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UNITED STATES BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

In re: 

PG&E CORPORATION 

 -andPACIFIC GAS AND ELECTRIC 

COMPANY, 

 Debtors. 

Bankruptcy Case No. 19 - 30088 (DM) 

Chapter 11 (Lead Case) (Jointly Administered) 

STATEMENT AND RESERVATION OF 

RIGHTS OF THE CITY OF SAN JOSE IN 

RESPONSE TO (I) THE DEBTORS’ MOTION 

TO APPROVE THE TORT CLAIMANTS RSA 

MOTION, AND (II) THE COURT’S 

MEMORANDUM REGARDING 

CONFIRMATION ISSUES

Related to: Docket Nos. 4760 and 5038 

☐ Affects PG&E Corporation 

☐ Affects Pacific Gas and Electric 

 Company 

☒ Affects both Debtors 

* All papers shall be filed in the Lead 

Case, No. 19-30088 (DM) 

Hearing Date: December 17, 2019 

Time: 10:00 a.m. (P.T.) 

Courtroom: Hon. Dennis Montali 

 450 Golden Gate Avenue 

 16th Floor, Courtroom 17 

 San Francisco, CA 94102 

Objections Due: December 16, 2019, 

 12:00 p.m. (P.T.)

The City of San Jose, California, submits this Statement and Reservation of Rights (i) in 

response to the Motion of the Debtors to approve the Tort Claimants RSA (the “Motion”), and (ii) in 

RICHARD DOYLE, City Attorney (88625) 

ED MORAN, Assistant City Attorney (86992) 

ELISA T. TOLENTINO, Sr. Deputy City Attorney (228726) 

LUISA F. ELKINS, Sr. Deputy City Attorney (286703) 

Office of the City Attorney 

200 East Santa Clara Street, 16th Floor 

San José, California 95113-1905 

Telephone Number: (408) 535-1900 

Facsimile Number: (408) 998-3131 

E-Mail Address: cao.main@sanjoseca.gov 

Attorneys for The City San Jose 

Case: 19-30088 Doc# 5128 Filed: 12/16/19 Entered: 12/16/19 11:47:54 Page 1 of

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response to the Court’s Memorandum Regarding Confirmation Issues (the “Memorandum”) [Docket 

No. 4760], and respectfully state as follows:1

I. INTRODUCTION 

The Tort Claimants RSA Motion and the Debtors’ and Shareholder Proponents’ Joint Chapter 

11 Plan of Reorganization dated December 12, 2019 [ECF No. 5101] (the “Plan”) contemplate a 

reorganization of the Debtors that is detrimental to the residents of California, including PG&E’s 16 

million customers.2 In addition, the Debtors’ proposed Plan (i) poses unacceptable risks to the health 

and safety of residents that live and work within PG&E’s service area, and (ii) exposes both the 

wildfire victims and the residents of California to insupportable financial risk. 

II. STATEMENT AND RESERVATION OF RIGHTS 

A. The Motion and Plan Fail to Address Critical Health and Safety Issues 

The Debtors have chosen to ignore critical health and safety issues in favor of reaching a 

financial resolution. But PG&E’s problems are not the result of an overburdened financial structure. 

PG&E’s issues are operational. Without a plan that resolves the operational health and safety issues, 

PG&E’s plan will inevitably be followed by a third bankruptcy, and therefore the Plan is not feasible 

and violates section 1129(a)(11). 

In connection with eligibility to participate in the new wildfire fund to be established pursuant 

to Assembly Bill 1054, on November 14, 2019, the California Public Utilities Commission (the 

“CPUC”) issued the Assigned Commissioner’s Scoping Memo and Ruling (the “Scoping Memo”).3

The Scoping Memo outlined that the Debtors should address certain health and safety issues, including 

the following: 

 steps to be taken to improve PG&E’s delivery of power in a safe and reliable manner; 

 steps to improve accountability of management for health and safety issues; 

 a corporate governance structure with respect to public safety on a going forward basis, 

 

1

 Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Motion. 

2

 Although the Court indicated that parties should file statements with respect to confirmation issues on December 12, 

2019, the Debtors waited until late that same day to file their proposed Plan. Accordingly, the ability of parties to review 

the proposed Plan and determine whether any confirmation issues had been addressed was hamstrung. 

