As part of its bankruptcy case, Pacific Gas & Electric (PG&E) has agreed to establish a $13.5 billion victims’ fundto compensate the approximately 70,000 people who suffered damages in the 2018 Camp Fire and other blazes started by the company’s equipment, according to The New York Times. The fund will be made up of cash and PG&E stock. The amount of PG&E stock to be awarded increased by roughly 2 percent of the company’s total stock value from December, when the utility provider first agreed to settle with fire victims.

The 2018 Camp Fire was the deadliest in the state’s history, resulting in at least 85 deaths and the destruction of nearly 19,000 buildings, according to The Sacramento Bee. The fire took out 90 percent of the town of Paradise, Calif., and resulted in tens of thousands of people becoming homeless. PG&E has stated that their equipment was likely the cause of the blaze as well as other wildfires including the 2017 Cascade Fire that resulted in the death of four California residents.

PG&E Stock Added to Fund

According to UtilityDive, PG&E first filed for Chapter 11 bankruptcy in January 2019 in order to deal with the $30 billion in liabilities it was facing in connection with fires caused during 2017 and 2018. PG&E made an initial offer of $11 billion to compensate victims and reached a final amount, $13.5 billion, by November 2019.

The fund is constituted of cash and PG&E stock. However, victims and their advocates argued that PG&E stock was likely to decline in value significantly by the time the company exits bankruptcy. In response, PG&E increased the amount of company stock it will be contributing to the fund. Originally, victims would have been awarded a 20 percent stake in the company, but that offer has since increased to 22.19 percent.

Judge Dennis Montali, who is presiding over PG&E’s bankruptcy, is expected to approve the deal in the coming days. The massive utility must emerge from bankruptcy by June 30 in order to qualify for a $20 billion wildfire fund established by California lawmakers to help private utilities cover the cost of fires.

The Future of PG&E Stock

While victims’ advocates have celebrated the announcement, some are worried about what the increase will actually mean.

“What are the practical consequences of the actual conditions of these various agreements?” a victim representative asked the Times. “What is the market going to do with the stock? Is it going to shun it or embrace it?”

According to the Times, PG&E stock has fallen in value by nearly 40 percent since February. Advocates worry that stock prices will fall even further as a result of COVID-19 and PG&E’s growing debt. The original value of the stocks included in the trust was $6.75 billion, according to Utility Dive. By April, that amount had been reduced by nearly $2 billion dollars to $4.85 billion.

If the PG&E stock agreement is approved by the judge, then the fund will be required to hold onto the shares for at least 90 days before attempting a sale. Bloomberg reports that under previous proposals, the fund may have been required to hold onto the PG&E stock for as long as six years.

This article is not legal advice. It is presented
for informational purposes only.