FEMA Defends $4 Billion Claim Against PG&E as Victims Cry Foul

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(Bloomberg) -- The Federal Emergency Management Agency is defending its push to collect $3.9 billion from PG&E Corp. for the relief it provided after the utility’s power lines sparked devastating wildfires in recent years.

Wildfire victims have been fighting the payments to FEMA in court, saying the agency would be taking money from a $13.5 billion pot that bankrupt PG&E had agreed to set aside for them. The U.S. agency has an obligation to seek recovery for the costs of critical services, such as medical expenses and home repairs, that it provided in the aftermath of blazes in 2015, 2017 and 2018, Bob Fenton, a regional administrator for FEMA, said in a call with reporters.

“We have no interest in reducing the funds PG&E owes to survivors,” Fenton said. “We are interested in holding PG&E responsible for the billions of dollars taxpayers provided to assist individuals and communities impacted by wildfires for which they accepted responsibility.”

The dispute has pit the victims of catastrophic fires against the very agencies that helped rescue them from the wreckage. California’s emergency services office is supporting FEMA and is seeking an additional $300 million to compensate the state for its efforts. If California didn’t assist FEMA in pursuing reimbursement, the federal agency could try to seek recovery from the state’s coffers, Governor Gavin Newsom’s office said.

The clash casts a shadow on the $13.5 billion settlement PG&E reached with victims, which won court approval just last month and brought the company one step closer to emerging from the biggest utility bankruptcy in U.S. history. The utility was forced to declare Chapter 11 a year ago after wildfires blamed on its equipment saddled it with an estimated $30 billion in liabilities.

Fenton warned that, if PG&E doesn’t pay up, FEMA would seek reimbursement from some victims who wind up with “a duplication of benefits” -- in other words, those who accepted assistance from the federal agency and also get paid out a settlement by PG&E. He estimated that amount would total less than $200 million.

Fenton said Monday that FEMA was left out of the talks between between PG&E and attorneys representing wildfire victims that resulted in their $13.5 billion settlement -- despite the fact that any payment to FEMA would come out of the same pot of money.

“It really quite frankly boggles my mind why the tort claims lawyers would want to relieve PG&E of its claims responsibility and make California and FEMA the enemy here,” he said. “Obviously, a taxpayer shouldn’t have to pay for a corporation’s wrongdoing.”

Victims’ attorneys have meanwhile argued in court filings that there is no legal basis for FEMA’s claims, citing a federal law that would only require PG&E to pay the agency if it intentionally started the fires. PG&E has sided with the victims’ lawyers, saying the federal agency has no “valid legal claim.”

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