FILE PHOTO: PG&E works on power lines to repair damage caused by the Camp Fire in Paradise, California, U.S. November 21, 2018. REUTERS/Elijah Nouvelage

NEW YORK (Reuters) - California utility owner PG&E Corp is exploring expanding its board as it navigates bankruptcy proceedings in an effort to potentially settle an ongoing battle with shareholder BlueMountain Capital Management LLC, people familiar with the matter said on Wednesday.

The discussions between PG&E and BlueMountain representatives underscore the restructuring challenges the company faces since filing for bankruptcy in January to address potentially crushing liabilities from catastrophic wildfires.

The talks come days after PG&E named a new chief executive and unveiled plans to appoint 10 directors to a newly formed board in response to pressure from other shareholders. California Governor Gavin Newsom criticized the slate as dominated by hedge-fund financiers, out-of-state executives and others lacking experience operating utilities.

The discussions are in early stages and will not necessarily lead to a deal that would again revamp PG&E’s board, according to the sources, who spoke on condition of anonymity because the talks are confidential. A PG&E representative declined to comment.

BlueMountain, a New York-based hedge fund, in March selected 13 candidates for PG&E’s board after slamming the company for seeking bankruptcy protection. BlueMountain’s slate includes an expert in resolving victim claims, a former treasurer of the state of California, a prominent California-based hedge fund manager, and people with banking and energy industry expertise.

Sources familiar with the talks have said that the company has been impressed with the skill-set the BlueMountain nominees bring in three main areas: doing business in California, safety and risk management, and utility and clean energy operations.

BlueMountain owns roughly 8 million PG&E shares, far less than the amount held by a group that includes Knighthead Capital Management, Redwood Capital Management and Abrams Capital Management. This group pushed for PG&E to hire Bill Johnson, who has been chief executive of the Tennessee Valley Authority, as its new leader.