Wildfire survivors support bid to seize control of PG&E ahead of Tubbs trial

Wildfire victims have stepped into the fray of one of the largest corporate bankruptcy cases in U.S. history, backing a competing proposal by a group of PG&E bondholders to wrest control of the company from its majority shareholders and set aside more money for individuals, businesses and others who suffered from catastrophic wildfires sparked by electrical equipment in 2017 and 2018.

Billions of dollars in financial payouts will be provided to wildfire victims who file simple claims in bankruptcy court, and the argument before U.S. Bankruptcy Judge Dennis Montali is over who gets to decide how much.

The new proposal would set a cap on victim payouts months before a California jury will have the chance, in a trial slated to start January, to decide whether and how much PG&E is liable for damages caused by the 2017 Tubbs fire, settling the controversy over how that fire started and whether the utility shares fault for the destruction.

Monday, Montali repeatedly voiced sharp skepticism about the bondholders’ plan, urging lawyers to explain why a potentially protracted legal battle over management of the investor-owned utility would benefit wildfire victims.

“To be blunt, my fear is that having a competing plan was designed as a battle over corporate control between two different money interests and has nothing to do with paying victims,” said Montali, who is expected to issue a written ruling on the request later this week.

Two years ago, the fires that erupted in the North Bay and Sierra Nevada foothills led to record-breaking devastation, killing 44 people and destroying more than 6,400 homes. In Sonoma County, the flames took more than 5,300 homes and 24 lives.

Most of the fires were started by PG&E equipment and power lines, undermining the financial stability of the state’s largest power company even before a worse outbreak of wildfire in Butte County last year, when a live wire broke free from a 100-year-old transmission tower and started the Camp fire. It destroyed about 14,000 homes and killed 85 people.

The start of 2019 continued on a momentous path. Cal Fire announced the Tubbs fire was likely sparked by private power equipment outside of Calistoga and not PG&E’s lines, a determination that upended widely held beliefs in Sonoma and Napa counties about how the inferno began and who was responsible for the damage.

The region, its residents, businesses and local governments were plunged into uncertainty over whether they would receive financial compensation for massive and in many cases unmanageable losses.

Five days after Cal Fire’s announcement, PG&E said it was seeking bankruptcy protection under the pressure of more than $30 billion in wildfire liabilities from 2017 and 2018. The move halted all lawsuits by wildfire victims seeking compensation from the utility.

So while the court fights stalled, the recovery efforts in Sonoma County and beyond marked progress. While thousands of fire-scarred lots still remain vacant, just as many now either have new homes or some signs of building activity.

Few fire survivors say they have staked their futures on compensation from the wildfire cases against PG&E, given the long timeline and the daunting prospects of an unfamiliar legal process.

Many are contending right now with the expiration of temporary coverage for living expenses - meaning they could be on the hook at the same time for a mortgage and monthly rent.

But Greg Wilson wants fellow fire survivors to know that they could receive significant financial support if they file a claim in PG&E’s bankruptcy case.

The night the Tubbs fire raged into Sonoma County, Wilson and his wife sought shelter in a swimming pool when flames came bearing down, blocking their escape and burning their Michele Way Estates neighborhood above Mark West Springs Road.

Wilson said the harrowing experience during the fire gave him a sense of purpose, and Cal Fire’s report on the cause of the Tubbs fire drove him to get involved.

He applied, and was chosen, to serve on an 11-person committee representing fire victims by a division of the U.S. Department of Justice, charged with ensuring all stakeholders have a voice in bankruptcy cases.

Cal Fire’s inconclusive report “left a bad taste in my mouth,” said Wilson, who hopes to move into his rebuilt home by the end of the year.

“Everything we endured, I like to think it gave me some strength. We’re there to represent all fire victims. We really want a level playing field for everyone.”

In August, Montali cleared the way for a California jury to settle the question of whether PG&E is responsible for damages caused by the Tubbs fire, saying in a written decision that a civil trial would provide wildfire victims a just resolution to their claims.

The San Francisco Superior Court trial is scheduled to start Jan. 7 with jury selection in. Judge Teri Jackson set aside eight weeks for the trial, which was split into two phases. The first part will focus on whether PG&E bears responsibility for the fire. If the jury finds PG&E liable, the second phase will focus on damages.

On Thursday, Jackson will consider PG&E’s request to have two different juries for the phases, a motion contested by lawyers for wildfire victims. They want the same jury to consider evidence about the utility’s conduct and, if found liable, make decisions about damages.

Santa Rosa resident Patrick McCallum, who lost his home in the Tubbs fire and lobbies on behalf of wildfire victims with the group Up from the Ashes, has been a key player in the behind-the-scenes negotiations with bondholders. He contends that the bondholders angling for control of PG&E have pledged to run a safer, more responsible company.

“Competition is good,” said McCallum, a Sacramento lobbyist. “And the group of hedge funds that compensates victims wholly and has safety as a priority is the group of investors we’re going to go with. The best for victims right now is the bondholders.”

The proposal before Montali represents a compromise struck between a committee representing wildfire victims and the bondholders. It would cap compensation at $14.5 billion for victims from the 2017 North Bay fires, the 2018 Camp fire and the 2016 fire in the Oakland Ghost Ship warehouse. The cap would also include payouts the utility must make to FEMA, Cal Fire and the California Public Utility Commission.

The proposal is about $6 billion more than PG&E’s current plan, which sets aside a trust capped at $8.4 billion for wildfire victims and the state and federal agencies. The utility has already struck a $1 billion tentative agreement to settle claims by local governments and another deal with insurers to settle their claims for $11 billion.

Jared Ellias, a UC Hastings law professor and bankruptcy expert who is a close observer of the PG&E case, said he believes the bondholders’ maneuver is leverage that could push PG&E to settle more quickly with wildfire victims on more favorable terms.

Most negotiations in bankruptcy cases take place behind closed doors, often with mediators, and the competing plan is a public part of that process, Ellias said.

“There will be bargaining and bargaining and that will benefit fire victims,” Ellias said. “You want there to be multiple dance partners.”

You can reach Staff Writer Julie Johnson at 707-521-5220 or julie.johnson@pressdemocrat.com. On Twitter @jjpressdem.