which agreement also involves procedures for additional notice to potential individual wildfire claimants. PG&E Corporation and the Utility and the TCC will file a stipulation with the Bankruptcy Court detailing the terms of the agreement and seeking approval of their agreement.

Other Significant Actions Related to the Chapter 11 Cases

Other significant actions and developments related to the Chapter 11 Cases, including the Tubbs Lift Stay Decision, the Tubbs Trial and the Estimation Proceeding are described in Note 10 (including under the headings “Proceeding in San Francisco County Superior Court for Certain Tubbs Fire-Related Claims” and “Wildfire Claims Estimation Proceeding in the U.S. District Court for the Northern District of California”).

On October 28, 2019, the Bankruptcy Court issued an order directing the principal parties in the Chapter 11 Cases to participate in mediation. The mediator is retired Bankruptcy Court Judge Randall Newsome.

Plan of Reorganization, RSA, Equity Backstop Commitments and Debt Commitment Letters

On September 9, 2019, PG&E Corporation and the Utility filed with the Bankruptcy Court their Joint Chapter 11 Plan of Reorganization (as may be amended, modified or supplemented from time to time, the “Proposed Plan”) for the resolution of the outstanding pre-petition claims against and interests in PG&E Corporation and the Utility.

On September 22, 2019, PG&E Corporation and the Utility entered into a Restructuring Support Agreement with certain holders of insurance subrogation claims (collectively, the “Consenting Subrogation Creditors”). On November 1, 2019, PG&E Corporation and the Utility and the Consenting Subrogation Creditors entered into an amended and restated Restructuring Support Agreement. The RSA provides for an aggregate amount of $11.0 billion (the “Allowed Subrogation Claim Amount”) to be paid by PG&E Corporation and the Utility pursuant to the Proposed Plan in order to settle all insurance subrogation claims (the “Subrogation Claims”) relating to the 2017 Northern California wildfires and the 2018 Camp fire (the “Subrogation Claims Settlement”), upon the terms and conditions set forth in the RSA. Under the RSA, PG&E Corporation and the Utility also have agreed to reimburse the holders of Subrogation Claims for professional fees of up to $55 million, upon the terms and conditions set forth in the RSA. See “Restructuring Support Agreement with Holders of Subrogation Claims” in Note 10 for further information on the RSA.

On September 23, 2019, in accordance with the RSA, PG&E Corporation and the Utility filed their First Amended Joint Chapter 11 Plan of Reorganization to incorporate the terms of the Subrogation Claims Settlement. On November 4, 2019, in accordance with the RSA, as amended, PG&E Corporation and the Utility filed their Joint Chapter 11 Plan of Reorganization dated November 4, 2019. The Proposed Plan, as amended, proposes the following:

•compensation of wildfire victims and certain public entities from a trust funded for their benefit in an amount to be determined in an estimation proceeding not to exceed $8.4 billion;

•compensation of insurance subrogation claimants from a trust funded for their benefit in the amount of $11.0 billion in accordance with the terms of the Subrogation Claims Settlement and RSA;

•payment of $1.0 billion in full settlement of the claims of the settling public entities relating to the wildfires (as further described under the heading “Plan Support Agreements with Public Entities” in Note 10);
•payment in full, with interest at the federal judgment rate, of all pre-petition funded debt obligations, all pre-petition trade claims and all pre-petition employee-related unsecured claims;

•assumption of all power purchase agreements and community choice aggregation servicing agreements;

•assumption of all pension obligations, other employee obligations, and collective bargaining agreements with labor;

•future participation in the state wildfire fund established by AB 1054; and

•satisfaction of the requirements of AB 1054.

The Proposed Plan, as amended, proposes the following key financing sources:

•one or more equity offerings of up to $14 billion, in accordance with the Backstop Commitment Letters (as described below); and

•permanent financing in the form of bank facilities, debt securities or a combination of the foregoing in the amount of $27.35 billion at the Utility and $7.0 billion at PG&E Corporation, which would be in lieu of the Facilities (as described below).

