By Ethan Haddon
Introduction: The California Camp Fire
California has suffered fifteen of the twenty largest wildfires in its history since 2000, and ten of its most costly fires have occurred since 2015.[1] California’s most deadly wildfire, the 2018 Camp Fire, lasted over two weeks and had a devasting impact on the people and town of Paradise.[2] The fire spread at the rate of 80 football fields a minute at its peak, and destroyed a total of 153,335 acres.[3] Almost 20,000 structures were destroyed, the majority of which were residences, with 30,000 people losing their homes.[4] The death rate, which disproportionately affected those over 60, reached 85 by the time the effects of the fire were finished.[5]
The California Department of Forestry and Fire Protection determined that the Camp Fire was caused by transmission lines that belonged to Pacific Gas & Electric, California’s largest electrical utility.[6] The transmission line was almost 100 years old, while the mean life expectancy of the type of line used was 65 years.[7]
Pacific Gas & Electric Bankruptcy & Restructuring Plan
In January 2019, Pacific Gas & Electric filed for Chapter 11 bankruptcy, citing as a key goal “the need for an orderly, fair, and expeditious process to assess and resolve PG&E’s potential liabilities resulting from the 2017 and 2018 wildfires.” PG&E was estimated to be facing up to $30 billion in liabilities from wildfires generally, and $10.5 billion in liabilities from the Camp Fire alone.[8]
On March 20, 2020, Pacific Gas & Electric and the State of California reached a deal that could help the utility emerge from bankruptcy.[9] The deal involves significant changes to Pacific Gas & Electric’s board of directors and operational leadership structure, essentially replacing all of those who were in leadership roles.[10] Further, Pacific Gas & Electric agreed to increased regulatory oversight and also agreed to spend billions of dollars to prevent future wildfires.[11] Under the deal, Pacific Gas & Electric will be allowed to raise $23 billion, with $11 billion in debt and $9 billion in new equity.[12] The deal may also allow Pacific Gas & Electric access to a state wildlife insurance fund, which includes $21 billion designed to protect California utilities from bankruptcies similar to the one Pacific Gas & Electric currently faces.[13]
California Governor Gavin Newsome had previously rejected Pacific Gas & Electric’s proposed restructuring plans, citing the need for a safer and more sustainable utility company.[14] However, the recent coronavirus outbreak has had a dramatic effect on the economy both in California and globally, which likely impacted the governor’s decision to accept the restructuring plan. Pacific Gas & Electric also faces the threat of a forced sale of the company should it fail to have its plan approved by the bankruptcy court and the California Public Utilities commission by June 30 or fail to meet its financing agreements by the end of September.[15]
Pacific Gas & Electric Settles with Wildfire Victims
In December 2019, Pacific Gas & Electric agreed to a multi-party settlement for its role in 2017 and 2018 wildfires, which included: $13.5 billion for individual wildfire victims; $11 billion to resolve all insurance subrogation claims arising from the 2017 fires and the 2018 Camp Fire; $1 billion for cities and counties affected by the fires; and Pacific Gas & Electric establishing a $105 million Wildfire Assistance Fund for those displaced by the fires who need assistance.[16]
However, half of the $13.5 billion set aside for victims will be in the form of Pacific Gas & Electric stock, which has felt the effects of the market downturn caused by coronavirus and has fallen sharply in recent months.[17]
Involuntary Manslaughter Guilty Plea
On March 17, 2020, Pacific Gas & Electric agreed to plead guilty to 84 counts of involuntary manslaughter after its equipment caused the Camp Fire.[18] The actual death toll was 85, but one death was ruled a suicide, and was not included in the criminal plea deal.[19] Pacific Gas & Electric will also plead guilty to one count of unlawfully causing a fire in violation of Cal. Penal Code § 452.[20] Under the settlement, Pacific Gas & Electric will be required to pay a maximum total fine of $3.5 million to the victims and $500,000 to the Butte County District Attorney Environmental and Consumer Protection Fund for costs spent on the criminal investigation.[21] Further, pursuant to the agreement, Pacific Gas & Electric will face no other criminal sentence or penalty for its involvement in the 2018 Camp Fire.[22]
Who Wins Here: Utility or Wildfire Victims?
