BANKRUPTCY FILING

12 Months Ended

Dec. 31, 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 14 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 Annual Report on 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.

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 November 11, 2019, the Bankruptcy Court entered an order approving a stipulation between PG&E Corporation and the Utility and the TCC to extend the Bar Date for unfiled, non-governmental fire claimants to December 31, 2019, at 5:00 p.m. (Pacific Time).

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 14 (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.

Plan of Reorganization, RSAs, 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 for the resolution of the outstanding pre-petition claims against and interests in PG&E Corporation and the Utility, which was thereafter amended on September 23, 2019 and November 4, 2019. On January 31, 2020, PG&E Corporation and the Utility, certain funds and accounts managed or advised by Abrams Capital Management, LP (“Abrams”), and certain funds and accounts managed or advised by Knighthead Capital Management, LLC (“Knighthead” and, together with Abrams, the “Shareholder Proponents”) filed the Debtors’ and Shareholder Proponents’ Joint Chapter 11 Plan of Reorganization dated January 31, 2020 with the Bankruptcy Court (as may be amended, modified or supplemented from time to time, the “Proposed Plan”).

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”) which agreement was amended and restated on November 1, 2019 and subsequently amended further during November and December 2019 (as amended, the “Subrogation RSA”). The Subrogation 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 Subrogation RSA. Under the Subrogation 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 Subrogation RSA. 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 Subrogation RSA and approval of the Subrogation Claims Settlement. Hearings on PG&E Corporation’s and the Utility’s motion to approve the Subrogation RSA were held on October 23, 2019, December 4, 2019 and December 17, 2019. On December 19, 2019, the Bankruptcy Court entered an order granting PG&E Corporation’s and the Utility’s motion to approve the Subrogation RSA. See “Restructuring Support Agreement with Holders of Subrogation Claims” in Note 14 for further information on the Subrogation RSA.

On December 6, 2019, PG&E Corporation and the Utility entered into a Restructuring Support Agreement, which was subsequently amended on December 16, 2019 (as amended, the “TCC RSA”), with the TCC, the attorneys and other advisors and agents for holders of Fire Victim Claims (as defined below) that are signatories to the TCC RSA (each a “Consenting Fire Claimant Professional”), and the Shareholder Proponents. The TCC RSA provides for, among other things, an aggregate of $13.5 billion in value to be provided by PG&E Corporation and the Utility pursuant to the Proposed Plan in order to settle and discharge all claims against PG&E Corporation and the Utility relating to the 2015 Butte fire, the 2017 Northern California wildfires and the 2018 Camp fire (other than the Subrogation Claims and the Public Entity Wildfire Claims) (the “Fire Victim Claims”), upon the terms and conditions set forth in the TCC RSA and the Proposed Plan. On December 9, 2019, PG&E Corporation and the Utility filed a motion with the Bankruptcy Court seeking authority to enter into, and perform under, the TCC RSA. A hearing on PG&E Corporation’s and the Utility’s motion to approve the TCC RSA was held on December 17, 2019. On December 19, 2019, the Bankruptcy Court entered an order granting PG&E Corporation’s and the Utility’s motion to approve the TCC RSA. See “Restructuring Support Agreement with the TCC” in Note 14 for further information on the TCC RSA.

Proposed Plan of Reorganization

The Proposed Plan proposes the following:

•compensation of wildfire victims and certain public entities from a trust funded for their benefit in an aggregate value of $13.5 billion in accordance with the terms of the TCC RSA (as further described under the heading “Restructuring Support Agreement with the TCC” in Note 14);

•compensation of insurance subrogation claimants from a trust funded for their benefit in the amount of $11.0 billion in cash in accordance with the terms of the Subrogation Claims Settlement and Subrogation RSA (as further described under the heading “Restructuring Support Agreement with Holders of Subrogation Claims” in Note 14);

•payment of $1.0 billion in cash 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 14);

•entitlement for the holders of claims related to the 2016 Ghost Ship fire to pursue their claims after the Effective Date, with any recovery being limited to amounts available under PG&E Corporation’s and the Utility’s insurance policies;

•refinancing of Utility Short-Term Notes, Utility Long-Term Notes and Utility Funded Debt (except Pollution Control Bonds Series 2008F and 2010E, which will be repaid in cash) with the issuance of new notes, reinstatement of Utility Reinstated Notes and reimbursement of the holders of Utility Long-Term Senior Notes for debt placement fees and the members of the Ad Hoc Noteholder Committee for professional fees of up to $99 million (as further described under the heading “Restructuring Support Agreement with the Ad Hoc Noteholder Committee”);