Additional sources of financing are expected to include insurance proceeds in connection with the 2015 Butte fire, 2017 Northern California wildfires and the 2018 Camp fire.

The Proposed Plan, as amended, has not been approved and may be further amended, modified, or supplemented as necessary or desired by PG&E Corporation and the Utility or as required by the Bankruptcy Court or the CPUC.

On September 24, 2019, PG&E Corporation and the Utility filed a motion with the Bankruptcy Court seeking authority to enter into, and perform under, the RSA and approval of the Subrogation Claims Settlement. Pursuant to that motion, PG&E Corporation and the Utility requested that the allowance of the Subrogation Claims in the aggregate amount of $11.0 billion be effective upon the approval of the motion and that the treatment and satisfaction of the Subrogation Claims be effectuated pursuant to the Proposed Plan following confirmation of the effectiveness of the Proposed Plan. Various stakeholders filed objections to PG&E Corporation's and the Utility's motion, including the UCC, the Ad Hoc Noteholder Committee, the TCC and the U.S. Government. A hearing on PG&E Corporation’s and the Utility’s motion to approve the RSA was held on October 23, 2019, at which the Bankruptcy Court continued the hearing on the motion to November 13, 2019. On November 2, 2019, PG&E Corporation and the Utility filed the RSA, as amended, with the Bankruptcy Court.

Equity Backstop Commitments

As of September 30, 2019, PG&E Corporation has entered into Chapter 11 Plan Backstop Commitment Letters (collectively, the “Backstop Commitment Letters”) with investors (collectively, the “Backstop Parties”), pursuant to which the Backstop Parties severally agreed to fund up to $14.0 billion of proceeds to finance the Proposed Plan through the purchase of PG&E Corporation common stock, subject to the terms and conditions set forth in such Backstop Commitment Letters (the “Backstop Commitments”). The price at which any such new shares would be issued to the Backstop Parties would be equal to (a) 10 (subject to adjustment as provided in the Backstop Commitment Letters), times (b) PG&E Corporation’s consolidated Normalized Estimated Net Income (as defined in the Backstop Commitment Letters) for the estimated year 2021, divided by (c) the number of fully diluted shares of PG&E Corporation that will be outstanding on the effective date of the Proposed Plan (the “Effective Date”) (assuming that all equity is raised by funding the Backstop Commitments).
The Backstop Commitment Letters provide that, under certain circumstances, PG&E Corporation and the Utility will be permitted to issue new shares of common stock of PG&E Corporation for up to $14.0 billion of proceeds to finance the transactions contemplated by the Proposed Plan through one or more equity offerings that, under certain circumstances, must include a rights offering (the “Rights Offering”). The structure, terms and conditions of any such equity offering (including a Rights Offering) are expected to be determined by PG&E Corporation and the Utility at a later time in the Chapter 11 process, subject to the terms and conditions of the Backstop Commitment Letters. This may include terms and conditions that are designed to preserve the ability of PG&E Corporation or the Utility to utilize their net operating loss carryforwards. There can be no assurance that any such equity offering would be successful. In the event that such equity offerings (together with additional permitted capital sources) do not raise at least $14.0 billion of proceeds in the aggregate or if PG&E Corporation and the Utility do not otherwise consummate such offerings, then PG&E Corporation and the Utility may draw on the Backstop Commitments for equity funding to finance the transactions contemplated by the Proposed Plan, subject to the satisfaction or waiver by the Backstop Parties of the conditions set forth therein.