3 http://docs.cpuc.ca.gov/SearchRes.aspx?DocFormat=All&DocID=319526476. 

Case: 19-30088 Doc# 5128 Filed: 12/16/19 Entered: 12/16/19 11:47:54 Page 2 of

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both short term and long term, particularly in light of PG&E’s criminal probation; and 

 a reorganization plan that is consistent with the State’s climate goals; 

The Tort Claimants’ RSA Motion and the Debtors’ proposed Plan filed on December 12, 2019 

fails to address any of these critical health and safety issues. Indeed, the redline of the proposed Plan 

filed by the Debtors on December 12, 2019 against the prior plan filed on November 4, 2019 [ECF 

No. 5102] shows that no changes were made to address critical health and safety issues identified by 

the CPUC in the Scoping Memo that was filed in the interim. 

B. The Motion and Plan Pose an Insupportable Financial Risk 

The Motion and the Debtors’ proposed Plan pose an egregious financial risk for both wildfire 

victims and the residents of the State of California. With respect to wildfire victims, the Plan provides 

that the Fire Victim Trust shall be funded with the Aggregate Fire Victim Consideration, which in 

relevant part includes: (i) “$6.75 billion in New HoldCo Common Stock (issued at Fire Victim Equity 

Value” (Plan § 1.6); (ii) “Fire Victim Equity Value means 14.9 multiplied by the Normalized 

Estimated Net Income as of a date to be agreed upon [among the parties to the Tort Claimants RSA]” 

(Plan § 1.77); and (iii) “Normalized Estimated Net Income” has a complex definition that can be easily 

manipulated by PG&E to substantially reduce compensation to fire victims (Plan § 1.130).4 The total 

amount that will be placed in the Fire Victim Trust could well prove to be illusory. Indeed, the 

definition of “Normalized Estimated Net Income” brings to mind the definition of “adjusted box office 

receipts” used by studios in contracts with actors. 

In addition, it appears that the Debtors ultimately intend to seek state backed tax exempt 

financing to pay wildfire victims. The Plan provides in relevant part that: 

If the State of California enacts legislation authorizing the issuance of Wildfire Victim 

Recovery Bonds or other securitized bonds, this would provide a source of low cost 

financing for expediting payment and satisfaction of Fire Claims following estimation or 

settlement. 

 

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 The Plan provides that “Normalized Estimated Net Income” shall mean, in each case with respect to the estimated year 

2021, (a) on a component-by-component basis (e.g., distribution, generation, gas transmission and storage, and electrical 

transmission), the sum of (i) the Utility’s estimated earning rate base for such component, times (ii) the equity percentage 

of the Utility’s authorized capital structure, times (iii) the Utility’s authorized rate of return on equity for such component, 

less (b) the projected post-tax difference in interest expense or preferred dividends for the entire company and the 

authorized interest expense or preferred dividends expected to be collected in rates based on the capital structure in the 

approved Plan, if any, less (c) the amount of the Utility’s post-tax annual contribution to the Go-Forward Wildfire Fund. 

Case: 19-30088 Doc# 5128 Filed: 12/16/19 Entered: 12/16/19 11:47:54 Page 3 of

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Plan § 6.17. 

If PG&E were to be reorganized as a public benefits corporation, it may well be a laudable 

goal to issue such financing to properly compensate wildfire victims, but not where PG&E is 

contemplated to be a private enterprise benefitting hedge funds that are the Debtors’ co-Plan 

Proponents without regard to health and safety. In the corporate structure contemplated by the 

Debtors, this is nothing more than a bailout at taxpayers’ expense. 

III. RESERVATION OF RIGHTS AND CONCLUSION 

For the foregoing reasons, the Court should defer consideration of the Motion to allow for 

further negotiations and to allow for a further review of the recently filed Plan. In addition, 

confirmation of the Plan on an expedited basis is inappropriate. The City of San Jose reserves its 

rights to object to confirmation of the Plan on additional grounds that may be discovered upon further 

review of the Plan. 

Dated: December 16, 2019 Respectfully submitted, 

RICHARD DOYLE, City Attorney 

By: /s/ Elisa T. Tolentino 

ELISA T. TOLENTINO 

Sr. Deputy City Attorney 

Attorneys for The City San Jose 

Case: 19-30088 Doc# 5128 Filed: 12/16/19 Entered: 12/16/19 11:47:54 Page 4 of

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