California wildfires, and especially the 2018 Camp Fire, are devastating for those affected. Those who were killed by the fires, their families, and nearly entire communities displaced by the impact of the fires have not only been burdened financially, but also emotionally and physically. The victims who lost their homes in the fire have been critical of the response of both Pacific Gas & Electric and prosecutors, feeling that the utility company is only getting a slap on the wrist.[23] Further, with much of the settlement recovery tied to Pacific Gas & Electric stock, the economic downturn could lead to a much smaller recovery than initially advertised if the market or Pacific Gas & Electric does not recover quickly.
Large companies using bankruptcy to escape civil liability for damages is not a novel concept, but the impact is magnified when the victims directly lose their lives and homes while trying to escape a terrifying wildfire. As far as criminal liability is concerned, it is difficult to conceive how justice could truly prevail when a single line from a major utility causes such a disaster. Who, if not the entire company, should be put on trial and face jail time is uncertain, as there are many factors and individuals involved.
In sum, nobody is really winning here. Pacific Gas & Electric has suffered nearly insurmountable losses as a company and will face an uphill battle from bankruptcy in a market that has been crippled by the coronavirus outbreak. The victims and their families will likely see some economic recovery, but little can mend their greater emotional loss of loved ones and the place the once called home.
[1] Science: Wildfire Impacts, California Department of Fish and Wildlife, https://wildlife.ca.gov/Science-Institute/Wildfire-Impacts (last visited Mar. 24, 2020).
[2] Priyanka Boghani, Camp Fire: By the Numbers, PBS (Oct. 29, 2019), https://www.pbs.org/wgbh/frontline/article/camp-fire-by-the-numbers/.
[3] Id.
[4] Id.
[5] Id.
[6] Peter Eavis & Ivan Penn, California Says PG&E Power Lines Caused Camp Fire That Killed 85, N.Y. Times (May 15, 2019), https://www.nytimes.com/2019/05/15/business/pge-fire.html
[7] Boghani, supra note 2.
[8] Id.
[9] Don Thompson & Daisy Nguyen, PG&E Reaches Bankruptcy Deal with California Governor, PBS News Hour (Mar. 20, 2020, 8:07 PM) https://www.pbs.org/newshour/economy/pge-reaches-bankruptcy-deal-with-california-governor.
[10] Id.
[11] Id.
[12] Jeff St. John, PG&E Reaches Deal With California Governor to Emerge From Bankruptcy, Greentech Media (Mar. 23, 2020) https://www.greentechmedia.com/articles/read/pge-reaches-deal-with-calif-gov-to-emerge-from-bankruptcy.
[13] Id.
[14] Jeff St. John, California Governor Still Opposes PG&E’s Bankruptcy Exit, Despite Bondholder Accord, Greentech Media (Jan. 24, 2020) https://www.greentechmedia.com/articles/read/gov-newsom-still-opposes-pges-bankruptcy-exit-despite-bondholder-accord.
[15] Jeff St. John, PG&E Reaches Deal With California Governor to Emerge From Bankruptcy, Greentech Media (Mar. 23, 2020) https://www.greentechmedia.com/articles/read/pge-reaches-deal-with-calif-gov-to-emerge-from-bankruptcy.
[16] PG&E Submits Comprehensive, Multi-Party Settlement Agreement to CPUC Related to 2017 and 2018 Wildfires, PG&E (Dec. 17, 2019) https://www.pge.com/en/about/newsroom/newsdetails/index.page?title=20191217_pge_submits_comprehensive_multi-party_settlement_agreement_to_cpuc_related_to_2017_and_2018_wildfires.
[17] Ivan Penn & Peter Eavis, PG&E Will Plead Guilty to Involuntary Manslaughter in Camp Fire, New York Times (Mar. 23, 2020) https://www.nytimes.com/2020/03/23/business/energy-environment/pge-camp-fire-manslaughter.html.
[18] PG&E Corp., Current Report (Form 8-K) (Mar. 17, 2020).
[19] Ivan Penn & Peter Eavis, PG&E Will Plead Guilty to Involuntary Manslaughter in Camp Fire, New York Times (Mar. 23, 2020) https://www.nytimes.com/2020/03/23/business/energy-environment/pge-camp-fire-manslaughter.html.
[20] PG&E Corp., Current Report (Form 8-K) (Mar. 17, 2020).
[21] Id.
[22] Id.
[23] Ivan Penn & Peter Eavis, PG&E Will Plead Guilty to Involuntary Manslaughter in Camp Fire, N.Y. Times (Mar. 23, 2020) https://www.nytimes.com/2020/03/23/business/energy-environment/pge-camp-fire-manslaughter.html.