The Backstop Parties’ funding obligations under the Backstop Commitment Letters are subject to numerous conditions, including, among others, that (a) the Backstop Commitment Letters have been approved by the Bankruptcy Court on or before November 20, 2019, (b) the conditions precedent to the Effective Date set forth in the Proposed Plan have been satisfied or waived in accordance with the Proposed Plan, (c) the Bankruptcy Court has entered an order confirming the Proposed Plan and approving the transactions contemplated thereunder, which shall confirm the Proposed Plan with such amendments, modifications, changes and consents as are approved by holders of a majority of the Backstop Commitments (the “Confirmation Order”), (d) PG&E Corporation’s and the Utility’s weighted average earning rate base for 2021 is no less than 95% of $48 billion and (e) there has been no event, occurrence or other circumstance that would have or would reasonably be expected to have a material adverse effect on the business of PG&E Corporation and the Utility or their ability to consummate the transactions contemplated by the Backstop Commitment Letters and the Proposed Plan. PG&E Corporation intends to seek an extension of the deadline to obtain Bankruptcy Court approval of the Backstop Commitment Letters.

In addition, the Backstop Parties have certain termination rights under the Backstop Commitment Letters. The Backstop Parties may terminate the Backstop Commitment Letters if PG&E Corporation’s and the Utility’s aggregate liability with respect to pre-petition wildfire-related claims exceeds $18.9 billion (the “Wildfire Claims Cap”) (without counting wildfire-related claims that are approved by the CPUC for recovery or pass-through against such cap), which cap may be adjusted upward for wildfire-related claims consisting of professional fees that the Bankruptcy Court (or the U.S. District Court for the Northern District of California (the “District Court”), if applicable) determines to be reasonable. The Backstop Parties’ other termination rights include, among others, if (i) the Proposed Plan is amended without the consent of the holders of a majority of the Backstop Commitments, (ii) the Confirmation Order has not been entered by June 30, 2020, (iii) the Effective Date has not occurred within 60 days of entry of the Confirmation Order, (iv) a material adverse effect (as described above) occurs, (v) wildfires occur in the Utility’s service area in 2019 that damage or destroy in excess of 500 dwellings or commercial structures in the aggregate, (vi) the CPUC fails to issue all necessary approvals, authorizations and final orders to implement the Proposed Plan prior to June 30, 2020, including approvals related to the Utility’s capital structure and authorized rate of return and the resolution of the CPUC’s claims against the Utility for fines or penalties, all of which must be satisfactory to the holders of a majority of the Backstop Commitments, (vii) asserted administrative expense claims in the Chapter 11 Cases exceed $250 million (subject to certain exceptions), (viii) one or more wildfires occur in the Utility’s service area during or after 2020 that damage or destroy at least 500 dwellings or commercial structures in the aggregate at a time when the portion of the Utility’s system at the location of such wildfire was not successfully de-energized, and (ix) the Utility has not elected and received Bankruptcy Court approval, or satisfied the other required conditions, to participate in the statewide wildfire fund established by AB 1054. There can be no assurance that the conditions precedent set forth in the Backstop Commitment Letters will be satisfied or waived, nor that events or circumstances will not occur that give rise to termination rights of the Backstop Parties.

In connection with PG&E Corporation’s and the Utility’s entry into the RSA as described above, if the Bankruptcy Court does not approve the RSA on or prior to November 20, 2019, then the Backstop Commitment Letters provide that (i) the Wildfire Claims Cap will be reduced to $17.9 billion (without counting wildfire-related claims that are approved by the CPUC for recovery or pass-through against such cap), which cap may be adjusted upward for wildfire-related claims consisting of professional fees that the Bankruptcy Court (or the District Court, if applicable) determines to be reasonable, and (ii) the Proposed Plan must be amended to remove any Permitted Amendments (as defined in the Backstop Commitment Letters).
The initial commitment premium for the Backstop Commitments is 0.75% of the amount of the Backstop Commitments. The initial term of the Backstop Commitment Letters expires on January 20, 2020. PG&E Corporation and the Utility can extend the term of the Backstop Commitment Letters to April 30, 2020 for an additional commitment premium of 1.25% of the amount of the Backstop Commitments, to June 30, 2020 for an additional commitment premium of 2.5% of the amount of the Backstop Commitments and to August 29, 2020 for an additional commitment premium of 0.5% of the amount of the Backstop Commitments. All such commitment premiums are cumulative. Subject to limited exceptions, all commitment premiums are payable in shares of PG&E Corporation common stock to be issued on the Effective Date, and the number of such shares to be paid as commitment premiums will be calculated using the backstop price described above. In the event that a plan of reorganization for PG&E Corporation and the Utility that is not the Proposed Plan is confirmed by the Bankruptcy Court, then the backstop commitment premium will be payable in cash if elected by the applicable Backstop Party.

