Pacific Gas & Electric has agreed to pay $11 billion to a group of insurance companies representing most of the claims from Northern California wildfires in 2017 and 2018 as the company tries to emerge from bankruptcy, the utility announced Friday.
The utility said in a statement the tentative agreement was reached with insurance companies holding 85% of the claims from fires that included the November 2018 fire that decimated the town of Paradise, killing 86 people.
The insurers said in a separate statement the settlement is well below the $20 billion the insurance companies had sought in bankruptcy court. However, it is more than the company had offered as part of a filing in bankruptcy court earlier this week.
“While this proposed settlement does not fully satisfy the approximately $20 billion in group members’ unsecured claims, we hope that this compromise will pave the way for a plan of reorganization that allows PG&E to fairly compensate all victims and emerge from Chapter 11 by the June 2020 legislative deadline,” the insurers said.
The deal removes some of the uncertainty hanging over PG&E as it tries to climb out of its financial pit. The company’s stock surged 8% to $10.94 in Friday trading.
“Today’s settlement is another step in doing what’s right for the communities, businesses, and individuals affected by the devastating wildfires,” PG&E CEO Bill Johnson said in a statement.
The settlement still must be approved by a bankruptcy court. PG&E Corp. on Monday released a plan to offer nearly $18 billion total to wildfire victims, insurance companies and cities and public entities in California that battled wildfires sparked by its electrical equipment.
That figure will now climb to $20.5 billion, including:
— $11 billion for insurance companies as part of the tentative deal;
— $8.4 billion to pay wildfire claims from uninsured victims, which attorneys representing them had rejected as too low;
— $1 billion will go toward local governments affected by the wildfires.
The San Francisco-based company is under deadline pressure to emerge from bankruptcy by June 2020 to participate in a state wildfire fund to help California’s major utilities pay out future claims as climate change makes wildfires across the U.S. West more frequent and more destructive.
The utility sought bankruptcy protection in January because it said it could not afford an estimated $30 billion in potential damages from lawsuits stemming from recent wildfires.