Newsom rips PG&E insurance deal as it nears settlement with wildfire victims
'This settlement is about leverage'
PG&E Corp. is nearing a $13.5 billion settlement with victims of the wildfires that pushed the utility company into bankruptcy, amid inflamed tensions with California Gov. Gavin Newsom over its Chapter 11 exit plan.
Nancy Mitchell, the lawyer representing the governor, said Newsom wants PG&E to guarantee that it will come out of bankruptcy financially stable, with cash to invest in new technology and improved safety practices, according to The Wall Street Journal, which first reported the news.
But the governor has criticized the agreement, accusing the company of trying to preserve value for its shareholders, in part through the insurance settlement, instead of buttressing its finances and equipment. Lawyers for people who lost lives, homes and businesses in the fires have also argued the deal would lockdown too much cash, possibly imperiling their clients’ ability to receive what they are owed.
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“This settlement is about leverage,” Mitchell said Wednesday, during a hearing in the Bankruptcy Court in San Francisco. “It is not about a debtor who is acting as a fiduciary.”
PG&E HAD SYSTEMIC PROBLEMS WITH POWER LINE MAINTENANCE, CALIFORNIA PROBE FINDS
The company insists that an $11 billion insurance deal, which would resolve claims from insurance companies that say they have already paid billions to people who lose homes in wildfires started by PG&E power lines in recent years, is essential to moving its case forward, according to the San Francisco Chronicle.
“We think this is a very, very, very responsible and good deal,” Stephen Karotkin, an attorney for PG&E, said during the hearing, the Chronicle reported.
Mitchell, however, said the insurance deal could eventually disqualify PG&E from a new fund that would protect it from future wildfire costs.
“If they can’t get into the wildfire fund, there is no feasible plan here,” she said.
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The hearing came amid dueling plans — one advanced by PG&E, and another backed by a group of bondholders and wildfire victims.
In the coming weeks, Newsom is expected to “express more concrete preferences” on the rival plans, according to Michael Stamer, a lawyer for the bondholders, the Journal reported. Both plans would provide for $11 billion for insurance companies, but PG&E’s proposal would require them paying the insurance creditors in cash, while the other would include a mix of cash and stock.
The California Department of Forestry and Fire Protection found that PG&E’s faulty equipment was responsible for the devastating Camp Fire, which obliterated the town of Paradise and killed 85 people last year. It was the deadliest and most destructive wildfire in California history. PG&E filed for Chapter 11 bankruptcy protection in late January after facing liabilities from the fires.