Thread by @ColbyBermel

I'm in San Fran to cover two key PG&E hearings.

Today is a hearing on the utility's criminal probation, and whether PG&E should be required to inspect all 130K miles of its lines before the next wildfire season.

Tomorrow is the first major hearing in $PCG's bankruptcy docket.

"PG&E is a convicted felon and is on probation," U.S. District Judge William Alsup says in his opening remarks. "You can't send a corporation to prison, but you can put them on probation."

Alsup is reminding us of how Cal Fire found PG&E to have caused a number of the 2017 Wine Country blazes.

However, he added, "I should give credit" to PG&E for not sparking the Tubbs Fire, the 2nd most destructive in CA history.

Cal Fire made that Tubbs determination last week.

Alsup said "most members of the public misunderstood" his statement this month that, according to his observations, uninsulated conductors have caused many recent wildfires.

It's fine for those to exist, Alsup said, but utilities have to trim trees to prevent downed lines.

"You haven't admitted much — in fact, very little," Alsup told PG&E attorneys. "There is one clear-cut pattern here: that PG&E is starting fires... Should PG&E continue business as usual by killing people?"

Alsup said electricity has to be delivered, of course, but safely.

PG&E and the probation office disagree on whether the company properly notified the PO on Cal Fire's findings that PG&E sparked the Honey Fire, one of the Wine Country blazes.

PG&E did send material to the PO, the office says, but apparently did not prominently state the info.

NEWS: Alsup said he will sustain the probation office's claim that PG&E did not provide proper notification of the Honey findings, and that the company did indeed violate its probation. Sentencing will be determined at a later date, he said.

Alsup has now moved onto his proposal that PG&E should inspect all 130K miles of its lines before June.

Chastising a PG&E attorney, the judge said the company in the past half decade paid $4.5 billion in dividends to shareholders: "That money could've been used to trim trees."

Mark Filip, the federally-appointed monitor of PG&E safety after the San Bruno pipeline explosion, argues the "regulatory minimum" is that a branch can hang over a line so long as it's healthy and four feet above.

Alsup disagrees, saying some Cal Fire rules supersede CPUC regs.

Filip contends that Alsup's plan, which PG&E and the CPUC criticized as too broad, doesn't deal specifically with qualifying trees that need special attention.

The monitor then proceeded to list the 10 highest-risk tree species that PG&E has connected to most recent wildfires.

"You spend so much money on lobbying that you could go Sacramento to get a law passed that would change tree trimming," Alsup tells the PG&E attorney.

"We are very open to get help wherever we can get it," Filip replied.

Filip said he's been in the field with PG&E tree trimmers, some of which have apparently encountered angry property owners with firearms.

"You're using the extreme case to do as little as possible," Alsup said.

"I definitely don't want to convey that impression," Filip replied.

Instead of PG&E being forced to inspect all 130K miles of its infrastructure, Filip wants Alsup's plan to address overhead costs, tackle the 10 tree species and insulate wires.

Filip said PG&E has talked with East Coast utilities on safety, & even met with Australian regulators.

Correction, via my peer @thejdmorris: The previous quotes attributed to federal monitor Mark Filip were actually said by Kevin Orsini, a PG&E attorney who deals with the company's wildfire safety.

"You have not convinced me," Alsup says to Orsini of his arguments. "If I were running the company, I would put the money where it would do the most good... PG&E should know the safety limits of its own system."

Alsup & Orsini having a back-and-forth on how wind speed affects PG&E's decisions to de-energize its lines, especially in light of the Camp Fire.

Alsup: speeds as low as 20 mph should be a red flag
Orsini: speeds of recent wind-sparked fires weren't necessarily 100% accurate

Orsini says PG&E wants better wind data, which would be aided by more detectors even closer to potential fire origins.

"Get the windmills going," Alsup replied.

Alsup is circling back to his total inspection proposal, which he argues should be done by June 21, the start of wildfire season, "to ensure no more crimes are committed."

We're back from a 15-minute recess.

AUSA Jeff Schenk is now telling Judge Alsup that he believes the court does have a basis to modify PG&E's probation. However, DOJ wants him to use the federal monitor "in a more aggressive way" to investigate issues and meet with agencies.

Alsup is hearing from @calnatresources Sec. Wade Crowfoot and @CAL_FIRE Assistant Deputy Dir. Matthew Reischman.

