PG&E Corp. settled a major dispute that could have jeopardized its bankruptcy reorganization plan, agreeing to pay $1 billion to FEMA for costs of responding to disastrous wildfires caused by the California utility.

The Federal Emergency Management Agency was demanding $3.9 billion from PG&E, dollars that would have been carved out of a $13.5 billion fund PG&E has established for victims of the 2017 and 2018 fires.

Instead, FEMA accepted $1 billion and agreed that it wouldn’t get paid until fire victims are compensated in full. Instead, FEMA accepted $1 billion and agreed that it wouldn’t get paid until fire victims are compensated in full. FEMA spokesman Robert Barker said the deal is “subject to final approval” by the Justice Department.

In addition, California’s Office of Emergency Services reportedly dropped its claim for $290 million.

The approximately 80,000 fire victims are preparing to vote on whether to accept the $13.5 billion fund. Carving out billions for the government could have tilted the vote against the PG&E plan.

Eric Goodman, a lawyer representing wildfire victims, had called the FEMA claim “a cloud over the entire case.” PG&E has to exit bankruptcy by June 30 in order to be eligible for a state-created insurance pool designed to buffer utilities against liabilities from future wildfires.

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PG&E had tried to knock out the claims altogether, arguing that federal law prohibits FEMA from seeking reimbursement unless it could prove that the utility had deliberately lit the Camp Fire and other fires.

“We didn’t intend to cause the fire,” utility lawyer Paul Zumbro said at a hearing in U.S. Bankruptcy Court last month.

While the multibillion-dollar claims have been resolved, PG&E still has to make peace with California officials over the basic outline of its reorganization plan.

Gov. Gavin Newsom has been insisting that PG&E emerge from bankruptcy as a “utility transformed,” with more emphasis placed on public safety. He rejected the company’s first bankruptcy plan, saying it didn’t overhaul PG&E’s corporate culture. PG&E rewrote the plan and pledged to shake up its board of directors, hire “chief safety officers” throughout its service territories and take other steps.

In a court filing last week, Newsom’s lawyers said PG&E’s rewritten plan address some “but not all” of Newsom’s objections. They said the governor’s staff continues to negotiate with PG&E.

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