Debt Commitment Letters

On October 11, 2019, PG&E Corporation and the Utility entered into debt commitment letters (the “Debt Commitment Letters”) with JPMorgan Chase Bank, N.A., Bank of America, N.A., BofA Securities, Inc., Barclays Bank PLC, Citigroup Global Markets Inc., Goldman Sachs Bank USA, Goldman Sachs Lending Partners LLC and the other lenders that may become parties to the Debt Commitment Letters as additional “Commitment Parties” as provided therein (the foregoing parties, collectively, the “Commitment Parties”), pursuant to which the Commitment Parties committed to provide $34.35 billion in bridge financing in the form of (a) a $27.35 billion senior secured bridge loan facility (the “OpCo Facility”) with the Utility or any domestic entity formed to hold all of the assets of the Utility upon emergence from bankruptcy (the Utility or any such entity, the “OpCo Borrower”) as borrower thereunder and (b) a $7.0 billion senior unsecured bridge loan facility (together with the OpCo Facility, the “Facilities”) with PG&E Corporation or any domestic entity formed to hold all of the assets of PG&E Corporation upon emergence from bankruptcy (the Corporation or any such entity, the "HoldCo Borrower") as borrower thereunder, subject to the terms and conditions set forth therein. The commitments under the Debt Commitment Letters will expire on August 29, 2020, unless terminated earlier pursuant to the termination rights described below.

Borrowings under the OpCo Facility would be senior secured obligations of the OpCo Borrower, secured by substantially all of the assets of the OpCo Borrower. Borrowings under the HoldCo Facility would be senior unsecured obligations of the HoldCo Borrower. The OpCo Borrower’s obligations under the OpCo Facility, and the HoldCo Borrower’s obligations under the HoldCo Facility, would not be guaranteed by any other entity. The scheduled maturity of each of the Facilities would be 364 days following the date the Facilities are funded. PG&E Corporation and the Utility will pay customary fees and expenses in connection with obtaining the Facilities.

The Commitment Parties’ funding obligations under the Debt Commitment Letters are subject to numerous conditions and termination rights, including, among others, certain conditions and termination rights similar to those included in the Backstop Commitment Letters, in addition to conditions that are not in the Backstop Commitment Letters, including (a) the delivery of specified financial information, (b) PG&E Corporation’s receipt of at least $14.0 billion of proceeds from the issuance of equity, of which up to $2.0 billion may take the form of preferred equity, equity-linked securities or securitizations to the extent not negatively impacting cash distributions to PG&E Corporation or distributions that will be available to service debt at PG&E Corporation, (c) the execution of definitive documentation for the Facilities and (d) that the Utility shall have received investment grade senior secured debt ratings. In addition, the Debt Commitment Letters are subject to approval by the Bankruptcy Court on or before November 20, 2019, and the Utility’s ability to borrow under the OpCo Facility is subject to approval by the CPUC. PG&E Corporation and the Utility intend to seek an extension of the deadline to obtain Bankruptcy Court approval of the Debt Commitment Letters.

In lieu of entering into the Facilities, PG&E Corporation and the Utility intend to obtain permanent financing on or prior to emergence from bankruptcy in the form of bank facilities, debt securities or a combination of the foregoing.

