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Fire Victims’ Interests vs Shareholders’ Interests

Have no doubts about the real cause of PG&Es so-called Public Safety Power Shutoff program that has left over half-million Californians without electricity this past week.

The reason has nothing to do with global warming, climate change, or a new norm of monstrous wildfires, as PG&E officials like to claim.

Theres only one reason and a single culprit to blame.

As I’ve written here before, the evidence is clear and unambiguous that the utility giant spent nearly a decade in stonewalling the California Public Utilities Commission (CPUC) on its maintenance program.

For the better part of a decade, all three of California’s monopoly-utilities PG&E, Southern California Edison, and San Diego Gas & Electric colluded to stall the states effort to map where their power lines present the highest risk for wildfires, an initiative that critics say could have forced PG&E to strengthen power poles and bolster maintenance efforts well before the last three years of conflagrations that resulted in hundreds of deaths and record-setting destruction of property and natural resources.

Twelve years ago, state officials began working to tighten regulations on the utilities and create the detailed maps after wind-toppled electrical lines ignited catastrophic fires in the San Diego area. But a whole decade later, the state Public Utilities Commission which initiated the process still hadn’t finished the maps, let alone adopted strict new regulations. All of those statutes and regulations have been coming on the books after-the-fact in the wake of the historically horrific wildfires of 2017 and 2018.

A review of the mapping project by the Bay Area News Group showed that utilities had repeatedly asked to slow down the effort and argued as recently as 2017 literally just a few days prior to the Wine Country Fires that, as PG&E put it, certain proposed regulations would add unnecessary costs to construction and maintenance projects in rural areas.

For unfathomable reasons, in October of 2017, two CPUC administrative law judges assigned to oversee the mapping-maintenance project, granted yet another delay at the request of PG&E and other utilities.

Clearly, the public watchdog that the CPUC is supposed to be, instead enabled PG&E to continue to thumb its nose at its statutory obligations to the public safety and weve all seen whats occurred in the past two years with seemingly the whole state engulfed in fires from one end to the other.

Now PG&E is in U.S. Bankruptcy Court arguing that it is fighting for its corporate life. This past Wednesday, in the midst of a power blackout for 500,000 PG&E customers, Judge Dennis Montali issued a surprise order that left PG&E wide open for a hostile takeover by strange bedfellows: a Wall Street hedge fund group that has partnered up with fire victims of the 2017 Wine Country fires and the 2018 Camp Fire.

According to a Sacramento Bee report, Until now, PG&E had the exclusive right until the end of November to forge ahead with its reorganization plan. But Montali was persuaded by the bondholders recent alliance with lawyers for tens of thousands of Northern California wildfire victims.

The bondholders have offered victims of the 2017 wine country fires and last Novembers Camp Fire about $14.5 billion for damages not covered by insurance. That’s about $6 billion more than PG&E offered the fire victims. Both sides have agreed to pay insurance companies $11 billion for the settlements they’ve made with policyholders.

The partnership with the fire victims, who are sympathetic players in the PG&E drama, gives the bondholders a major advantage.

Montali, at a lengthy hearing Monday, seemed reluctant to allow the bondholders to move ahead with their plan, saying the fight could lead to extensive litigation that could delay payments to fire victims. But he decided ultimately that he wouldn’t second-guess the informed decision of the bondholders and fire victims lawyers to team up.

The company had argued that it couldn’t match the bondholders offer to fire victims without solid evidence of the size of the damages. It added that, under bankruptcy law, it couldn’t risk over-paying the fire victims at the expense of another group of creditors: its own shareholders. It also accused the bondholders, led by hedge fund Elliott Management, of trying to grab the company on the cheap.

The bondholders and fire victims, however, said PG&E was simply trying to protect its shareholders at all costs. If the bondholders succeed, they would control the company and wipe out the investments of current shareholders.

Ironic isn’t it, that these fire victims may finally find some justice where their interests will outweigh the interests of PG&E and its shareholders.

(Jim Shields is the Mendocino County Observers editor and publisher, and is also the long-time district manager of the Laytonville County Water District. Listen to his radio program This and That every Saturday at 12 noon on KPFN 105.1 FM, also streamed live:

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