PG&E Corp. ratepayers Thursday faced tough questioning from a bankruptcy judge as they sought to gain an official voice in the California utility’s bankruptcy.
Judge Dennis Montali said he would rule later on a request to order the appointment of an official committee to speak for ratepayers, as PG&E tries to resolve damage claims from wildfires that are estimated at $30 billion or more.
Customers fear PG&E’s bankruptcy will end in higher rates for electricity, said Cecily Dumas, lead lawyer for the official committee of wildfire victims.
The fire victims’ committee took no position on the request for a ratepayers committee, but is “sympathetic to the concerns of the ratepayers particularly in the event that this turns out to be an estate that is insolvent and the cost of the wildfire losses get passed to the ratepayers,” she said.
PG&E’s damages could prove to be higher than $30 billion, the fire victims have said in court papers. With more than $24 billion owed to bondholders, lenders and other creditors, PG&E might have to raise rates if it wants to emerge from chapter 11 with all its debts paid.
Moody’s Investors Service, in a report earlier this year, also cited the possibility that PG&E’s customers will see higher bills because of the utility’s fire damages.
Judge Montali indicated skepticism about the ratepayers’ request for a committee, which met with opposition from PG&E, federal bankruptcy watchdogs and the official committee that represents the unsecured financial creditors in the case, including investors owning $17 billion in bond debt.
“What they are concerned about is rates going forward,” said Stephen Karotkin, lawyer for PG&E. Ratepayers can make their case to hold the line on electricity charges before the California Public Utilities Commission, Mr. Karotkin said.
Nora Sheriff, lawyer for an association that represents industries that are large power customers, said ratepayers haven’t received an answer yet from the CPUC on requests “for increased transparency and clarity” on PG&E’s financial stress test and an investigation into the company’s safety culture.
Official committee status would entitle ratepayers to hire professionals, and send the bill to PG&E. In addition to its own lawyers and advisers, PG&E in bankruptcy is required to pay for lawyers and advisers for other official committees.
Ratepayers said their payments to PG&E are funding the bankruptcy. Timothy S. Laffredi, a lawyer representing U.S. Trustee Andrew Vara, said that didn’t entitle them to official committee status.
The chapter 11 proceeding that began in January is PG&E’s second bankruptcy. During PG&E’s first bankruptcy, Judge Montali disbanded a ratepayers committee, on the grounds ratepayers don’t count as creditors.
The Utility Reform Network, a consumer advocacy group that led the drive for a committee for this case, said ratepayers are entitled to refunds from PG&E, and that gives them creditor status.
Judge Montali said PG&E is likely to issue credits for those refunds. Once that happens, the judge said, the ratepayers would no longer qualify as creditors under the bankruptcy code, and wouldn’t be entitled to seats on an official committee.
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