•payment in full of all pre-petition funded debt obligations of PG&E Corporation, 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 proposes the following key financing sources:

•one or more equity offerings of up to $9.0 billion, in accordance with the Backstop Commitment Letters, although the Backstop Commitment Letters (as described below) permit PG&E Corporation to draw up to $12.0 billion;

•the issuance of $6.75 billion of new equity to the Fire Victim Trust;

•the issuance of $4.75 billion of new PG&E Corporation debt;

•the reinstatement of $9.575 billion of pre-petition debt of the Utility;

•the issuance of $23.775 billion of new Utility debt, consisting of (i) $6.2 billion of New Utility Long-Term Notes to be issued to holders of certain pre-petition senior notes of the Utility pursuant to the Proposed Plan, (ii) $1.75 billion of New Utility Short-Term Notes to be issued to holders of certain pre-petition senior notes of the Utility pursuant to the Proposed Plan, (iii) $3.9 billion of Utility Funded Debt Exchange Notes to be issued to holders of certain pre-petition indebtedness of the Utility pursuant to the Proposed Plan and (iv) $11.925 billion of new debt securities or bank debt of the Utility to be issued to third parties for cash on or prior to the Effective Date (of which $6.0 billion is expected to be repaid with the proceeds of a new securitization transaction after the Effective Date);

•approximately $2.2 billion in proceeds of PG&E Corporation’s and the Utility’s liability insurance proceeds for wildfire events; and

•cash available to PG&E Corporation or the Utility immediately prior to the Effective Date.

On October 4, 2019, the CPUC issued an OII to consider the ratemaking and other implications of the Proposed Plan.

The Proposed Plan has not been approved and is subject to regulatory review by the CPUC and FERC, as and to the extent required by law, including as potentially causing a change in control under Section 203 of the Federal Power Act. The Proposed Plan 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.

Disclosure Statement

On February 7, 2020, pursuant to section 1125 of the Bankruptcy Code, PG&E Corporation and the Utility filed a proposed disclosure statement (the “Proposed Disclosure Statement”), with all schedules and exhibits thereto, for the Proposed Plan. PG&E Corporation and the Utility filed on February 18, 2020, a motion requesting that the Court (i) establish Plan solicitation and voting procedures, and (ii) approve the forms of Ballots, Solicitation Packages, and related notices to be sent to the various creditors and interest holders in connection with confirmation of the Plan (the “Solicitation Procedures Motion”). A hearing to consider approval of the Proposed Disclosure Statement and the relief requested in the Solicitation Procedures Motion is scheduled for March 10, 2020.

Restructuring Support Agreement with the Ad Hoc Noteholder Committee

On January 22, 2020, PG&E Corporation and the Utility entered into the Noteholder RSA with those holders of senior unsecured debt of the Utility that are identified as “Consenting Noteholders” below and the Shareholder Proponents. The Noteholder RSA provides for, among other things, (i) the refinancing of the Utility’s senior unsecured debt in satisfaction of all claims arising out of the Utility Short-Term Senior Notes, the Utility Long-Term Senior Notes and the Utility Funded Debt, each as defined below, and (ii) the reinstatement of the Utility Reinstated Senior Notes, as defined below (together with the Utility Short-Term Senior Notes and Utility Long-Term Senior Notes, the “Utility Senior Note Claims”), in each case pursuant to the Proposed Plan and upon the terms and conditions set forth in the Noteholder RSA. Under the Noteholder RSA, PG&E Corporation and the Utility have also agreed to reimburse the holders of Utility Long-Term Senior Notes for debt placement fees and the members of the Ad Hoc Noteholder Committee for professional fees of up to $99 million upon the terms and conditions set forth in the Noteholder RSA. The following holders of Utility Senior Notes Claims are party to the Noteholder RSA as “Consenting Noteholders” as of the date hereof: Apollo Global Management LLC, Elliott Management Corporation, Oaktree Capital Management L.P., Farallon Capital Management LLC, Capital Group, Värde Partners Inc., Davidson Kempner Capital Management LP, Canyon Capital Advisors LLC, Third Point LLC, Pacific Investment Management Company LLC, Citadel Advisors LLC and Sculptor Capital Investments, LLC. Any holder of Utility Senior Note Claims or Utility Funded Debt can become a party to the Noteholder RSA by executing the joinder attached to the Noteholder RSA.

