Wildfire victims and Pacific Gas and Electric Co. bondholders have joined forces in an effort to reorganize the bankrupt utility and wrest control from its current stockholders.
The two groups told PG&E’s bankruptcy judge Thursday they are ready to offer their own proposal that would set aside $24 billion to pay everyone owed money because of fires started by the company’s power lines in recent years, including individual people whose homes burned down and insurance companies.
Their proposal is billions more than what PG&E has said it wants to pay victims as part of its plan to exit bankruptcy. The company has offered to pay individual victims from a trust capped at $8.4 billion and reached settlements with insurers and local governments of $11 billion and $1 billion, respectively.
Bondholders would invest $28.4 billion in exchange for a 58.8% stake in the utility’s parent PG&E Corp., diluting the firms who currently own shares of the company. The investment would fund creation of a $24 billion trust, in cash and stock, to pay claims from various fires in which the company was involved.
The trust would be acceptable to wildfire victims because they would designate someone to “manage the process,” attorneys for the committees of wildfire victims and bondholders involved in the PG&E case said in their joint filing.
“By placing the governance of the mechanism by which wildfire victims will be paid in the hands of the representatives of those victims, the Alternative Plan ensures a quick and fair process for victims to receive their recoveries,” the committees’ court papers said.
In an email, PG&E spokesman James Noonan noted the two settlements the company has already reached with parties in the bankruptcy case and said the company is “committed to working with the remaining individual plaintiffs to fairly and reasonably resolve their claims.”
“PG&E remains focused on doing right by the customers and communities we serve,” Noonan said in the email. “By contrast, the bondholders’ plan is an attempt to pay themselves more than they are entitled to under the law and costs customers billions of dollars.”
The committees said their plan is the only one that could make individuals whole and could avoid a “lengthy and uncertain” process to estimate the company’s wildfire liabilities. They said it could also prevent the need for a state court trial about PG&E’s role in the 2017 Tubbs Fire that is currently scheduled to begin Jan. 7.
State investigators said the Tubbs Fire was not started by PG&E, but victims’ attorneys think otherwise, and they previously persuaded U.S. Bankruptcy Judge Dennis Montali to let them try their case before a jury in San Francisco Superior Court.
In their joint court filing, victims’ and bondholders’ attorneys accused PG&E of prioritizing the interests of its current stockholders at the expense of others with a stake in the bankruptcy case. They called their plan “the only available path to a fair and equitable outcome for victims” that would resolve PG&E’s bankruptcy by June 30, a deadline the company must meet in order to access a fund to protect it from future fire costs.
The two groups asked Montali to terminate PG&E’s exclusive right to file a reorganization plan so they could formally introduce their own. The judge is set to hear them out Tuesday, which is when PG&E is supposed to update him on the company’s own plan of reorganization.
Montali rejected an earlier attempt from the bondholder group to terminate PG&E’s sole right to propose a reorganization plan. But the plan the company offered is untenable to people affected by the wildfires PG&E caused and does not have adequate financing, victims and bondholders told the judge.
Patrick McCallum, who lost his Santa Rosa home in the Tubbs Fire and now leads a group called Up from the Ashes that advocates for fire victims, said he hopes Montali ends PG&E’s exclusive right to put forward a reorganization plan.
Cecily Dumas, an attorney for the fire victims’ committee, said in another court filing on Wednesday that she and her clients had uncovered a “misconception” in the case. Possibly “hundreds if not thousands of victims” who could file a claim against PG&E have not done so “based on the belief, however mistaken, that they would be violating their insurance policies and the terms of payment of their benefits,” she said.
But while insurance covers damaged or destroyed property, it does not prevent someone from seeking payment for personal injuries such as emotional distress and physical harm, Dumas said. The victims’ committee plans to “conduct more comprehensive discovery” of insurance companies and the people they covered to try to “find out whether victims are confused and believed that they are prohibited from emotional distress claims because they received insurance payments,” she said.
Victims have until Oct. 21 to file a claim against PG&E as part of its bankruptcy case.
Source: San Francisco Chronicle