California Gov. Gavin Newsom and bankruptcy bound Pacific Gas and Electric Co. (PG&E) and its parent company have informed a federal court in San Francisco of their joint support for a revised plan of reorganization for the combination utility’s exit from Chapter 11. The agreement includes PG&E’s acceptance of a state takeover if it fails to get timely court and state approvals.

In motions to U.S. Bankruptcy Judge Dennis Montali late Friday, Newsom confirmed that PG&E’s plan, with modifications, now meets the requirements of the state’s wildfire relief law, Assembly Bill (AB) 1054.

A “rate neutral securitization” option from another recent wildfire law (Senate Bill, SB, 901) is in the public interest, Newsom said.

SB 901 should “strengthen the going-forward business [of a reorganized PG&E] and support its ability to provide safe, reliable, affordable and clean energy to its customers,” according to Newsom.

In announcing the latest milestone, PG&E listed a half-dozen new commitments it has made as a result of recent weeks of negotiations with Newsom’s office. Heading the list is PG&E’s agreement to support stronger regulatory oversight from the California Public Utilities Commission (CPUC), including accepting the embedding of a third-party state observer at the utility to assess progress on safety goals before PG&E’s exit from bankruptcy.

Aside from the possible sale to the state, the other changes PG&E agreed to involve financial limitations regarding dividends, $7.5 billion of utility rate-neutral post-bankruptcy financing, and a ban on using ratepayer funds to cover PG&E’s estimated $25.5 billion in wildfire liabilities.

PG&E spokesperson Ari Vanrenen said the utility has already taken a number of steps to ensure the reorganization plan meets all AB 1054 requirements. The federal bankruptcy court earlier this month approved the utility’s exit financing arrangements.

CEO Bill Johnson praised the governor’s supportive bankruptcy court comments, and said the beleaguered company now is focused on gaining approval for its exit plan from a still-skeptical CPUC so it can pay wildfire victims and participate in the AB 1054 wildfire fund.

Johnson said PG&E will partner with the state to achieve “bold climate change goals and provide protection to California if the Chapter 11 process is not concluded in a timely manner.”

Upon exiting bankruptcy, the combination utility company will be “new and transformed,” he said.