The Noteholder RSA provides for the following treatment of Utility Senior Note Claims and Utility Funded Debt which treatment has been incorporated into the Proposed Plan:

•Utility Short-Term Senior Notes: Currently outstanding Utility notes maturing through 2022 in an aggregate principal amount of $1.75 billion (the “Utility Short-Term Senior Notes”) will receive new Utility secured notes in the following aggregate principal amounts: $875 million of new Utility 3.45% secured notes due 2025 and $875 million of new Utility 3.75% secured notes due 2028 (together, the “New Utility Short-Term Notes”). The New Utility Short-Term Notes will otherwise have substantially similar terms and conditions as the Utility’s 6.05% Senior Notes due March 1, 2034. Additionally, holders of claims arising out of the Utility Short-Term Senior Notes will receive cash in an amount equal to the sum of (1) the amount of pre-petition interest outstanding on the Utility Short-Term Senior Notes calculated using the applicable non-default contract rate and (2) interest calculated using the federal judgment rate on the sum of (A) the applicable principal amount of the Utility Short-Term Senior Notes and (B) the amount in clause (1) for the period commencing on the day after the Petition Date and ending on the Effective Date.

•Utility Long-Term Senior Notes: All long-term Utility notes bearing an interest rate greater than 5% of which there is an aggregate principal amount outstanding of $6.2 billion (the “Utility Long-Term Senior Notes”), will receive new Utility secured notes in the following aggregate principal amounts: $3.1 billion of new Utility 4.55% secured notes due 2030 and $3.1 billion of new Utility 4.95% secured notes due 2050 (together, the “New Utility Long-Term Notes”). The New Utility Long-Term Notes will otherwise have substantially similar terms and conditions as the Utility’s 3.95% Senior Notes due December 1, 2047. Additionally, holders of claims arising out of the Utility Long-Term Senior Notes will receive cash in an amount equal to the sum of (1) the amount of pre-petition interest outstanding on the Utility Long-Term Senior Notes calculated using the applicable non-default contract rate and (2) interest calculated using the federal judgment rate on the sum of (A) the applicable principal amount of the Utility Long-Term Senior Notes and (B) the amount in clause (1) for the period commencing on the Petition Date and ending on the Effective Date.

•Utility Reinstated Senior Notes: The remaining outstanding $9.575 billion aggregate principal amount of Utility notes (the “Utility Reinstated Senior Notes”) will be reinstated on their contractual terms, including being secured equally and ratably with the New Utility Short-Term Notes and the New Utility Long-Term Notes.

•Utility Funded Debt: Holders of the Utility’s pre-petition credit facilities and Pollution Control bonds (collectively, the “Utility Funded Debt”) will receive new Utility secured notes in the following aggregate principal amounts: $1.949 billion in new Utility 3.15% senior secured notes due 2025, and $1.949 billion in new Utility 4.50% senior secured notes due 2040 (the “New Utility Funded Debt Exchange Notes”). The New Utility Funded Debt Exchange Notes will otherwise have substantially similar terms and conditions as the Utility’s 6.05% Senior Notes due March 1, 2034. Additionally, holders of claims arising out of the Utility Funded Debt will receive cash in an amount equal to the sum of (1) the amount of pre-petition interest outstanding on the Utility Funded Debt calculated using the applicable non-default contract rate, (2) fees and charges and other obligations owed as of the Petition Date in respect of the Utility Funded Debt, (3) reasonable attorney’s fees and expenses of counsel, subject a maximum of $6 million and (4) interest calculated using the federal judgment rate on the sum of (A) the applicable principal amount of the Utility Funded Debt and (B) the amount in clauses (1) and (2) for the period commencing on the Petition Date and ending on the Effective Date.

The Noteholder RSA further provides that PG&E Corporation and the Utility must use their best efforts to cause various parties to PG&E Corporation and the Utility’s equity backstop commitment letters to transfer up to $2.0 billion of equity backstop commitments to certain of the Consenting Noteholders.

