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PG&E Fire Victims Fight FEMA Over Multibillion-Dollar Payout

Mark Chediak and Steven Church

(Bloomberg) -- Victims of wildfires blamed on PG&E Corp.’s power lines and government agencies that provided them disaster relief are tussling over a payout from the bankrupt utility.

PG&E reached a settlement with fire victims to pay a total of $13.5 billion for damages tied to catastrophic blazes. California’s emergency services office and the Federal Emergency Management Agency, known as FEMA, want more than $6 billion -- payouts that victims’ attorneys said Thursday would leave less money for those directly affected by the fires.

Every dollar that FEMA and California’s agency receive “is one less dollar available to pay victims,” a committee representing fire victims said in filings to the judge overseeing PG&E’s bankruptcy.

The dispute casts a shadow on the settlement PG&E reached with victims that won court approval just last month. The company had spent weeks cobbling together the deal, which is crucial to its efforts to come up with a viable restructuring plan and emerge from bankruptcy by a state-imposed deadline of June 30.

FEMA said it’s required by federal law to pursue claims from third parties found responsible for creating disasters. “It is important that responsible parties are held accountable for causing the expenditure of taxpayer dollars,” the agency said in a statement.

PG&E said it sides with the wildfire victims. “FEMA does not have a valid legal claim against the company,“ the utility said in a statement.

The California Governor’s Office of Emergency Services didn’t immediately respond to a request seeking comment.

The bankruptcy court has scheduled a Feb. 11 hearing on the objections to the federal and state agency claims. PG&E shares fell 0.3% at 2:41 p.m. in New York.

San Francisco-based PG&E filed for Chapter 11 in January 2019 after its equipment was blamed for the devastating blazes, crippling it with an estimated $30 billion in liabilities. The company has been fending off efforts by bondholders including activist investor Elliott Management Corp. and Pacific Investment Management Co. to take over the company ever since.

“The Bankruptcy Court has approved our settlement agreements resolving all major wildfire claims,” PG&E said. “This brings us one significant step closer to getting victims paid so they can rebuild their lives. As for our overall Plan of Reorganization, we remain engaged in active and constructive dialogue with stakeholders.”

FEMA has made claims against PG&E for more than $3.9 billion, according to court documents. California’s emergency response agency is trying to recover more than $2.4 billion.

Victims’ attorneys say FEMA and California can recover their costs through other means, including tapping a $1 billion settlement that PG&E has separately reached with certain local government agencies. The agencies should be required “to exhaust those sources before seeking to take money away from victims,” the victims’ committee said in its filing.

The case is PG&E Corp. 19-bk-30088, U.S. Bankruptcy Court Northern District of California (San Francisco)

(Adds PG&E statement in sixth paragraph)

To contact the reporters on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net;Steven Church in Wilmington, Delaware at schurch3@bloomberg.net

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, ;Rick Green at rgreen18@bloomberg.net, Joe Ryan, Will Wade

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