Feds blast PG&E's $13.5B deal with fire victims that may see money clawed back

SAN FRANCISCO (AP) — Tensions between the U.S. government and Pacific Gas & Electric are boiling over as the two sides battle over whether a taxpayer-funded agency should be allowed to stake a claim on a $13.5 billion settlement covering most of the losses from catastrophic wildfires blamed on the bankrupt utility.

The showdown came into sharper focus Monday when a top official from the Federal Emergency Management Agency blasted the nation's largest utility and fire victims' lawyers for negotiating a deal that could put the government in the untenable position of trying to claw back money it already has paid to people who lost family members and homes in fires ignited by PG&E's transmission lines from 2015 and 2018.

Robert Fenton, a FEMA regional administrator, lashed out during a media conference call held after the San Francisco Chronicle first reported the agency planned to seek repayment of a portion of the $3.9 billion bill that it incurred in the fires from the victims if it can't get the money from PG&E as the utility scrambles to emerge from bankruptcy protection by June 30.

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The $13.5 billion settlement requires FEMA and various California agencies to try to cover their wildfire expenses from the same fund set up for individuals and businesses devastated by deadly blazes that destroyed tens of thousands of homes and businesses.

If PG&E doesn't pay, FEMA believes it might have to seek up to $200 million from fire victims who also tap into the $13.5 settlement for some of the same losses that the agency already doled out.

That is a public relations nightmare that FEMA is hoping to avoid by reworking the deal that a federal judge approved last month. Most of the $3.9 billion being sought by FEMA overlaps with the majority of a $3.3 billion claim being made by various California state agencies in PG&E's bankruptcy case.

“It really, quite frankly, boggles my mind why the (fire victims') lawyers would appear to want to relieve PG&E of its responsibility and make California and FEMA the enemy here," Fenton said.

He also expressed indignation at being forced to seek money from the $13.5 billion settlement, even though FEMA was excluded in the confidential negotiations that led to the deal.

PG&E and the lawyers for the fire victims have repeatedly asserted that the government agencies aren't entitled to a cent from the settlement fund, a position that the utility reiterated in a statement issued Monday.

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PG&E hailed the deal as a “significant step” to ensuring the more than 73,000 people who have filed fire claims get their money. Lawyers for the fire victims didn't immediately respond to requests for comment Monday.

The battle over the settlement fund seems likely to heat up heading to a Feb. 11 court hearing that has been scheduled to hash out the thorny issue. As part of its efforts to win more public support for its arguments, FEMA has scheduled a public discussion Wednesday on its Facebook page.

Fire victims already have been expressing their outrage over the possibility that a taxpayer-backed agency that's supposed to help disaster victims might end up reducing the amount of money available to them in the $13.5 billion settlement.

“FEMA doesn't deserve any of this money," Brenda Wright, a 2018 fire victim, wrote to U.,S. Bankruptcy Judge Dennis Montali in a recent letter. “Please man up and do the right thing for us.”

More than three dozen U.S. lawmakers chided FEMA in a letter sent to the agency last week, warning that it risks ruining its reputation “as an honest and fair partner" if it does anything that reduces the amount of money paid to victims. Fenton said FEMA is meeting with the lawmakers to try to explain its stance.

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California has no plans to seek any money from the fire victims even if it isn't fully repaid from the $13.5 billion settlement, Gov. Gavin Newsom's office said Monday.

FEMA contends it is following its legal obligation to seek repayment for money paid in a disaster caused by a company or person. But that issue could boil down to whether the fires caused by PG&E stemmed from deliberate acts by the utility and its management or was a matter of negligence.

The government agency said it will only ask fire victims for repayments of losses that they also recover from the $13.5 billion settlement. Figuring that out could be a complex process, besides a public relations nightmare.

“We want to help people after a disaster," Fenton said. “The last thing we want to do is hurt them.”