PG&E to pay $415 million to North Bay government agencies for 2017 wildfires

The payments are expected to be incorporated into PG&E’s bankruptcy reorganization plan when it is finalized. Then the deal also must be approved by the bankruptcy court.|

PG&E has agreed to pay $415  million to about a dozen North Bay governments and public agencies hit by wildfires in October 2017, including Sonoma County and the City of Santa Rosa, to help compensate them for costs borne by taxpayers because of the disasters.

The tentative agreement is part of a $1 billion proposal to settle local government claims against the state’s largest utility for wildfires sparked by PG&E’s electric grid going back to 2015. The largest chunk of the money - about $570 million - will go to governments hit by the 2018 Camp fire in Butte County, the deadliest and most destructive fire in California history.

The 2017 fires took the greatest toll in Sonoma County, where blazes destroyed about 5,300 homes and caused widespread damage to infrastructure, from roads to water systems, during the fires and subsequent cleanup effort. Local governments have been on the hook for a massive outlay of resources to respond to the fires, their cleanup and rebuilding that continues today.

“From day one, the county’s mantra has been that we just want to be made whole for the losses we incurred,” Sonoma County Board of Supervisors Chairman David Rabbitt said, acknowledging the agreement is not final. “This, for us, is an important step.”

The proposal is the first PG&E has reached through mediation proceedings with its creditors since January, when the utility filed for bankruptcy amid mounting liabilities - which the company has estimated at $30 billion tied to catastrophic wildfires. The deal and any other settlement proposals must be approved by the bankruptcy judge overseeing PG&E’s reorganization, a process anticipated to take another year.

The deal does not involve claims from people who lost family members, homes or businesses. It also excludes claims from insurance companies seeking compensation for the financial toll of wildfires sparked by the utility’s equipment.

The negotiation process began earlier this year overseen by mediator Jay Gandhi, a retired judge. PG&E and the government parties accepted Gandhi’s initial proposal Tuesday after several days of negotiations in San Francisco. They are still finalizing how to divvy up the $415 million among North Bay governments and agencies.

The agreement “is an important first step toward an orderly, fair and expeditious resolution of wildfire claims and a demonstration of our willingness to work collaboratively with stakeholders to achieve mutually acceptable resolutions,” PG&E spokesman Ari Vanrenen said in a statement.

PG&E provides electric and gas services across 70,000 square miles of Northern and Central California and employs 24,000 people, including more than 700 in Sonoma County.

Vanrenen said the utility hopes to continue “making progress with other stakeholders.”

The utility put the number of its creditors between 50,000 and 100,000, including bondholders, credit holders, shareholders, employees, state regulators and wildfire victims after filing for Chapter 11 protection in U.S. Bankruptcy Court in San Francisco in January.

Cal Fire has implicated PG&E’s electrical equipment in all but one of the major fires that have broken out in recent years: the Tubbs fire, which started near Calistoga in northern Napa County and burned westward over the Mayacamas Mountains into Sonoma County and Santa Rosa neighborhoods.

Cal Fire said the Tubbs fire was sparked by a private electrical system, not PG&E equipment. That became a “hotly contested” focal point in the mediation negotiations, where PG&E representatives argued the utility wasn’t responsible for losses related to the Tubbs fire, according to Scott Summy, an attorney with Baron & Budd, which represented the public entities in the negotiations.

“We took the position that the Cal Fire report was not correct with respect to the Tubbs fire, and we argued irrespective of that fire, they should have de-energized those power lines,” Summy said.

The result is a deal negotiated by the mediator that involves compromise from both sides, said Summy, adding that he viewed the settlement as “very fair.”

Ultimately, the mediation process will help local governments seeking compensation from the utility avoid long legal battles, he said.

The list of local governments and public agencies involved in the agreement illustrate the broad impact of the fires that broke out in October 2017: Sonoma County, the City of Santa Rosa, the Sonoma County Water Agency, the Sonoma County Agricultural Preservation and Open Space District, Mendocino County, Napa County, the City of Napa, Lake County, the City of Clearlake, the Lake County Sanitation District, Nevada County and Yuba County.

The agencies hit by the 2018 Camp fire are the Town of Paradise, Butte County, Paradise Park and Recreation District, and Yuba County. The agreement also includes payment to the Calaveras County Water District for costs incurred in the 2015 Butte fire.

Santa Rosa Mayor Tom Schwedhelm said the settlement agreement with PG&E is just one of the many avenues the city has pursued to help fund the massive response and recovery from the fires.

The fire and impact from the cleanup ravaged infrastructure in the city’s Coffey Park and Fountaingrove neighborhoods, and the city has spent millions repairing parts of a local water system contaminated with benzene, a cancer-causing compound. The Tubbs fire also destroyed a new $4 million fire station in Fountaingrove, which the city plans to rebuild.

Schwedhelm cautioned that the bankruptcy process could drag on and nothing is yet guaranteed.

“I’m not about to spend this money, say this is what we’re going to do with it,” Schwedhelm said. “But if it’s approved, it’s another step in our recovery.”

Calling the deal a “very important milestone,” Sonoma County Supervisor Susan Gorin said she believes the settlement with governments is a sign there could soon be an agreement on compensation for those who lost their homes.

“This should be heartening to people who have been struggling for 21  months, dealing with the stress of being underinsured,” said Gorin, who lost her home in a branch of fire that burned near Oakmont.

She’s among thousands of burned-out residents who joined lawsuits against PG&E. She initially didn’t want to become a plaintiff, but chose to do so around the one-year anniversary of the fires because her home was among the many woefully underinsured.

Gorin reflected on the years of work residents and governments will spend recovering from the fires, including the county’s expensive overhaul of its emergency division.

“We’re expending tens of millions if not hundreds of millions,” Gorin said.

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