PG&E takes responsibility for California Camp Fire

Date published

06/04/2020

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On March 23, 2020, Pacific Gas & Electric (PG&E)—the California energy utility—announced that it will plead guilty to criminal charges for its role in the 2018 Camp Fire in Northern California, which led to the deaths of 85 people and caused billions of dollars in property damage. This plea brings a lengthy investigation to a conclusion, but it is not anticipated that PG&E’s existing civil liabilities ($24.5 billion) will increase as a result of the plea agreement.

The company announced that under the terms of its plea agreement with Butte County, California, PG&E will plead guilty to 84 counts of involuntary manslaughter and one count of unlawfully starting a fire stemming from the 2018 Camp Fire. PG&E’s culpability in the Camp Fire was based, in part, on its acknowledged failure to properly maintain the equipment that sparked the fire. As is common in corporate criminal proceedings, no one from PG&E will go to prison for the felony crimes. Rather, the company will pay the maximum of approximately $4 million in fines, which includes the expenses related to the District Attorney's investigation. The plea agreement ultimately must be approved by the Butte County Superior Court and the California Bankruptcy Court. Approval has not yet been given.

Outside of the criminal proceedings, PG&E has been in bankruptcy reorganization since early 2019, and it is expected to emerge from bankruptcy by mid-2020 so that it can qualify for inclusion in a new state wildfire fund that could compensate for losses related to future fires. To date, PG&E has executed settlement agreements totaling $24.5 billion. Specifically, a federal bankruptcy judge recently approved PG&E’s $13.5 billion civil settlement with victims of the Camp Fire and the 2017 Tubbs Fire. The judge also approved PG&E’s $11 billion settlement agreement to resolve insurance subrogation claims relating to the 2017 and 2018 wildfires. In addition to the two settlements, PG&E has paid $1 billion to cities and counties affected by the fires, as well as agreed to a proposed $1.675 billion settlement with state energy regulators.

As a result of the criminal plea, certain Camp Fire victims may have rights to restitution under California Penal Code § 1202.4. This section of the Penal Code allows for victims of criminal acts to seek monetary restitution for their economic losses from the culpable actor. PG&E, in turn, is permitted to seek a discharge of such restitution claims in bankruptcy. PG&E is expected to take the position before the bankruptcy court that such claims are satisfied under PG&E’s existing settlement agreements with individuals and public entities holding wildfire-related claims. Under the terms of the plea agreement, the prosecutor has agreed not to oppose any effort by PG&E to seek the discharge of claims for statutory restitution in the bankruptcy case.

The discharge of the statutory restitution claims will require bankruptcy court approval even if not opposed. If ultimately approved, the net effect may be that that PG&E’s guilty plea will not increase its monetary exposure in connection with the existing civil claims.

Read others items in London Market Brief - April 2020