Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Related Party Transactions

Approval Policies

The Boards of PG&E Corporation and the Utility each adopted a written policy (the companies’ Related Party Transaction Policy (“Policy”)) which generally requires Audit Committee approval or ratification of transactions that would require disclosure under Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934 (“Item 404(a)”), except that the Policy has a lower dollar threshold than Item 404(a).

Under the Policy, at the first meeting of each year, each company’s Audit Committee reviews, approves, and/or ratifies related party transactions (other than the types of transactions that are excluded from disclosure under Item 404(a), as described below) with values exceeding $10,000 in which either company participates and in which any “Related Party” has a material direct or indirect interest. For these purposes, “Related Party” generally includes (1) any director, nominee for director, or executive officer, (2) holders of greater than 5 percent of that company’s voting securities, and (3) those parties’ immediate family members.

After the annual review and approval of related party transactions, if either company wishes to enter into a new related party transaction, then that transaction must be either pre-approved or ratified by the applicable Audit Committee. If a transaction is not ratified in accordance with the Policy, management will make all reasonable efforts to cancel or annul that transaction.

Where it is not practical or desirable to wait until the next Audit Committee meeting to obtain approval or ratification, the Chair of the applicable Audit Committee may elect to approve a particular related party transaction. If the Chair of the applicable Audit Committee has an interest in the proposed related party transaction, then that transaction may be reviewed and approved by another independent and disinterested member of the applicable Audit Committee. In either case, the individual approving the transaction must report such approval to the full Committee at the next regularly scheduled meeting.

When reviewing any related party transaction, the Audit Committees consider whether the transaction is on terms comparable to those that could be obtained in arm’s-length dealings with an unrelated third party. The Policy also requires that each Audit Committee disclose to the respective Board any material related party transactions.

As provided in Item 404(a), the following types of transactions are excluded:

Since January 1, 2019, all related party transactions have been approved or ratified by the applicable Audit Committee in accordance with this Policy, except for entering into the backstop commitment letters with Knighthead, Abrams and Stonehill, which were reviewed and approved by the full PG&E Corporation Board.

Related Person Transactions

Kathy Thomason is employed by the Utility as a Business Finance Analyst, Expert, and she is the spouse of David S. Thomason, who is Vice President, Chief Financial Officer, and Controller of the Utility. Since January 1, 2019, Ms. Thomason received compensation and related payments and benefits from the Utility with a value of approximately $ 170,000. Any payments to Ms. Thomason for services rendered during 2020 are expected to be similar in nature and value to payments provided during 2019, consistent with the Utility’s policies and practices that apply to employee compensation generally.

Backstop Commitment Letters

According to the Schedule 13Ds filed with the SEC on August 7, 2019 by Knighthead and Abrams, each of Knighthead and Abrams may be deemed to be a member of a group for the purposes of Section 13(d)(3) of the Securities Exchange Act of 1934 comprised of Knighthead and Abrams. Together, Knighthead and Abrams own more than 5% of the outstanding common stock of PG&E Corporation. On September 9, 2019, PG&E Corporation entered into Chapter 11 Plan Backstop Commitment Letters with Knighthead and Abrams. Knighthead and Abrams committed to purchase $1.0 billion and $500 million, respectively, of shares of PG&E Corporation, subject to the terms and conditions set forth therein. As of September 9, 2019, the total amount of such commitments was $1.5 billion. For a complete description of these equity backstop commitments, see PG&E Corporation’s and the Utility’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 9, 2019.

On September 13, 2019, PG&E Corporation entered into amended Chapter 11 Plan Backstop Commitment Letters with Knighthead and Abrams. Knighthead and Abrams committed to purchase $1.0 billion and $500 million, respectively, of shares of PG&E Corporation, subject to the terms and conditions set forth therein. As of September 13, 2019, the total amount of such commitments was $1.5 billion. For a complete description of these equity backstop commitments, see PG&E Corporation’s and the Utility’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 13, 2019.

