Pacific Gas & Electric is currently under bankruptcy protection but this morning the company announced an $11 billion settlement agreement which is a major step toward resolving claims connected to the deadly Camp Fire in northern California. Incredibly, the $11 billion figure was considered a win for the utility as it was much less than the amount insurance companies were seeking.
“These claims are based on payments made by insurance companies to individuals and businesses with insurance coverage for wildfire damages” in those catastrophic blazes, PG&E said in announcing the deal.
The utility says the tentative deal with a group of insurers covers about 85% of claims from those fires. While the $11 billion sum is large, it’s far smaller than the roughly $20 billion that the insurance companies wanted, after paying out billions to California wildfire victims.
However, this settlement is only part of the picture. The Sacramento Bee reports there is already a backlash from uninsured homeowners who believe PG&E just agreed to give away money that had been set aside for them. I know it’s Friday but some light math is required in order for this to make sense:
The $11 billion is $2.5 billion more than what PG&E offered the insurance carriers Monday, when the utility outlined a proposal to pay insurers $8.5 billion and the individual victims $8.4 billion, for a total of $16.9 billion. Yet in a Securities and Exchange Commission filing Friday, the company said it was raising the total payout by $1 billion, not $2.5 billion.
That suggests the company is scaling back its offer to the individual victims by $1.5 billion, said Patrick McCallum, a wine country fire victim and head of the lobbying group Up from the Ashes.
“They’re clearly trying to squeeze victims,” McCallum said.
A spokesman for PG&E denied that the company was taking money from one pot to put it in another saying, “The pot could change.” Maybe so, but the fact that the company is saying “it could” instead “it has” seems significant.
PG&E is rushing to exit bankruptcy in time for a court-mandated deadline next June. That’s the deadline for the company to join a “wildfire insurance fund” set up by the state. However, the company is also facing a potential hostile takeover:
The company is also trying to fend off a hostile takeover attempt by a group of hedge funds that hold PG&E bonds and are owed billions of dollars. The bondholders have proposed a rival plan in which they’d pay wildfire claims and take control of as much as 95 percent of PG&E’s stock at a steep discount.
PG&E’s reorganization plan would repay the bondholder hedge funds in full. Because of that, PG&E considers those debts “unimpaired” and ordinarily the bondholders wouldn’t have the right to challenge the reorganization plan.
The bondholders disagree and could fight the current plan in court. So, PG&E has many more hurdles it needs to clear but today’s settlement does represent some progress.
The Camp Fire is the deadliest wildfire in California’s history. It killed 85 people and destroyed more than 18,000 structures.