Not the First Time the Company Has Hurt Its Customers
Pacific Gas and Electric (PG&E) was formed in 1905. PG&E has been supplying power to millions of Californians for over 110 years. However, the utility company has had more than its share of problems and incidents. In this article, we discuss a few of the worst incidents throughout the years that have caused residents harm and how the current Chapter 11 case could continue that trend.
Years of Problems, Safety Issues, and Devastation for California Residents
One of the most well-known incidents in PG&E’s history was the Hinkley groundwater contamination case, which became the basis for a Hollywood movie. A natural gas compression station in Hinkley was the source of groundwater contamination. The station contaminated the water supply for Hinkley with chromium-6 between 1952 and 1966. However, PG&E did not report the contamination to the local water board until years later, after the residents had been exposed to the harmful element. Nearly 650 people were harmed and sued the company. PG&E settled the lawsuit for $333 million.
The Trauner Fire, which started in August 1994, destroyed homes and a school in Nevada County. A jury convicted PG&E on 739 counts of criminal negligence when it found that the company was guilty of a pattern of tree-trimming violations that led to the fire. PG&E was fined $2 million. The Pendola Fire of 1999 burned almost 12,000 acres of national forests and was blamed on inadequate inspection programs and poor vegetation management.
In 2003, the Mission Substation Fire in San Francisco was almost identical to the fire of 1996 at the same location. According to reports, the utility company ignored suggested improvements to safety measures after the 1996 fire, which could have prevented the 2003 fire. In the years that followed, PG&E was plagued by fires and explosions blamed on negligence and safety issues, including:
- 2004 – Fred’s Fire and Sims Fire blamed on trees falling on power lines. A decaying tree that PG&E failed to remove caused the Sims Fire. The Fred’s Fire was because of the negligent supervision of a subcontractor who lost control over a tree that fell on the power lines.
- 2008 — PG&E used incorrect pipes during a repair that caused the Rancho Cordova gas explosion on Christmas Eve, killing one person and injuring others.
- 2010 — Eight people died and others were injured in the San Bruno Pipeline explosion. PG&E was convicted of six felony charges, which resulted in probation, community service, and millions of dollars in fines. The utility company also had to pay for an advertising campaign that detailed their wrongdoing and steps to prevent future instances.
- 2015 — The Butte Fire destroyed over 70,000 acres, hundreds of homes, and killed two people. A downed tree making contact with a PG&E electrical wire caused the fire.
- 2017 — PG&E is still being investigated as causing several fires in 2017, even though it has been found not guilty for causing the Tubbs Fire.
- 2018 — The Camp Fire was the most destructive and deadly fire in California history. The fire destroyed the town of Paradise and killed 85 people. PG&E power lines in Butte County were to blame for the devastating blaze.
- 2019 — Most recently, PG&E equipment is being blamed for causing the Kincade Fire and two fires in Contra Costa County.
The above list is not a complete list of incidents in which PG&E was said to be negligent in causing fires and explosions. PG&E’s equipment is thought to have started 19 major California wildfires in 2017 and 2018. That total has increased with the most recent wildfires.
The wildfires and explosions show a pattern of negligence and wrongdoing by the utility company. Failing to properly maintain its equipment and control vegetation around its power lines is a serious problem.
Sadly, the company’s negligence has resulted in thousands of people being injured and suffering damages because of wildfires. The fires have caused millions of dollars in damage to homes and businesses. Families are still living in temporary housing or have no homes at all.
Now, wildfire victims face another challenge. They must fight for their right to fair and just compensation for their losses and damages in bankruptcy court. Instead of being allowed to pursue their claims by filing lawsuits against PG&E, they are being forced to navigate the complicated and restrictive process of a Chapter 11 bankruptcy case. For many wildfire survivors, PG&E’s Chapter 11 bankruptcy case is another way the utility company has caused them harm.
PG&E Files Chapter 11 As It Faces Overwhelming Claims – Was it Necessary?
PG&E filed for Chapter 11 bankruptcy protection on January 29, 2019. The utility cited numerous lawsuits against it for the North Bay Wildfires in 2017 and the Camp Fire in 2018 as one of the reasons that it needed to seek financial reorganization through a Chapter 11 bankruptcy. The company had informed investors that the fire-related liabilities the company faced could total $30 million.
However, when PG&E filed for bankruptcy relief, the company was solvent. Information filed with the bankruptcy court listed PG&E assets of $71.39 billion and debts of $51.69 billion. This filing left some wondering why the utility company was filing Chapter 11 if it was not upside down. According to Blue Mountain Capital, a PG&E shareholder, the bankruptcy was unnecessary because there appeared to be “overwhelming evidence” that the utility company was solvent.
