PG&E Settles Key Battle Over $13.5 Billion Wildfire Victims' Fund

Pacific Gas & Electric told a federal bankruptcy judge Tuesday that it has settled a dispute with disaster-relief agencies that threatened to siphon money away from a $13.5 billion fund earmarked for victims of catastrophic wildfires in California.

The breakthrough, disclosed by a PG&E lawyer during a court hearing in San Francisco, could remove a major stumbling block as the massive utility scrambles to meet a June 30 deadline to emerge from bankruptcy proceedings that began early last year. The truce is designed to ensure that people who lost family members and property during a series of fires ignited by PG&E equipment in 2017 and 2018 get paid through two different taxpayer-backed agencies.

It's still unclear whether the deal worked out between the Federal Emergency Management Agency, California’s Office of Emergency Services and lawyers for wildfire victims will satisfy everyone involved. PG&E attorney Stephen Karotkin said some final details were still being worked out with the help of a federal mediator.

The two disaster relief agencies had been attempting to recover as much as $4 billion from the fund as reimbursement for financial assistance provided during and after fires that raged in Northern California in 2015, 2017 and 2018.

Karotkin doesn't expect the full settlement to be revealed until next week, but he told U.S. Bankruptcy Judge Dennis Montali that the disaster-relief agencies' claims will be pared to $1 billion and that amount won't be paid unless there is money left after the victims' claims are paid. Lawyers for FEMA and the Office of Emergency Services told the judge they were pleased with the deal worked out with PG&E.

Investors cheered the news too, as PG&E's stock surged 10% Tuesday to close at $13.90.

Without repayment, the agencies asserted, U.S. and California state taxpayers could be forced to absorb the costs for cleaning up the mess that might not have happened had PG&E properly maintained power lines that provide electricity to 16 million people.

PG&E faced more than $50 billion in claimed losses from the fires, prompting the utility to file for bankruptcy for the second time in less than two decades.

The San Francisco company has settled the claims of wildfire victims, insurers and a few other government agencies for a total of $25.5 billion as part of its plan to get out of bankruptcy.

Those deals include the $13.5 billion fund earmarked for victims, many of whom have protested the prospect of the disaster-relief agencies taking nearly one-third of the money that is supposed to help people rebuild their lives.

"I think it means our clients likely will be paid in full or very close to it," said Gerald Singleton, an attorney representing several thousand wildfire survivors. "It's incredibly significant. This is one of the biggest issues. Our clients were very concerned about FEMA taking a huge chunk of that $13.5 billion, and the way it works out now, FEMA is not going to be paid a penny unless everyone is paid 100 cents on the dollar in full."