On October 23, 2019, PG&E Corporation and the Utility filed a motion with the Bankruptcy Court seeking approval of the Backstop Commitment Letters, the Debt Commitment Letters and certain related matters. The hearing on PG&E Corporation’s and the Utility’s motion to approve the Backstop Commitment Letters, the Debt Commitment Letters and certain related matters is scheduled for November 19, 2019.

The timing and outcome of the Chapter 11 Cases is uncertain. Although PG&E Corporation, the Utility, the Bankruptcy Court, the CPUC and many other stakeholders have stated that they are working towards confirming a plan of reorganization by June 30, 2020, it is possible that the Chapter 11 process could extend beyond the June 30, 2020 deadline and take a number of years to resolve.
TCC/Ad Hoc Noteholder Plan of Reorganization

On October 17, 2019, the TCC and the Ad Hoc Noteholder Committee filed the TCC/Ad Hoc Noteholder Plan. The TCC/Ad Hoc Noteholder Plan differs from the Proposed Plan in a number of respects, including, but not limited to:

•the TCC/Ad Hoc Noteholder Plan proposes a trust for payment of wildfire victim claims (other than insurance subrogation claims) funded with consideration in an amount equal to the lesser of (i) $14.5 billion (“at plan value”), of which $1.0 billion would be set aside in a separate trust for the Supporting Public Entities, and (ii) an amount of such claims as determined by a court of competent jurisdiction (with the form of such consideration to be an unspecified mix of cash and PG&E Corporation common stock (“at plan value”));

•the TCC/Ad Hoc Noteholder Plan proposes that holders of claims in respect of certain series of short-term senior notes of the Utility receive consideration consisting of (i) principal and accrued and unpaid pre-petition interest at the contract rate specified in the definitive documentation for each such series, (ii) accrued and unpaid post-petition interest at the contract rate specified in the definitive documentation for each such series and (iii) any prepayment premium, make-whole or other similar call protection specified in the definitive documentation for each such series;

•the TCC/Ad Hoc Noteholder Plan proposes that the Utility’s other senior notes would be reinstated at emergence with holders receiving (i) accrued and unpaid pre-petition interest at the contract rate specified in the definitive documentation for each such series and (ii) accrued and unpaid post-petition interest at the contract rate specified in the definitive documentation for each such series; and

•the TCC/Ad Hoc Noteholder Plan proposes the following significant financing sources: (i) $12.75 billion (“at plan value”) of newly issued PG&E Corporation common stock, representing 40.6% of the post-emergence PG&E Corporation common stock, would be issued to the trust for payment of wildfire victim claims and, if applicable, the trust for payment of insurance subrogation claims; (ii) members of the Ad Hoc Noteholder Committee, and potentially other third parties, would make a $15.5 billion investment in PG&E Corporation common stock, representing 59.3% of the post-emergence PG&E Corporation common stock, in order to fund the transactions contemplated by the TCC/Ad Hoc Noteholder Plan; and (iii) PG&E Corporation would issue $5.75 billion of new senior unsecured notes and the Utility would issue $8.0 billion of new senior secured notes, in each case to certain members of the Ad Hoc Noteholder Committee in order to fund the transactions contemplated by the TCC/Ad Hoc Noteholder Plan.

The TCC/Ad Hoc Noteholder Plan has not been approved by the Bankruptcy Court or the CPUC and may be amended, modified, or supplemented as necessary or desired by the proponents thereof.

Debtor-In-Possession Financing

See Note 5 for further discussion of the DIP Facilities, which provide up to $5.5 billion in financing.

