Brigette Honaker  |  February 25, 2020

Category: Legal News

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Pacific Gas and Electric fire liability owed to victims of wildfire.Pacific Gas and Electric fire liability may be resolved with a $13.5 billion settlement, half of which would be composed of company shares.

Under the proposed settlement, Pacific Gas and Electric would emerge from bankruptcy with 20.9 percent of its shares dedicated to a consumer compensation trust. Over the course of several years, these shares would reportedly be sold in order to compensate individuals who have been injured by wildfires linked to the company.

Although this proposed dual cash/shares settlement would resolve the liability claims pending against Pacific Gas and Electric, some legal experts argue that this set up would come with significant risks. Until the shares are sold to consumers, the wildfire victims would potentially end up bearing liability for future wildfires based on their company ownership.

Another critique lies in the fact that other settlements are being paid entirely in cash. For example, settlements with California agencies and insurance companies are being funded entirely with cash from the company while the wildfire victims may be compensated in part by stocks.

“Our focus is on getting victims paid and continuing to implement changes across our business to improve our operations for the long term,” PG&E told the Wall Street Journal in a statement.

Overview: Pacific Gas and Electric Fire Liability

Pacific Gas and Electric fire liability has reportedly mounted up to billions of dollars after the company was implicated in California wildfires. In the face of these costs, the utility has turned to potential state funding to help offset their losses.

In July of last year, California passed a law that would set up a liability compensation fund for utilities such as Pacific Gas and Electric. The $21 billion fund, coming half from taxpayers and half from investor-owned utilities, provides compensation for utilities’ future fire liability as long as they meet certain requirements.

Unfortunately for the utility, Pacific Gas and Electric fire liability cannot be eligible for the fund until they satisfy the financing, governance, and safety measures. In order to be eligible, the company is required to meet these requirements and emerge from bankruptcy.

As the company scrambles to resolve the liability against them, San Francisco reportedly looks to move away from the investor-owned utility model and adopt a municipal utility system as seen in Los Angeles and Sacramento. The city has offered to pay $2.5 billion to Pacific Gas and Electric in order to take control of the company’s San Francisco assets.

Although the San Francisco Public Utilities Commission and the Board of Supervisors have given conditional approval to the plan, unions and the utility argue that the change could have negative side effects.

Unions claim that the utility change could result in loss of benefits for utility workers, including pension credits. The utility argues that the city may see economic problems and increased taxpayer liability with the change because they would no longer contribute tax revenue.

“While recent proposals for state or municipal ownership of PG&E’s infrastructure are not new concepts, we don’t agree that the outcomes of this type of framework will benefit customers, taxpayers, local communities, the state or our economy,” a Pacific Gas and Electric spokesman told the New York Times.

Other concerns have been posed about the city’s ability to run an efficient electricity system while San Francisco’s water and transit services have already struggled.

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