According to the amended Schedule 13G filed with the SEC on February 14, 2020 by Stonehill, Stonehill owns more than 5% of the outstanding First Preferred Stock, Cumulative, par value $25 per share of the Utility. On September 30, 2019, PG&E Corporation entered into a Chapter 11 Plan Backstop Commitment Letter with Stonehill. Stonehill committed to purchase $295 million of shares of PG&E Corporation, subject to the terms and conditions set forth therein. As of September 30, 2019, the total amount of such commitments (including similar commitments of third parties) was $14.0 billion. For a complete description of these equity backstop commitments, see PG&E Corporation’s and the Utility’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 1, 2019.

On November 16, 2019, PG&E Corporation entered into new Chapter 11 Plan Backstop Commitment Letters with Knighthead and Abrams which superseded the earlier backstop commitments. Knighthead and Abrams committed to purchase $400 million and $400 million, respectively, of shares of PG&E Corporation, subject to the terms and conditions set forth therein. As of November 16, 2019, the total amount of such commitments (including similar commitments of third parties) was $7.415 billion. For a complete description of these equity backstop commitments, see PG&E Corporation’s and the Utility’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 18, 2019.

On November 16, 2019, PG&E Corporation entered into a Chapter 11 Plan Backstop Commitment Letter with Stonehill. Stonehill committed to purchase $50 million of shares of PG&E Corporation, subject to the terms and conditions set forth therein. As of November 16, 2019, the total amount of such commitments (including similar commitments of third parties) was $7.415 billion. For a complete description of these equity backstop commitments, see PG&E Corporation’s and the Utility’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 18, 2019.

On December 6, 2019, PG&E Corporation entered into new Chapter 11 Plan Backstop Commitment Letters with Knighthead and Abrams which superseded the earlier backstop commitments. Knighthead and Abrams committed to purchase $548 million and $548 million, respectively, of shares of PG&E Corporation, subject to the terms and conditions set forth therein. As of December 6, 2019, the total amount of such commitments (including similar commitments of third parties) was $12 billion. For a complete description of these equity backstop commitments, see PG&E Corporation’s and the Utility’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 11, 2019.

On December 6, 2019, PG&E Corporation entered into a Chapter 11 Plan Backstop Commitment Letter with Stonehill. Stonehill committed to purchase $184 million of shares of PG&E Corporation, subject to the terms and conditions set forth therein. As of December 6, 2019, the total amount of such commitments (including similar commitments of third parties) was $12.0 billion. For a complete description of these equity backstop commitments, see PG&E Corporation’s and the Utility’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 11, 2019.

On December 23, 2019, PG&E Corporation entered into new Chapter 11 Plan Backstop Commitment Letters with Knighthead and Abrams which superseded the earlier backstop commitments. Knighthead and Abrams committed to purchase $400 million and $300 million, respectively, of shares of PG&E Corporation, subject to the terms and conditions set forth therein. As of December 23, 2019, the total amount of such commitments (including similar commitments of third parties) was $12 billion. For a complete description of these equity backstop commitments, see PG&E Corporation’s and the Utility’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 26, 2019.

On December 23, 2019, PG&E Corporation entered into a Chapter 11 Plan Backstop Commitment Letter with Stonehill. Stonehill committed to purchase $150 million of shares of PG&E Corporation, subject to the terms and conditions set forth therein. As of December 23, 2019, the total amount of such commitments (including similar commitments of third parties) was $12.0 billion. For a complete description of these equity backstop commitments, see PG&E Corporation’s and the Utility’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 26, 2019.

On March 1, 2020, PG&E Corporation entered into new Chapter 11 Plan Backstop Commitment Letters with Knighthead and Abrams which superseded the earlier backstop commitments. Knighthead and Abrams committed to purchase $400 million and $300 million, respectively, of shares of PG&E Corporation, subject to the terms and conditions set forth therein. As of December 23, 2019, the total amount of such commitments (including similar commitments of third parties) was $700 million. For a complete description of these equity backstop commitments, see PG&E Corporation’s and the Utility’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 2, 2020.