Financial Reporting in Reorganization

Effective on the Petition Date, PG&E Corporation and the Utility began to apply accounting standards applicable to reorganizations, which are applicable to companies under Chapter 11 bankruptcy protection. These accounting standards require the financial statements for periods subsequent to the Petition Date to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Expenses, realized gains and losses, and provisions for losses that are directly associated with reorganization proceedings must be reported separately as reorganization items, net in the Condensed Consolidated Statements of Income. In addition, the balance sheet must distinguish pre-petition LSTC of PG&E Corporation and the Utility from pre-petition liabilities that are not subject to compromise, post-petition liabilities, and liabilities of the subsidiaries of PG&E Corporation that are not debtors in the Chapter 11 Cases in the Condensed Consolidated Balance Sheets. LSTC are pre-petition obligations that are not fully secured and have at least a possibility of not being repaid at the full claim amount. Where there is uncertainty about whether a secured claim will be paid or impaired pursuant to the Chapter 11 Cases, PG&E Corporation and the Utility have classified the entire amount of the claim as LSTC.
Furthermore, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in-possession, actions to enforce or otherwise effect the payment of certain claims against PG&E Corporation and the Utility in existence before the Petition Date are stayed while PG&E Corporation and the Utility continue business operations as debtors-in-possession. These claims are reflected as LSTC in the Condensed Consolidated Balance Sheets at September 30, 2019. Additional claims (which could be LSTC) may arise after the Petition Date resulting from the rejection of executory contracts, including leases, and from the determination by the Bankruptcy Court (or agreement by parties-in-interest) of allowed claims for contingencies and other disputed amounts.

PG&E Corporation’s Condensed Consolidated Financial Statements are presented on a consolidated basis and include the accounts of PG&E Corporation and the Utility and other subsidiaries of PG&E Corporation and the Utility that individually and in aggregate are immaterial. Such other subsidiaries did not file for bankruptcy.

The Utility’s Condensed Consolidated Financial Statements are presented on a consolidated basis and include the accounts of the Utility and other subsidiaries of the Utility that individually and in aggregate are immaterial. Such other subsidiaries did not file for bankruptcy.

Liabilities Subject to Compromise

As a result of the commencement of the Chapter 11 Cases, the payment of pre-petition liabilities is subject to compromise or other treatment pursuant to a plan of reorganization. Generally, actions to enforce or otherwise effect payment of pre-petition liabilities are stayed. Although payment of pre-petition claims generally is not permitted, the Bankruptcy Court granted PG&E Corporation and the Utility authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. This relief generally was designed to preserve the value of PG&E Corporation’s and the Utility’s business and assets. As described above, among other things, the Bankruptcy Court authorized, but did not require, PG&E Corporation and the Utility to pay certain pre-petition claims relating to employee wages and benefits, taxes, and amounts owed to certain vendors.

The determination of how liabilities will ultimately be settled or treated cannot be made until the Bankruptcy Court confirms a Chapter 11 plan of reorganization and such plan becomes effective. Accordingly, the ultimate amount of such liabilities is not determinable at this time. GAAP requires pre-petition liabilities that are subject to compromise to be reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for different amounts. The amounts currently classified as LSTC are preliminary and may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, the values of any collateral securing such claims, rejection of executory contracts, continued reconciliation or other events.

The following table presents LSTC as reported in the Condensed Consolidated Balance Sheets at September 30, 2019:
(in millions)Utility
PG&E Corporation (1)
PG&E Corporation Consolidated
Financing debt (2)
$21,813  $650  $22,463  
Wildfire-related claims (3)
20,560  —  20,560  
Trade creditors1,253  6  1,259  
Non-qualified benefit plan18  126  144  
2001 bankruptcy disputed claims221  —  221  
Customer deposits & advances278  —  278  
Other166  2  168  
Total Liabilities Subject to Compromise$44,309  $784  $45,093  
(1) PG&E Corporation amounts reflected under the column “PG&E Corporation” exclude the accounts of the Utility.
(2) At September 30, 2019, PG&E Corporation and the Utility had $650 million and $21,526 million in aggregate principal amount of pre-petition indebtedness, respectively. Utility pre-petition financing debt also includes $287 million of accrued contractual interest to the Petition Date. See Note 5 for details of pre-petition debt reported as LSTC.
(3) See Note 10 for information regarding pre-petition wildfire-related claims reported as LSTC, including the settlement with the Consenting Subrogation Creditors entered into on September 22, 2019. Wildfire-related claims include amounts for the Butte fire of $212 million and is shown net of $100 million deposited into the Wildfire Assistance Fund on August 2, 2019 in connection with potential liabilities related to the 2018 Camp fire and 2017 Northern California wildfires.
Potential Claims

