California Governor Gavin Newsom isn’t the only potential obstacle facing PG&E Corp.’s plan to finish its bankruptcy case by June 30. Fire victims who blame the utility for their losses could also derail it.
U.S. Bankruptcy Judge Dennis Montali warned the company and its backers that it needs to win broad support from fire victims or face a backlash of anger when they vote on the proposal this spring. If the victims, who are considered creditors, reject the plan, Montali said he may block it.
The looming vote from fire victims is a reminder of the precarious balancing act PG&E faces as it pushes to emerge from the biggest utility bankruptcy in U.S. history. While the utility has secured support from bondholders, insurers and others, winning over families and small business owners devastated by fires blamed on PG&E’s equipment may be a more formidable hurdle.
“There is a significant uprising underway among the fire victims,” said lawyer Tom Tosdal, who represents 1,000 people who were harmed by wildfires blamed on PG&E. “There is a chance the fire victims would vote it down because the government is in there grabbing money.”
PG&E shares fell 0.2% before the start of regular trading in New York.
The biggest complaint by the victims is that the $13.5 billion PG&E has pledged to help them is going to be shared with the Federal Emergency Management Agency, which says it is owed $3.9 billion. Attorneys for the victims will be in court Feb. 26 to ask Montali to dismiss FEMA’s claim.
The company did not directly respond to questions about what would happen if fire victims vote against the reorganization plan.
Instead, in an emailed statement, the utility reiterated its commitment to pay victims: “From the beginning of the Chapter 11 process, getting wildfire victims fairly compensated, especially the individuals, has been our primary goal,” the company said in its statement. “We want to help our customers, our neighbors and our friends in those impacted areas recover and rebuild after these tragic wildfires.”
PG&E has multibillion-dollar deals with bondholders, insurers and local governments that require them to back the utility’s reorganization plan. But the residents and businesses who hold 80,000 wildfire claims against PG&E can vote as they choose.
Montali will hold a hearing today in which fire victim William Abrams will try to get the judge to reverse his earlier decision to approve a deal between the company and a committee representing residents who lost homes and businesses in fires blamed on PG&E.
On Friday, PG&E released a disclosure statement designed to explain the complex reorganization plan in plain language. Montali has warned lawyers backing the plan to make that disclosure statement as easy to understand as possible to help fire victims and other creditors decide how to vote.
“There is this hostility toward” PG&E’s plan, Montali said at a court hearing last month, citing numerous letters he has received. “If for some reason the fire survivors vote against the plan, I’m not so sure I’m going to cram the plan down.”
Under bankruptcy rules, a judge must take creditor votes into consideration when deciding whether to approve a reorganization proposal. Overriding the negative vote of a specific class of creditors, like the fire victims, is called “cramming down” the plan.
Under their restructuring deal with PG&E, victim attorneys must try to persuade their clients to vote for the reorganization deal, which sets up a trust to pay fire survivors.. If their lawyers fail to block FEMA’s claim, fire victims could see their proposed recovery cut, spuring a vote against the plan.
“Whoever is administering that trust better brace themselves for emotional criticism, anger and frustration,” said Kenneth Feinberg, who has overseen some of the biggest mass compensation efforts in U.S. history, including the fund for victims of the 9/11 terrorist attacks. “It goes with the territory.”
Telling Their Story
Money is only one issue for victims, Feinberg said. Another is the frustration of not having the chance to tell their stories to those responsible, Feinberg said.
Victoria Gann lost her home in the 2018 Camp Fire in Northern California. Since then, she has lived in various FEMA camps while waiting for the money she needs to rebuild her life. Her biggest complaint is that PG&E officials haven’t spent time listening to fire survivors like her tell their stories.
“This is the request,” she wrote in a Jan. 17 email to Montali. “Two hours together. It is time for a change. It is time for PG&E to see faces and hear the voices of those they have taken everything from.”
The bankruptcy case is PG&E Corp. 19-bk-30088, U.S. Bankruptcy Court, Northern District of California (San Francisco)
— With assistance by Mark Chediak