The judge asked Cal Fire to submit a brief by next week looking at its and other regulations on whether it's mandatory or discretionary to trim overhanging branches.

Crowfoot says it's his understanding that Cal Fire has a say alongside the CPUC on the sufficiency of utilities' wildfire prevention plans, which are due next Wednesday.

.@californiapuc attorney Christine Hammond tells Alsup that localities often say they need solutions tailored to their circumstances. The agency also wants to hear more from local fire/police departments.

CPUC is opposed to Alsup's total inspection plan: subscriber.politicopro.com/states/califor…

Alsup continues to defend his inspection/trimming plan, arguing the "single worst problem" causing wildfires is vegetation downing distribution lines.

"That's where we say we've got to stop this," he said.

Alsup asked the PUC why so many blazes have occurred under its watch.

An attorney for wildfire victims tells Alsup that "the real cancer" is how PG&E conducts its risk management activities.

The attorney praised San Diego Gas & Electric for its de-energization program, which he calls "the gold standard" and wants implemented by PG&E.

Alsup called the CPUC representatives back to the bench to provide commentary on SDG&E's de-energization and wildfire monitoring systems, including cameras.

Hammond said the agency is already working on the former.

Alsup replied by saying that utility workers still have to travel the length of lines, even when they're de-energized, to see if vegetation fell on them. He says that's more evidence of why his plan should happen.

Hammond is calling for nuance in whatever Alsup sets for PG&E.

After hearing from San Bruno city attorney Marc Zafferano and former city manager Connie Jackson, Alsup listens as PG&E official Frank Orsini argues that today's PG&E is different from the one 10 years ago (pipeline explosion) and the one two years ago (multiple wildfires).

Orsini warns of the repercussions of de-energization, and the need to target certain trees, rather than a broad swath as Alsup wants.

"I have a better idea: it's got to be one that works," the judge replies.

NEWS: Alsup is ~not~ making a decision on whether to impose stringent inspection/safety requirements on PG&E.

He's waiting until he reads PG&E's wildfire prevention plan, due to state regulators next Wednesday.

Alsup says he could be satisfied with it, or add more on top of it.

Alsup outlined several possible mandates for PG&E if, in his view, its plan is lacking:

— "PG&E shall not start another fire"
— PG&E should fully comply with CPUC code on overhanging branches
— PG&E should adopt SDG&E's de-energization / cameras system

Alsup asked for the following briefs due next Wednesday:

— Cal Fire on overhanging branch regulations
— wildfire victims attorney Frank Pitre on SDG&E's system

He also asked for all parties, excluding the CPUC, to comment on PG&E's wildfire prevention plan once filed.

From yesterday's probation hearing:

PG&E violated probation after it was implicated in Honey Fire, judge rules
subscriber.politicopro.com/states/califor…

Federal judge backs off call for PG&E to inspect 130K miles of power lines
subscriber.politicopro.com/states/califor…

$PCG's bankruptcy hearing is starting now.

U.S. Bankruptcy Judge Dennis Montali reminds attendees that bankruptcy court is not the place for people to voice opinions on PG&E's criminal probation, a hearing for which was held three floors up yesterday in the district court room.

Just before giving his opening statement for PG&E, attorney Stephen Karotkin tells Judge Montali that on hearing logistics, "I'm OK with anything with you say, sir."

Montali, making light of the weighty bankruptcy, replied: "OK, see you next week," to laughs in the courtroom.

Because of recent wildfires & inverse condemnation, PG&E attorney Karotkin tells Judge Montali that "it became abundantly clear" the company couldn't obtain capital necessary to address liabilities, operate its biz, provide reliable service to 16M customers, service $23B in debt.

"Simply stated, Your Honor, there was no way for PG&E to finance its way through years of litigation and finance its business," PG&E attorney Karotkin says. "Ch. 11 is the only viable alternative."

Bankruptcy will provide financial stability and restore capital access, he says.

PG&E attorney Karotkin says unlike the company's 2001 bankruptcy, it wants to work collaboratively with state regulators, other entities.

"They weren't engaged 18 years ago?" Judge Montali asks.

"Not to my knowledge."

"I still have the boxing gloves emblazoned in my chambers."

PG&E attorney Stephen Karotkin tells Judge Montali there are not any motions currently filed that would have the company exit its electricity contracts, often powered by renewables.

"Those will be evaluated as the case progresses" and in consultation with parties, Karotkin says.

