SACRAMENTO, Calif. — The multibillion-dollar trust fund responsible for paying PG&E Corp. wildfire victims is lobbying Gov. Gavin Newsom and the Legislature for a loan.
The PG&E Fire Victim Trust says it needs a state loan of about $1.5 billion to help it fully compensate the nearly 70,000 survivors of the wildfires that drove California’s largest utility into bankruptcy in 2019.
Without the state’s help, the trust probably can’t make the victims whole, said Patrick McCallum, a lobbyist hired by the trust to press its case at the Capitol.
“You have 66,000 victims, many of them poor, desperately needing the cash,” McCallum said in an interview.
As it prepared to emerge from bankruptcy in 2020, PG&E told fire victims it would pay them $13.5 billion for losses not covered by their insurance. The utility set up the independently-run Fire Victim Trust with $6.75 billion in cash and 477 million shares of PG&E stock, an ownership stake of about one fifth. Fire victims won’t actually receive any stock. Instead, the head of the trust, a retired appellate court justice named John Trotter, is selling the shares periodically to raise cash. The deal was approved by a vote of the fire survivors.
But for the victims to receive the full $13.5 billion, the trust must sell its shares for about $14.15 a share. PG&E’s share price has consistently traded at significantly below that target price.
That problem was painfully driven home two months ago, when Trotter made his first stock sale: 40 million shares at $12.09 a share. The pattern repeated itself last Thursday, when the trust unloaded another 60 million shares at $12.04.
The trust’s remaining 377.7 million shares were worth about $4.6 billion based on Tuesday’s market price. That would leave the trust about $1 billion short.
Seeking help from the state, Trotter has hired McCallum, a retired education lobbyist who lost his home in the 2017 Tubbs Fire in Santa Rosa. After the fire, McCallum founded a victims’ advocacy group called Up from the Ashes. He and his wife eventually bought a home to replace what they’d lost.
McCallum made an initial pitch to Newsom’s staff Tuesday at the Capitol. “He has an opportunity to help us out,” McCallum said in an interview.
Although state leaders rebuffed earlier overtures by Trotter, the lobbyist said Newsom’s staff has indicated it’s willing to explore some form of assistance. “The governor’s staff told me to give them options,” he said.
McCallum thinks a loan is the best bet. The Fire Victim Trust has paid out nearly $3.4 billion in claims so far and is starting to run low on cash, he said. With a loan, the trust could hold onto its shares until PG&E’s stock rises high enough so Trotter can sell them at the proper price point.
That could be about a year away. One of the impediments holding down PG&E’s stock price is that the utility isn’t paying dividends on its stock, as part of the deal it made with Newsom in 2020 to get out of bankruptcy. The agreement allows PG&E to resume paying dividends once it reaches a certain level of profitability — a milestone that it’s likely to achieve by mid-2023, according to Travis Miller, an investment analyst with Morningstar.
The resumption of dividends would boost the price, enabling the trust to repay the loan, McCallum said.
“It’s a safe loan for the state,” he said.
He added that the loan would benefit the entire state by enabling fire victims to accelerate their rebuilding efforts.
“The governor gets thousands of housing starts,” he said. “It stimulates the economy.”
Trotter approached legislative leaders months ago about a rescue plan that involved rewriting AB 1054, a landmark 2019 law that created an insurance pool that utilities could tap to help pay claims from mega-fires. The pool is funded by ratepayers and company shareholders; PG&E has said it plans to file the first claim, for $150 million, to cover a portion of the damages from last year’s Dixie Fire.
The AB 1054 pool is limited to wildfires that occur in 2019 or later. It’s off limits to the survivors of all pre-2019 fires — the same people who are relying on the PG&E Fire Victim Trust. Legislative leaders turned aside Trotter’s request to open the insurance pool to them.
------