Under the Noteholder RSA, each Consenting Noteholder must, among other things, (i) withdraw any participation in and support for the Ad Hoc Noteholder Plan, including by taking certain actions to defer further action on the make-whole and post-petition interest issues, (ii) immediately direct counsel for the Ad Hoc Noteholder Committee to suspend its motion to reconsider the Bankruptcy Court order approving the Subrogation RSA and the TCC RSA and oppose any and all efforts and procedures to terminate, vacate or modify the TCC RSA or the Subrogation RSA, (iii) immediately withdraw all discovery issued in connection with PG&E Corporation and the Utility’s motion to approve their exit financing and file a statement in support of such motion, (iv) immediately withdraw all filings submitted in any proceeding before the CPUC involving PG&E Corporation and the Utility and cease participation in any proceeding before the CPUC involving PG&E Corporation and the Utility, and (v) vote to accept the Proposed Plan. Further, each Consenting Noteholder and each of its affiliates shall not, among other things, object to, delay, impede or take any other action to interfere with the approval of PG&E Corporation and the Utility’s disclosure statement or the solicitation of votes to accept, acceptance, confirmation, or implementation of the Proposed Plan. Each Consenting Noteholder further agreed, subject to certain exceptions, not to transfer any of its claims against PG&E Corporation and the Utility, unless the transferee either is a Consenting Noteholder, or before such transfer agrees in writing to become a Consenting Noteholder and to be bound by all the terms of the Noteholder RSA.

The Noteholder RSA will automatically terminate if the Effective Date of the Proposed Plan does not occur on or prior to September 30, 2020 or December 31, 2020 if such later outside date is approved by the Bankruptcy Court.

The Noteholder RSA may be terminated by a majority of the Consenting Noteholders under certain circumstances, including, among others, if (i) the treatment of the Utility Senior Note Claims or claims arising from Utility Funded Debt in the Proposed Plan are, or are modified to be, inconsistent with the Noteholder RSA, (ii) an order confirming the Proposed Plan is not entered on or before June 30, 2020, (iii) PG&E Corporation and the Utility fail to achieve an investment grade rating on the new senior secured notes from at least one credit rating agency on the Effective Date, (iv) PG&E Corporation and the Utility’s equity backstop commitment letters representing a majority of the equity backstop commitments are terminated or (v) PG&E Corporation and the Utility or the Shareholder Proponents breach certain provisions of the Noteholder RSA. The Noteholder RSA may be terminated by PG&E Corporation and the Utility or the Shareholder Proponents under certain circumstances, including, among others, if the Consenting Noteholders breach certain provisions of the Noteholder RSA.

PG&E Corporation and the Utility and the Shareholder Proponents have separately agreed with certain of the Consenting Noteholders that, among other things, these Consenting Noteholders and certain of their representatives will not have any communications regarding the Proposed Plan, any changes to the Proposed Plan, or any alternative plan of reorganization or other strategic transaction related to PG&E Corporation and the Utility, with certain external stakeholders of PG&E Corporation and the Utility, including certain claimholders, government officials and certain of their representatives. This agreement will be filed under seal with the Bankruptcy Court.

Equity Backstop Commitments

As of December 31, 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 $12.0 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 $12.0 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 $12.0 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. Although the Backstop Commitment Letters permit PG&E Corporation to draw up to $12.0 billion in equity, the Proposed Plan contemplates an equity raise of only $9.0 billion, which equity will be raised in accordance with the terms of the Backstop Commitment Letters.

Under the Backstop Commitment Letters, PG&E Corporation agrees that if the Backstop Commitments are drawn, and PG&E Corporation does not expect to conduct a third-party transaction based upon or related to the utilization or monetization of any net operating losses or tax deductions resulting from the payment of pre-petition wildfire-related claims (a “Tax Benefits Monetization Transaction”) on the Effective Date, no later than five business days prior to the Effective Date, PG&E Corporation and the Utility must form a trust which would provide for periodic distributions of cash to the Backstop Parties in amounts equal to (i) all tax benefits arising from the payment of wildfire-related claims in excess of (ii) the first $1.35 billion of tax benefits, starting with fiscal year 2020. PG&E Corporation intends to explore a Tax Benefits Monetization Transaction.

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, (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 aggregate 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. The Backstop Parties have consented to move the deadline for Bankruptcy Court approval of the Backstop Commitment Letters to February 28, 2020.