However, the bankruptcy court accepted PG&E’s Chapter 11 petition and granted it bankruptcy protection. That leaves somewhere around 100,000 wildfire victims dealing with the bankruptcy court instead of proceeding through state court to resolve their claims.
Will Wildfire Victims Receive Full Compensation for All Damages and Losses Through the Chapter 11 Case?
A Chapter 11 bankruptcy case is a reorganization bankruptcy action. It allows a company to restructure its debt so that it can continue to operate. In many cases, the company eliminates a portion of its debts through the bankruptcy case. Unsecured creditors may receive a small percentage of the debt owed to them through the bankruptcy case. Wildfire victims fall into the category of unsecured creditors.
Wildfire victims are represented in the bankruptcy case, but may not have the power they desire to ensure their claims are treated fairly. There are several competing interests, and the Chapter 11 case continues to become more complicated.
A federal bankruptcy judge ruled that PG&E no longer has the exclusive right to file a proposed plan of reorganization. As of right now, there are two competing Chapter 11 plans filed with the bankruptcy court.
Gov. Newsom is threatening to file a proposed plan on behalf of the state if the parties are unable to resolve their differences in a timely fashion. Several groups have called for the state to change the utility from an investor-owned utility company into a customer-owned utility company. Gov. Newsom also asked the judge to delay a motion hearing to approve an $11 billion settlement between PG&E and a group of major insurance companies. The settlement repays the insurance companies for money they have already paid to wildfire victims.
In its original proposed Chapter 11 plan, PG&E had offered to pay up to $8.4 billion in compensation to wildfire victims and certain limited public entities through a trust. Insurance subrogation claims were to be capped at $8.5 billion, but it appears that the company has settled with the insurers for $11 billion, contingent upon approval by the bankruptcy court.
Now, the federal bankruptcy judge in the case has approved a request by noteholders of PG&E and a committee for wildfire victims to file their own proposed Chapter 11 plan. The plan calls for noteholders to purchase $15.5 billion in new shares, which would give them just over 59 percent equity in the utility. The plan also includes issuing new stock to fund a wildfire victim trust valued at $12.75 billion. The wildfire victims committee backed the noteholders’ plan because it pays more in compensation than the PG&E proposed plan.
A Complex Process That Continues to Hurt Wildfire Victims
Unfortunately, wildfire victims have no choice but to work within the bankruptcy case to resolve their claims. Victims of the most recent wildfires will have an advantage over the victims of wildfires dated before the filing of the Chapter 11 case.
The claims of Kincade wildfire victims would be paid before any of the other claims related to the wildfires in 2017 or 2018. Therefore, wildfire victims who have filed claims with the bankruptcy court could end up taking a back seat to new wildfire claims, adding to the injustice and harm suffered by these individuals.
Some individuals and sources have alleged that PG&E filed Chapter 11 simply to avoid facing juries in California. Juries made up of individuals who may have family members and friends who suffered during the 2017 and 2018 California wildfires caused by PG&E. They allege that PG&E filed for bankruptcy relief to avoid paying full compensation to wildfire victims, even though the company had sufficient assets to obtain loans, and its liabilities did not outweigh its assets.
When Will Wildfire Victims Receive Money from PG&E Chapter 11 Case?
Victims of the California wildfires attributed to PG&E before the filing of the Chapter 11 case are required to file claims before the extended claims bar date. Victims who fail to file claims do not receive payment from the bankruptcy plan, nor can they pursue claims against PG&E for claims and damages covered by the bankruptcy plan.
Even though the claims bar date is quickly approaching, that does not mean that wildfire victims should anticipate receiving funds in the near future. There are competing bankruptcy plans that creditors need to vote upon, and the bankruptcy court must approve any Chapter 11 plan chosen by the creditors. Therefore, the final amount to be paid to fire claimants is not set, and it could be sometime next year before a Chapter 11 plan is confirmed.
After a Chapter 11 plan is confirmed, it could still take some time for all wildfire claims to be paid. For wildfire victims who are struggling to rebuild or still have no permanent place to live, the slow pace of the bankruptcy process increases stress and financial damages. Unfortunately, many of these victims may never receive full compensation for their claims because PG&E chose to hide from litigation by filing for bankruptcy relief.
While PG&E may hold itself out to be a victim in the process because it is being attacked from multiple sides, the wildfire victims who lost everything are the true victims. The families and businesses who struggle daily to make ends meet and recover from wildfires that were caused by negligence, poor maintenance, failure to reduce vegetation, failing to adhere to safety measures, and other wrongdoing by PG&E may continue to suffer additional harm and damages for some time to come.
Protect your rights and get the compensation you deserve to rebuild your home and life
If you are the victim of the California wildfires, please contact our office to schedule a free consultation with a California wildfire lawyer. Call 1-650-513-6111 for more information or to schedule your free case review.