PG&E reaches $11 billion settlement over wildfire insurance claims

Pacific Gas & Electric has reached a tentative $11 billion settlement to compensate a group of insurance companies for claims they paid out to tens of thousands of residents and businesses hit by 2017 wildfires and the 2018 Camp fire.

The sum is below the $20 billion originally requested by insurers to cover losses but a boost from the $8.5 billion PG&E offered up just four days ago.

The agreement was blasted by some wildfire victims who still have no tentative deal. That pool includes burned-out households, businesses and those with wrongful death claims against the utility.

Those parties appear to be far apart in the negotiations, although the deadline for people who lost homes, businesses or loved ones to file a claim and be included as a creditor in the bankruptcy case - Oct. 21 - is fast approaching.

PG&E outlined a plan Monday to establish a trust capped at $8.4 billion to compensate tens of thousands of people and businesses with losses from 19 different fires.

But that sum was rebuffed as vastly insufficient according to court filings on behalf of wildfire victims estimating their losses at $54 billion. 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, characterized the $11 billion deal as an agreement that awards hedge funds that bailed out insurance companies by buying their claims at steep discounts.

“PG&E focuses on taking care of hedge funds and Wall Street and insurance companies and not on victims,” McCallum said.

The draft agreement offers $2.5 billion more than what PG&E offered to insurance companies earlier this week, causing concern from other groups that it’s drawing down the pot of money available to individual victims with losses from the fires.

It’s the latest deal reached between PG&E and its creditors in closed-door negotiations as the company builds a road map for exiting the bankruptcy protection it sought in January under mounting liability for wildfires caused by its power grid. The plans, including a $1 billion payout proposal reached in June to pay local government entities for costs incurred during firefights and recoveries, must be approved in U.S. Bankruptcy Court.

Friday’s plan settles with about 85% of insurance carriers with claims against PG&E, according to a statement from the utility announcing the plan. Bill Johnson, the utility’s president and chief executive officer, called the agreement “another step in doing what’s right for the communities, businesses, and individuals affected by the devastating wildfires.”

“As we work to resolve the remaining claims of those who’ve suffered, we are also focused on safely and reliably delivering energy to our customers, improving our systems and infrastructure, and continuing to support California’s clean energy goals. We are committed to becoming the utility our customers deserve.”

PG&E provides electric and gas services across 70,000 square miles of Northern and Central California and employs 24,000 people, including more than 700 in Sonoma County.

State fire investigators said PG&E’s power lines and equipment ignited all but three of the catastrophic wildfires that broke out over the past three years.

One of those outliers is the 2017 Tubbs fire, which started near Calistoga in northern Napa County and burned west over the Mayacamas Mountains into Sonoma County and Santa Rosa neighborhoods, destroying about 5,300 homes and killing 22 people in Sonoma and Napa counties.

After a 16-month investigation, Cal Fire investigators blamed a private property owner’s power lines for starting that fire.

But Tubbs victims have largely rejected Cal Fire’s findings, arguing the utility bears responsibility because of the company’s documented problems meeting state standards for clearing trees and other vegetation from its power lines and because the company failed to take measures like de-energizing lines during dangerous fire weather.

Last month, U.S. Bankruptcy Judge Dennis Montali agreed to lift a stay that halted all civil lawsuits against PG&E for a small group of litigants with losses from the Tubbs fire. The purpose was to allow a fast-tracked trial and ask a California jury to decide whether the utility should be held liable for damages.

There are several ways PG&E and fire claimants can reach an agreement. One of those includes a mediated agreement like= the kind reached with insurers Friday and local governments in June, and those negotiations are underway.

U.S. District Court Judge James Donato is preparing to start hearings to estimate how much money PG&E owes various categories of victims - such as homeowners, renters, business owners, employees and family of those who died - in each of the fires.

McCallum said his group is also pursuing a third option - negotiations with a group of bondholders that has made moves to gain enough of the company’s stock to wrest control away from current shareholders.

Regardless of how the deal is reached, victims need to file a claim through the bankruptcy court by Oct. 21 in order to be included. Some lawyers involved in the case are alarmed at the low number of wildfire victims who have filed claims to be included as a creditor in the bankruptcy case.

Khaldoun Baghdadi, a lawyer representing wildfire victims who are on a bankruptcy claimant committee, said records show only about 5% of the 60,000 to 80,000 people and entities eligible to file a claim in the bankruptcy case have done so.

While they expect thousands more to step forward before the Oct. 21 deadline, it could still be far lower than the number of people eligible for compensation.

“The headline I want to see every day is this: ‘PG&E has billions of dollars available to pay victims of wildfires who file claims,’” said Eric Goodman, an attorney with BakerHostetler representing wildfire victims as creditors in the PG&E bankruptcy case.

Goodman said there’s a widely held misconception about bankruptcy that creditors don’t get paid. In corporate bankruptcy, like PG&E’s, that’s simply not true, he said.

“Every wildfire victim should expect to be made whole,” Goodman said.

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