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PG&E Reaches $13.5 Billion Deal With Wildfire Victims

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PG&E Reaches $13.5 Billion Deal With Wildfire Victims

Today´s Deals

After months of tense negotiations, Pacific Gas & Electric and lawyers for forest fire victims who killed dozens of people and destroyed tens of thousands of homes and businesses agreed on Friday on a multi-billion dollar legal settlement.

The victims would not receive all of the $ 13.5 billion being made available under the contract. Part of that would be to pay the claims of some government agencies, and the victims' lawyers would get a share.

The deal is a big step forward for PG&E, whose response to forest fires has often faltered. For the victims, money would help them rebuild homes and lives after months of uncertainty, although many were likely to receive much less than they expected or needed. And a deal would significantly increase the likelihood that PG&E will emerge from bankruptcy before a crucial deadline in June. The company filed for bankruptcy in January, claiming it was facing about $ 30 billion in fire lawsuits.

"We turned the corner," said Patrick McCallum, a Sacramento lobbyist who runs the Up From the Ashes group of forest fire victims. "We're close. Finally, there is a solution for fire victims."

The agreement, which requires US Bankruptcy Court approval, follows agreements that PG&E has announced with insurance companies and some government agencies. A hearing is scheduled for December 20.

To receive payments, forest fire victims must file claims by December 31, a deadline that was extended after tens of thousands of victims failed to file complaints and some said they were not even aware of the process.

Even with the deal, the future of the dealership's operations remains uncertain. The devastating fires in 2017 and 2018, including the campfire that destroyed the northern California city of Paradise, angered many residents and elected officials, including San Jose Governor Gavin Newsom and Mayor Sam Liccardo. These leaders proposed making PG&E a public service, turning it into a cooperative owned by its customers, or selling it to an entity such as Warren E. Buffett's Berkshire Hathaway, owner of several large energy companies.

"There have been a lot of requests for PG&E to change in recent years," the company's chief executive, Bill Johnson, said in a statement. "The PG&E leadership team listened to these change requests and we realized that we need to do even more to be a different company now and in the future."

The breadth of the deal will help PG&E overcome its biggest legal challenges. The agreement not only sets out claims arising from the 2018 and 2017 forest fires, but also covers those at Butte Fire in 2015 and Ghost Ship in 2016 in Oakland. PG&E was one of several organizations prosecuted by the families of the Ghost Ship fire victims, which killed 36 people during a warehouse party with a long history of security breaches.

PG&E said the deal would also settle claims for the 2017 Tubbs Fire, a giant fire in northern California. The California Department of Forestry and Fire Protection had released PG&E of responsibility for this fire, but a California Superior Court judge scheduled a trial in January to determine if PG&E equipment caused it. The agreement could eliminate the need for this judgment.

Along with the destruction of forest fires caused by PG&E equipment, the utility has faced increasing criticism for its failure to inspect and maintain its transmission network. Many Californians have also expressed anger at how the company turned off the power of millions of people during periods of high winds and dry conditions to prevent fires.

A report released last week by the California Utilities Commission identified a 100-year-old transmission tower as the cause of the camp fire. It also revealed significant deficiencies in PG&E inspections of its power lines, a major cause of forest fires in the state.

In recent bankruptcy negotiations, Mr Newsom's representatives lobbied PG&E to sufficiently compensate fire victims, treat workers fairly and maintain their commitment to clean energy. He said the usefulness that emerges from bankruptcy must make security a priority.

In a statement, the victims 'lawyers said a fund would be set up to pay victims' claims, funded with a mix of "money, assets and other consideration." Equity is expected to be the PG&E stock that emerges from bankruptcy. But actions could lose some of their value if PG&E faces new financial challenges, including wildfires or other disasters caused by its equipment, potentially harming victims.

PG&E has already agreed to pay claims holders $ 11 billion in cash.

PG&E shares rose this week, with investors more optimistic about the prospects of a deal with the fire victims, but closed 1.3 percent on Friday.

The company originally offered to pay individual victims up to $ 8.4 billion, but increased its offer last month to try to win over the victims. Victims' lawyers estimated in July that claims against PG&E totaled $ 54 billion for the 2017 and 2018 fires.

PG&E is expected to exit bankruptcy by June to attract a fire fund California set up this year. The fund will help the three major utilities owned by state investors to pay future fire claims if they meet certain conditions, such as improving safety practices.

On Thursday, a federal judge overseeing PG&E probation following a 2010 gas blast that killed eight people in a San Francisco suburb asked the dealership to provide more information about equipment failures and pre-fire inspections. Depending on the company's responses, Judge William H. Alsup may initiate new disciplinary hearings or impose additional sanctions against the company.

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