Close to Home: Five reasons why wildfire victims should accept PG&E’s offer
Over the next six weeks, wildfire victims will vote on whether to accept the $13.5 billion settlement negotiated by their lawyers and PG&E. I lost my home and all my family's possessions in these fires, and I am voting to accept this settlement. Let me explain why I am voting yes.
First, this is one of the largest settlements in history. PG&E is paying more to wildfire victims than victims of Enron were paid, more than victims of Worldcom or the Exxon-Valdez oil spill. This is an unprecedented bankruptcy settlement. In any litigation, $13.5 billion is a large amount of money, and this unrivaled opportunity allows for fire victims to be compensated for their immense losses.
Second, accepting the settlement rebuilds our communities now. Because of the June 30 deadline imposed by the state Legislature in AB 1054, wildfire victims had the unique leverage to insist that PG&E offer a large settlement quickly. If we vote no, wildfire victims will lose that leverage, causing many years of further litigation delay. Dow Corning's bankruptcy lasted nine years before its breast implant victims were partially paid. Enron's took eight years, paying only a small portion of their defrauded victims' losses. Johns-Mansville's took five years before asbestos victims were paid for their losses. If fire victims reject this $13.5 billion settlement, we will be back to square one. That means no money, which means homes and businesses aren't rebuilt. We cannot wait years and years more before we rebuild our communities.
Third, there is no other deal on the table. The bondholders withdrew their offer and, when invited, chose not to participate in the equity financing of the present deal. Likewise, the state declined to buy the company. Instead, Gov. Gavin Newsom came out in support of PG&E's reorganization, asking the federal Bankruptcy Court to approve the plan as presented. In the wake of the coronavirus stock market crash this month, there are no other investors lined up to provide the money. If we reject the current settlement, it will take years to pay wildfire victims.
Fourth, with the old PG&E now dead, the new company will be better positioned to improve safety and deliver electricity to Northern California. The officers and management team of old PG&E were replaced. A new board of directors will soon be in place. Most of PG&E's prior institutional owners were replaced as well. Newsom required the company to replace its board and invest billions in grid hardening technology to prevent future fires. The company cannot pay dividends for the next three years. The state will play a major role in selecting PG&E's new leaders and has the right to insist on objective safety improvements, or PG&E will lose its license.
Fifth, no one is required to accept stock in the company. The $13.5 billion amount is to be paid one-half in cash and one-half in stock. PG&E's obligations are backed by $12 billion in financial backstop commitments from more than 70 of the largest financial institutions in the United States. This backstop amounts to an insurance policy to help protect fire victims and ensure payments. Because the company is in bankruptcy with limited access to capital, fire victims also required that the owners of PG&E give up a percentage of their ownership of the company. The Fire Victims Trust is set to receive equity of PG&E, which will be sold off to create further cash to compensate victims. No one is required to take stock in the company, but given the company sells a product that will always be in demand, some clients may choose to keep stock as part of their settlement. Each client has that choice.
In summary, wildfire victims should vote yes and accept the settlement available to us.
Roy Miller of Santa Rosa is a partner in the Hansen & Miller Law Firm.
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