PG&E Corporation and the Utility have filed with the Bankruptcy Court schedules and statements of financial affairs setting forth, among other things, the assets and liabilities of PG&E Corporation and the Utility, subject to the assumptions filed in connection therewith. As a general matter, claims against PG&E Corporation or the Utility relating to the period prior to the Petition Date must be filed by the Bar Date. See above under the heading “Bar Date” for a discussion of the Bar Date.

PG&E Corporation and the Utility have received a substantial number of proofs of claim since the Petition Date and are early in the process of reconciling those claims to the amounts listed in the schedules of assets and liabilities. PG&E Corporation and the Utility may ask the Bankruptcy Court to disallow claims that they believe are duplicative, have been later amended or superseded, are without merit, are overstated or should be disallowed for other reasons. Given the substantial number and amount of claims filed, the claims resolution process will take considerable time to complete. As a result of the agreement between PG&E Corporation and the Utility and the TCC to extend the Bar Date for individual wildfire-related claims and if approved by the Bankruptcy Court, the number and amount of claims filed may continue to grow, which may further increase the time the claims resolution process will take to complete. Differences between liability amounts recorded by PG&E Corporation and the Utility as liabilities subject to compromise and claims filed by creditors will be investigated and, if necessary, the Bankruptcy Court will make a final determination of the allowed amount of the claim. Differences between those final allowed claims and the liabilities recorded in the Condensed Consolidated Balance Sheet will be recognized as reorganization items in PG&E Corporation’s and the Utility’s Condensed Statement of Consolidated Income (Loss) as they are resolved. The determination of how liabilities will ultimately be resolved cannot be made until the Bankruptcy Court approves a plan of reorganization or approves orders related to settlement of specific liabilities. Accordingly, the ultimate amount or resolution of such liabilities is not determinable at this time. The resolution of such claims could result in substantial adjustments to PG&E Corporation’s and the Utility’s financial statements.

Reorganization Items, Net

Reorganization items, net represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and are comprised of professional fees and financing costs, net of interest income. Reorganization items also include adjustments to reflect the carrying value of LSTC at their estimated allowed claim amounts, as such adjustments are approved by the Bankruptcy Court.  Cash paid for reorganization items, net was $13 million and $145 million for PG&E Corporation and the Utility, respectively, during the nine months ended September 30, 2019. Reorganization items, net for the three months ended September 30, 2019 and from the Petition Date through September 30, 2019 include the following:
Three Months Ended September 30, 2019
(in millions)Utility
PG&E Corporation (1)
PG&E Corporation Consolidated
Debtor-in-possession financing costs$—  $—  $—  
Legal and other83  7  90  
Interest income(14) (3) (17) 
Adjustments to LSTC—  —  —  
Total reorganization items, net$69  $4  $73  
(1) PG&E Corporation amounts reflected under the column “PG&E Corporation” exclude the accounts of the Utility.
Petition Date Through September 30, 2019
(in millions)Utility
PG&E Corporation (1)
PG&E Corporation Consolidated
Debtor-in-possession financing costs$97  $17  $114  
Legal and other181  10  191  
Interest income(41) (8) (49) 
Adjustments to LSTC —  —  —  
Total reorganization items, net$237  $19  $256  
(1) PG&E Corporation amounts reflected under the column “PG&E Corporation” exclude the accounts of the Utility.
Contractual Interest on Debt Subject to Compromise

Effective as of the Petition Date, PG&E Corporation and the Utility ceased recording interest expense on outstanding pre-petition debt. Contractual interest expense represents amounts due under the contractual terms of outstanding pre-petition debt. From the Petition Date through September 30, 2019, contractual interest expense of $666 million related to LSTC has not been recorded in the financial statements. The portion of authorized revenues from the Petition Date through September 30, 2019 related to interest expense on pre-petition debt has been deferred as a noncurrent regulatory liability.