In addition, the Backstop Parties have certain termination rights under the Backstop Commitment Letters, including, among others, if (a) the Proposed Plan (including as may be amended, modified or otherwise changed) does not include Abrams and Knighthead as plan proponents and is not in a form acceptable to each of Abrams and Knighthead, (b) the Bankruptcy Court has not entered an order approving the Backstop Commitment Letters by February 28, 2020, (c) PG&E Corporation’s and the Utility’s aggregate liability with respect to pre-petition wildfire-related claims exceeds $25.5 billion, (d) the Proposed Plan is amended without the consent of the holders of a majority of the aggregate Backstop Commitments, (e) the Confirmation Order has not been entered by the Bankruptcy Court by June 30, 2020, (f) the Effective Date has not occurred within 60 days of entry of the Confirmation Order, (g) a material adverse effect (as described above) occurs, (h) 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, (i) 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 aggregate Backstop Commitments, (j) the amount of asserted administrative expense claims or the amount of administrative expense claims PG&E Corporation and the Utility have reserved for and/or paid in the aggregate exceeds $250 million, in each case excluding administrative expense claims that are ordinary course, professional fee claims, claims that are disallowed in the Chapter 11 Cases and the portion of an administrative expense claim that is covered by insurance, (k) one or more wildfires occur in the Utility’s service area on or after January 1, 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, (l) as of the Effective Date, 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, (m) at any time the Bankruptcy Court determines that PG&E Corporation and the Utility are insolvent, (n) PG&E Corporation and the Utility enter into any Tax Benefit Monetization Transaction and the net cash proceeds thereof are less than $3.0 billion, excluding the $1.35 billion of tax benefits to be utilized in the Proposed Plan, and (o) the Proposed Plan or any supplements to or other documents in connection with the Proposed Plan has been amended, modified or changed, without the consent of the holders of at least 66 2/3% of the aggregate Backstop Commitments, to include a process for transferring the license and operating assets of the Utility to the State of California or a third party (a “Transfer”) or PG&E Corporation and the Utility effect a Transfer other than pursuant to the Proposed Plan. 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.

The commitment premium for the Backstop Commitments is 6.364% of the amount of the Backstop Commitments. Such commitment premium will be earned in full upon Bankruptcy Court approval of the Backstop Commitment Letters, subject to clawback under certain circumstances set forth in the Backstop Commitment Letters. Subject to limited exceptions, all commitment premiums are payable in shares of common stock of PG&E Corporation 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 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. Under the Backstop Commitment Letters, PG&E Corporation and the Utility have also agreed to reimburse the Backstop Parties for reasonable professional fees and expenses of up to $17 million in the aggregate for the legal advisor and $19 million in the aggregate for the financial advisor, upon the terms and conditions set forth in the Backstop Commitment Letters.

Debt Commitment Letters

On October 11, 2019, PG&E Corporation and the Utility entered into debt commitment letters, which were subsequently amended on November 18, 2019, December 20, 2019, January 30, 2020, and February 14, 2020 (as amended, 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 $10.825 billion in bridge financing in the form of (a) a $5.825 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 $5.00 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.

In connection with the anticipated funding for the Proposed Plan and the anticipated amount of debt and equity to be used for funding thereunder, on February 14, 2020, the Debt Commitment Letters were amended to, among other things, (1) adjust the maximum amount of any roll-over, “take-back” or reinstated debt permitted under the Facilities from $30.0 billion to $33.35 billion at the Utility and from $7.0 billion to $5.0 billion at PG&E Corporation and (2) increase the amount of proceeds from the issuance of debt securities or other debt for borrowed money as a condition to funding from $2.0 billion at PG&E Corporation to $6.0 billion at the Utility.

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 $9.0 billion of proceeds from the issuance of equity, (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 February 28, 2020, and the Utility’s ability to borrow under the OpCo Facility is subject to approval by the CPUC.

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 February 26, 2020.

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.

Ad Hoc Noteholder Plan of Reorganization

On October 17, 2019, the TCC and the Ad Hoc Noteholder Committee filed the Ad Hoc Noteholder Plan. On December 19, 2019, pursuant to the TCC RSA (described below), the TCC filed a notice of withdrawal as a plan proponent of the Ad Hoc Noteholder Plan with the Bankruptcy Court. The Ad Hoc Noteholder Plan differed from the Proposed Plan in a number of respects, including, but not limited to, its treatment of equity interests, its treatment of holders of claims in respect of debt of PG&E Corporation and the Utility and its financing sources.

