SAN FRANCISCO (CN) – Pacific Gas and Electric would pay no more than $17.9 billion for wildfire claims, far less than the $40 billion estimated by fire victims’ attorneys, under the terms of a plan proposed by the company in bankruptcy court Monday.
Wildfire victims would get $8.4 billion, fire victims’ insurers would get $8.5 billion and government entities would get $1 billion. That amounts to nearly half of the $30 billion in wildfire-related liabilities PG&E predicted when it filed for bankruptcy earlier this year.
Representing fire victims, attorney Cecily Dumas said by email that the plan “was not negotiated in good faith” with her clients and that the Official Committee of Tort Claimants, which represents fire victims, “strongly objects to the artificial and unsupported limitation on funds available to pay wildfire claims.”
PG&E CEO Bill Johnson painted the proposal in a different light, arguing it will “fairly compensate wildfire victims” and ensure PG&E emerges from bankruptcy “financially sound and able to continue meeting California’s clean energy goals.”
Under PG&E’s proposal, fire victims, insurers, government entities and shareholders are the only groups who would take a haircut, or receive less money than they are owed. PG&E previously agreed to settle claims with 14 cities and counties for $1 billion.
Other groups, including hedge funds to whom PG&E owes money in bonds or loans, would be fully paid. Only those who are “impaired,” or receive less money than they are owed, have a right to object to the plan in bankruptcy court.
U.S. District Judge Dennis Montali previously rejected requests by two groups of bondholders and insurers to terminate PG&E’s exclusive right to propose its own bankruptcy plan.
The bondholders proposed injecting $30 billion in new capital to help PG&E pay off its debt in exchange for a majority stake in the restructured company. Insurers sought to convert their estimated $20 billion in claims against PG&E to new stock in the company, which would also give them a major stake in the corporation. PG&E dismissed both proposals as attempts to seize control of the company.
Under the plan proposed by PG&E Monday, the company would also contribute nearly $5 billion to a state wildfire fund established by the California Legislature earlier this year. PG&E must contribute to that fund and exit bankruptcy by June 30, 2020, in order to access $21 billion that can be used to settle future wildfire claims. The money will come from utility contributions and the extension of a $2.50 monthly surcharge on Californians’ energy bills, enacted during the state’s energy crisis in the early 2000s.
On Friday, the city of San Francisco offered to pay $2.5 billion to buy PG&E’s power lines and take over electric utility operations in the city. City officials said the money could help PG&E pay wildfire victims, but the company responded in a statement that the offer would not serve “the best interests of our customers and stakeholders.”
Meanwhile, the bankruptcy case has expanded to encompass three separate courts. A state court jury will decide if PG&E is liable for the 2017 Tubbs Fire, which killed 22 people and caused $6.2 billion in damage, despite disputed Cal Fire findings that the fire was caused by a “private electrical system” and not PG&E equipment.
PG&E said it plans to file an appeal of Montali’s decision to allow the state court trial with U.S. District Judge James Donato. Donato is overseeing the process of estimating PG&E’s liability for the 2017 and 2018 wildfires. Donato will also decide if claims for damages resulting from emotional distress, in addition to physical injuries, death and property loss, may be included in that estimate.
PG&E’s CEO said in a statement Monday that the company is committed to emerging from bankruptcy in a better position to serve the 16 million people who depend on it for electric and gas service.
“Throughout this process, we remain focused on the guiding principles of safely and reliably delivering energy to our customers, further reducing the risk of wildfires, and continuing to support the state’s clean energy goals,” Johnson said. “I am confident that we can, and will, provide better service to our customers and communities, and our plan of reorganization is another step in this process.”
By Nicholas Iovino
Source: Courthouse News Service