On March 6, 2020, PG&E Corporation entered into a Chapter 11 Plan Backstop Commitment Letter with Stonehill. Stonehill committed to purchase $150 million of shares of PG&E Corporation, subject to the terms and conditions set forth therein. As of March 6, 2020, the total amount of such commitments (including similar commitments of third parties) was $12.0 billion. For a complete description of these equity backstop commitments, see PG&E Corporation’s and the Utility’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 10, 2020.

Director Independence

On both PG&E Corporation’s Board and the Utility’s Board, at least 75 percent of the directors are independent, as required by each company’s Guidelines. The definitions of “independence” are identical for each company, are set forth in each company’s Guidelines, and reflect applicable NYSE definitions.

As of February 21, 2020, all of PG&E Corporation’s non-employee directors also are independent as defined by the NYSE. The Utility Board is exempt from NYSE American rules requiring that at least a majority of the directors meet the stock exchange’s definition of “independent director” because PG&E Corporation holds approximately 96 percent of the voting power of the Utility and the Utility is a “controlled” subsidiary.

The Boards of the Corporation and the Utility have determined that each of the following directors is independent according to the applicable company’s Guidelines: Richard R. Barrera, Jeffrey L. Bleich, Nora Mead Brownell, Cheryl F. Campbell, Fred J. Fowler, Michael J. Leffell, Dominique Mielle, Meridee A. Moore, Eric D. Mullins, Kristine M. Schmidt, William L. Smith, Alejandro D. Wolff and John M. Woolard. PG&E Corporation and the Utility also have determined that from January 1, 2019 to the date of this Amendment No. 1, each of the following past directors was independent while serving on the Boards, according to the applicable company’s Guidelines: Frederick W. Buckman, Lewis Chew, Richard C. Kelly, Roger H. Kimmel, Kenneth Liang, Richard A. Meserve, Forrest E. Miller, Benito Minicucci, Rosendo G. Parra, Barbara L. Rambo, and Anne Shen Smith.

In assessing each director’s independence, the companies considered transactions between PG&E Corporation or the Utility and their respective directors, and their immediate family members, and certain entities with which the directors or their immediate family members were affiliated. These transactions primarily involved (a) the Utility’s provision of utility services at rates or charges fixed in conformity with law or governmental authority and (b) membership fees paid to a non-profit entity previously affiliated with one of the companies’ directors (in amounts below the $10,000 threshold for Audit Committee review pursuant to the companies’ Related Party Transaction Policy), which the Boards determined were not material and did not affect the director’s independence.

In assessing the independence of each member of the Audit Committees, the Boards of PG&E Corporation and the Utility considered the following: Michael Schmidt, brother of Kristine M. Schmidt, is currently the Chief Technology Officer of Deloitte & Touche LLP (“Deloitte & Touche”), the independent registered public accounting firm for PG&E Corporation and the Utility since 1999. In his capacity as the Chief Technology Officer, Mr. Schmidt oversees technology issues relating to Deloitte & Touche’s global and U.S. audit functions. Mr. Schmidt does not participate in any auditing or quality control activities at Deloitte & Touche or work on any matters related to PG&E Corporation or the Utility and is not otherwise a “covered person” within the meaning of Item 2-01 of Regulation S-X under the Securities Act. The Boards determined that Ms. Schmidt’s family relationship does not affect Ms. Schmidt’s or Deloitte & Touche’s independence.

Each of the Audit Committees, the Compensation Committee, and the Nominating and Governance Committee is composed entirely of independent directors, as defined in the applicable company’s Guidelines and the Committee’s charters. In addition, the Audit Committees, the Compensation Committee, and the Nominating and Governance Committee are composed entirely of independent directors, as required and defined by the NYSE. Because the Utility is a “controlled” subsidiary of PG&E Corporation for purposes of the NYSE American standards, the Utility is not subject to NYSE American rules that otherwise would require that the Utility’s Board committees responsible for executive compensation and governance be comprised of “independent” directors, as defined by NYSE American, and would impose requirements on the Utility’s director nomination and compensation-setting processes.

Each member of the Audit Committees and each member of the Compensation Committee also satisfies heightened independence standards established by SEC rules and applicable stock exchange requirements regarding independence of audit committee members and compensation committee members.