On January 22, 2020, the Ad Hoc Noteholder Committee entered into the Noteholder RSA with PG&E Corporation and the Utility, under which it agreed, upon entry of the order of the Bankruptcy Court approving the Noteholder RSA, to withdraw any participation in and support for the Ad Hoc Noteholder Plan, including by taking certain actions to defer further action on the make-whole and post-petition interest issues. On February 4, 2020, the Noteholder RSA was approved by the Bankruptcy Court, and on February 5, 2020, the Ad Hoc Noteholder Committee withdrew the Ad Hoc Noteholder Plan. It is possible that, if the Noteholder RSA is terminated, the Ad Hoc Noteholder Committee could re-file a competing plan with similar or different terms.

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 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 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 Consolidated Balance Sheets at December 31, 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 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 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 Consolidated Balance Sheets at December 31, 2019:

(in millions)	Utility		PG&E Corporation (1)		PG&E Corporation Consolidated
Financing debt (2)	$	22,450	$	666	$	23,116
Wildfire-related claims (3)	25,548		—		25,548
Trade creditors	1,183		5		1,188
Non-qualified benefit plan	20		137		157
2001 bankruptcy disputed claims (4)	234		—		234
Customer deposits & advances	71		—		71
Other	230		2		232
Total Liabilities Subject to Compromise	$	49,736	$	810	$	50,546

⁽¹⁾ PG&E Corporation amounts reflected under the column “PG&E Corporation” exclude the accounts of the Utility.

⁽²⁾ At December 31, 2019, PG&E Corporation and the Utility had $650 million and $21,526 million in aggregate principal amount of pre-petition indebtedness, respectively. Pre-petition financing debt includes accrued contractual interest of $1 million and $286 million for PG&E Corporation and the Utility, respectively, to the Petition Date. Financing debt also includes post-petition interest of $15 million and $638 million for PG&E Corporation and the Utility, respectively, in accordance with the terms of the Noteholder RSA. See Note 5 for details of pre-petition debt reported as LSTC.

⁽³⁾ See “Pre-petition Wildfire-related claims” in Note 14 for information regarding pre-petition wildfire-related claims reported as LSTC.

⁽⁴⁾ 2001 bankruptcy disputed claims includes $14 million of interest recorded at the interest rate specified by FERC in accordance with S35.19a of the Commission’s regulations.

Interest on Debt Subject to Compromise

On December 30, 2019, the Bankruptcy Court issued a memorandum decision in which it ruled that the UCC is entitled to post-petition interest at the Federal Judgment Rate of 2.59%. Pursuant to the Noteholder RSA, holders of $11.9 billion in aggregate principal amount of Utility Short-Term Senior Notes, Utility Long-Term Senior Notes and Utility Funded Debt will receive interest at the contractual rate for accrued and unpaid pre-petition interest plus interest at the Federal Judgement Rate on the sum of the applicable principal plus the amount of accrued and unpaid interest for the period commencing the day after the Petition Date and ending on the Effective Date. The $9.58 billion in aggregate principal of Utility Reinstated Senior notes will accrue interest at the contractual rate in accordance with the terms of the Noteholder RSA. From the Petition Date through December 31, 2019, the Utility concluded that interest was probable of being an allowed claim and resumed recording interest on pre-petition debt subject to compromise in accordance with the Noteholder RSA. For more information on Interest on Debt Subject to Compromise, see Note 5 of the Notes to the Consolidated Financial Statements.

Potential Claims

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, were filed late, or should be disallowed for other reasons. 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 Consolidated Balance Sheet will be recognized as reorganization items in PG&E Corporation’s and the Utility’s 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 $15 million and $223 million for PG&E Corporation and the Utility, respectively, during the year ended December 31, 2019. Reorganization items, net from the Petition Date through December 31, 2019 include the following:

	Petition Date Through December 31, 2019
(in millions)	Utility		PG&E Corporation (1)		PG&E Corporation Consolidated
Debtor-in-possession financing costs	$	97	$	17	$	114
Legal and other	273		19		292
Interest income	(50)		(10)		(60)
Adjustments to LSTC	—		—		—
Total reorganization items, net	$	320	$	26	$	346

⁽¹⁾ PG&E Corporation amounts reflected under the column “PG&E Corporation” exclude the accounts of the Utility.

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 were filed on November 20, 2019, PG&E Corporation’s and the Utility’s answering brief was filed on December 20, 2019, and reply briefs of FERC and the other appellants were filed on January 17, 2020. 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 opening brief was filed on November 20, 2019, FERC’s and respondent-intervenors’ answering briefs were filed on December 20, 2019, and the Utility’s reply brief was filed on January 17, 2020.

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, will not be resolved until after emergence from the Chapter 11 Cases.