California's chief utility regulator told state lawmakers yesterday that he'll safeguard PG&E's power contracts.

"Should we be worried about reneging on contracts with renewable energy projects? I doubt it. PG&E said they wouldn't; we won't let them."

subscriber.politicopro.com/states/califor…

Judge Montali thanked PG&E's Karotkin for being "extremely helpful" with the volume of filings over the past two days.

However, Montali wants to cut down on duplicates, and have the parent & its utility combined together, & indications if something affects one, the other, both.

U.S. Trustee atty Lynette Kelly objects to PG&E motion to extend time to file schedules & statements.

It could "very well prejudice a number of parties, including creditors... We don't know all the creditors yet, if they're being noticed yet, if they can commit to the schedule."

Judge Montali: "I know lawyers, I love them; I used to be one of them."

Judge Montali says he will grant PG&E's motion to extend time to file schedules, but expects the parties to work out sequencing.

He proposed 30 days for schedules of liabilities and 60 days for schedules of assets.

PG&E has 50,000 creditors, attorney Stephen Karotkin says.

PG&E is seeking to maintain its obligations to critical suppliers in the areas of reliability, public health and safety, and nuclear power. But the company wants to keep the list of vendors secret for security reasons.

Several attorneys for lenders have lined up to oppose that.

Keeping the list secret is "subverting the priorities of the bankruptcy court without any evidence," a creditor's attorney says. "It's hard to know what the record is."

PG&E's Matthew Goren argues they'll review each request and don't want to get into this in a public setting.

An attorney for Turner Construction says "We too believe we're critical," and that he simply wants more information.

PG&E's Matthew Goren says an added complexity is overlapping debtor committees with mixed members.

PG&E attorney Stephen Karotkin comes up behind his colleague Matthew Goren to whisper something in his ear as Goren is talking to Judge Montali, but Goren waves off Karotkin and loudly tells him, "I know!"

PG&E attorney Matthew Goren argues to Judge Montali that just because a vendor isn't being paid today doesn't mean they'll be paid tomorrow.

"They aren't being prejudiced and are free to demonstrate to the debtor their criticality."

PG&E attorney Matthew Goren reinforces for Judge Montali:

"We're perfectly happy to discuss the critical nature with each vendor, but there is sufficient evidence to support interim and final relief for debtors."

PG&E had $811M of critical contracts leading up to bankruptcy.

An attorney for Butte County wildfire victims, his voice rising, pleads with Judge Montali for PG&E to also honor existing settlement payments to 22 plaintiffs alongside the critical contracts, and to not have those agreements take priority over the to-be-paid damages.

NEWS: Judge Montali overruled the objections of critical vendors and wildfire victims' attorneys to keep the PG&E list secret.

We're back from a 15-minute recess.

An outside attorney for the California Public Utilities Commission says the agency "intends to be an active participant in this case" defending ratepayer interests.

"That makes two of us," Judge Montali replies.

An attorney for a number of cities and counties affected by recent wildfires, including Butte and Sonoma, said PG&E attorney Stephen Karotkin is a fair lawyer.

"We know there will be diversions" in the bankruptcy case, he said, "but hope they'll be minimal."

Khaldoun Baghdadi, a court-appointed liaison for victims in the 2017 North Bay Fires, says those affected by the blazes are in bankruptcy court "through no choice of their own."

Mary Alexander, a liaison in the 2016 Ghost Ship warehouse fire in Oakland, is making an appearance in bankruptcy court.

Judge Montali said he wasn't aware of Ghost Ship's connection to PG&E.

Alexander is leading a lawsuit against PG&E for their alleged role in the disaster.

Dennis Dunne, an attorney for an ad-hoc committee with over $7B in unsecured bonds, says "I suspect we will be a repeat appearance at this hearing."

Dunne says there will surely be disagreements with PG&E, but that his committee will try to resolve as many of them outside court.

Jones Day attorney Bruce Bennett is making an appearance on behalf of clients who hold more than 20% of PG&E's issued and outstanding equity.

Just before lunch, PG&E attorney Stephen Karotkin told Judge Montali that "I think it's essential we get through all the motions today."

Montali cancels the lunch break, and we're now hearing from the third PG&E attorney today. The company has eight lawyers crowded at a table.

Read the dispatch I filed during the lunch break, now updated with Judge Montali's decisions this afternoon on $PCG's DIP financing:

"Bankruptcy judge grants early victories to PG&E"

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