The Bankruptcy Court’s Decision on its Authority over PG&E Corporation’s and the Utility’s Rejection of Power Purchase Agreements

On June 7, 2019, the Bankruptcy Court granted PG&E Corporation’s and the Utility’s motion for declaratory judgment in an adversary proceeding entitled Pacific Gas and Electric Company v. FERC.  In its amended declaratory judgment, the Bankruptcy Court found that FERC had no “concurrent jurisdiction, or any jurisdiction, over the determination of whether any rejections of power purchase contracts by either Debtor should be authorized” pursuant to section 365 of the Bankruptcy Code.  The Bankruptcy Court also found that the “Debtors do not need approval from the Federal Energy Regulatory Commission to reject any of their power purchase contracts” and that “[a]ny determinations of the Federal Energy Regulatory Commission” that were contrary to these findings “are void, of no force and effect and not binding on this court or either Debtor.”  The Bankruptcy Court further stated that such determinations include, but are not limited to, those previously made in certain FERC proceedings initiated before the Chapter 11 Cases were filed in connection with power purchase contracts with the Utility (the “FERC Orders”).

On June 12, 2019, the Bankruptcy Court certified its amended declaratory judgment for direct appeal to the United States Court of Appeals for the Ninth Circuit.  On July 15, 2019, FERC and certain counterparties to the Utility’s power purchase agreements filed requests for the Ninth Circuit to permit such direct appeal, which the Ninth Circuit granted on September 17, 2019. On September 17, 2019, the Ninth Circuit granted the requests and docketed both appeals. Opening briefs of FERC and the other appellants are due November 20, 2019, PG&E Corporation’s and the Utility’s answering briefs are due December 20, 2019, and optional reply briefs are due 21 days after service of PG&E Corporation’s and the Utility’s answering briefs. Separately, on June 26, 2019, the Utility filed a petition for review of the FERC Orders, also in the Ninth Circuit. On September 20, 2019, the Ninth Circuit granted the Utility’s motion to align the briefing schedule with the direct appeals from the Bankruptcy Court. The Utility’s and petitioner-intervenor’s opening briefs are due November 20, 2019. FERC’s and respondent-intervenors’ answering briefs are due December 20, 2019, and the Utility’s optional reply brief is due 21 days after service of FERC’s answering brief.

The Proposed Plan proposes to assume all power purchase agreements and community choice aggregation servicing agreements.

Resolution of Remaining 2001 Chapter 11 Disputed Claims

Various electricity suppliers filed claims in the Utility’s 2001 prior proceeding filed under Chapter 11 of the U.S. Bankruptcy Code seeking payment for energy supplied to the Utility’s customers between May 2000 and June 2001.  While the FERC and judicial proceedings are pending, the Utility pursued settlements with electricity suppliers and entered into a number of settlement agreements with various electricity suppliers to resolve some of these disputed claims and to resolve the Utility’s refund claims against these electricity suppliers. Under these settlement agreements, amounts payable by the parties, in some instances, would be subject to adjustment based on the outcome of the various refund offset and interest issues being considered by the FERC. Generally, any net refunds, claim offsets, or other credits that the Utility receives from electricity suppliers either through settlement or through the conclusion of the various FERC and judicial proceedings are refunded to customers through rates in future periods.

The Utility’s obligations with respect to such claims (all of which arose prior to the initiation of the Utility’s pending Chapter 11 Case on January 29, 2019), including pursuant to any prior settlements relating thereto, are expected to be determined through the proceedings of the Chapter 11 Cases.