PG&E makes deal to pay California wildfire victims. What it means for utility's future

Dec. 7--PG&E Corp. late Friday announced a blockbuster agreement to pay victims of the major Northern California wildfires, a move that strengthens the bankrupt utility's hand as it tries to ward off a takeover by its bondholders and a group of local governments.

The deal will pay $13.5 billion to victims of the November 2018 Camp Fire in Paradise and the October 2017 wine country fires. That includes payment to victims of the Tubbs Fire in Napa and Sonoma counties, the worst of the 2017 fires, even though state investigators had declared PG&E wasn't at fault.

Pacific Gas and Electric initially offered fire victims $8.4 billion, a figure dismissed by victims' attorneys as too low. PG&E sweetened the offer in mid-November, soon after Bankruptcy Judge Dennis Montali ordered the two sides to undergo mediation.

The agreement announced Friday pays for damages not covered by insurance. It will come in a mix of cash, PG&E stock and "other considerations," according to a statement from a committee representing fire victims. More details are expected to be revealed in the coming days.

The settlement also covers the deadly 2016 Ghost Ship Fire in Oakland, and the 2015 Butte Fire in Amador and Calaveras counties. PG&E said it won't admit fault for the Tubbs or Ghost Ship fires. Further details of the plan would be released Monday in a filing with the federal Securities and Exchange Commission, the company said.

The agreement could stymie efforts by PG&E's bondholders, who had reached an earlier agreement with the fire victims, to wrest control of PG&E away from the utility's shareholders. The $13.5 billion figure matches the sum bondholders had offered.

PG&E's deal also could undermine Gov. Gavin Newsom's call for a radical restructuring of the troubled company, which has infuriated elected officials by causing major fires and then imposing widespread blackouts in an effort to prevent new fires. Problems on a PG&E transmission line ignited a massive wildfire in Sonoma County in October even though the area had been blacked out.

A consortium of mayors, led by San Jose Mayor Sam Liccardo, has been pushing to create a customer-owned utility, and Newsom has said a state takeover wasn't out of the question. At the same time, Newsom had been pressing PG&E to compensate fire victims, convening a meeting of representatives of both sides at the Capitol last month.

Liccardo told the San Francisco Chronicle he still intends to pursue his takeover plan. Spokesmen for Newsom weren't available for comment.

Fire victims called the agreement their best hope for a fair settlement. "The (victims' committee) reached this agreement with PG&E, in part, to give fire victims and other tort claimants the best chance at being fully compensated for their harms," said Kirk Trostle, member of the victims' committee and a Camp Fire victim, in a prepared statement.

The agreement comes at a crucial time. A trial on damages in the Tubbs Fire was set to begin in January. Despite Cal Fire's finding that PG&E didn't cause that fire, which burned through a residential neighborhood in Santa Rosa, it was expected that PG&E could have to pay considerable sums to victims. Separately, a federal judge in San Francisco had begun hearings aimed at estimating the total amount PG&E owes for fires since 2015.

The utility's deal with fire victims still needs approval of the U.S. Bankruptcy Court and state officials. Nonetheless, the company hailed the agreement as a move that puts it "on a sustainable path forward to emerge from Chapter 11 by the June 30, 2020, deadline to participate in the state of California's go-forward wildfire fund." The $21 billion fund, created by the Legislature and to be financed by shareholders and ratepayers, is designed to help utilities pay claims from future fires caused by their equipment.

"From the beginning of the Chapter 11 process, getting wildfire victims fairly compensated, especially the individuals, has been our primary goal," said PG&E Chief Executive Bill Johnson in a prepared statement.

"We are focused on emerging from Chapter 11 as the utility of the future that our customers and communities expect and deserve," he said. "There have been many calls for PG&E to change in recent years. PG&E's leadership team has heard those calls ... and we realize we need to do even more to be a different company."

The company earlier made a deal to reimburse insurance companies for about $11 billion for claims they paid to wildfire victims. But the utility was struggling to regain control of the bankruptcy case after the fire victims made a deal with the bondholders' group, a consortium of hedge funds intent on taking over the company.

By cutting its own deal with victims, PG&E has appeared to regain the upper hand.

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