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PG&E Sinks After Announcing Plans to File for Bankruptcy

PG&E Sinks After Announcing Plans to File for Bankruptcy”

The utility announced Monday it would file for Chapter 11 protection by the end of January in anticipation of overwhelming financial liability due to its role in igniting California wildfires, which PG&E estimates could be more than $30 million.

The company said it is in discussions with lenders about receiving more than $5 billion to fund its ongoing operations as it navigates through bankruptcy.

PG&E said in a securities filing it could potentially raise more money and avoid seeking bankruptcy protection, but argued such a move would be complex, uncertain and expensive. The company said it would look to hire a new chief executive with "extensive operational and safety expertise".

Mark Toney, executive director of consumer advocate group the Utility Reform Network, said the atmosphere had cooled considerably toward PG&E in recent months, making a bailout politically more hard for lawmakers.

Meanwhile, the company is widely reported to be considering filing for bankruptcy protection as its stock price has nose-dived after it said in November that it could be liable for billions of dollars in excess of its insurance coverage from fires both previous year and in 2017. State fire officials pointed to damage to PG&E poles and power lines as the cause of more than a dozen fires that year.

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PG&E said the bankruptcy filing will not impact its services for 16 million customers.

Democratic Sen. Jerry Hill, meanwhile, said a PG&E bankruptcy may turn out to be a good thing.

Few politicians want to rush to the defense of a big utility, but many policy experts argue that PG&E wouldn't be in this position if it weren't for a unique California legal standard that makes utilities strictly liable for damages from wildfires linked to their equipment even if the utilities were not negligent or unreasonable.

PG&E's decision to replace its chief executive is likely meant to satisfy state regulators rather than investors, said Paul Patterson, an analyst who follows PG&E at Glenrock Associates LLC. Here, transmission towers in a valley near Paradise, Calif., as the Camp Fire burns in November 2017.

California's new governor, Democrat Gavin Newsom, told reporters that "safety, reliability and affordability" are his top concerns, alongside protecting wildfire victims and ratepayers, in confronting the potential bankruptcy. Governor Newsom and the legislature should not give into bankruptcy blackmail and bail out this company at the expense or ratepayers. He said the utility should "honor promises made to energy suppliers and to our community".

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It is believed the fire was started when a PG&E power line came in contact with nearby trees.

"The Natural Resources Defense Council warned that bankruptcy could threaten billions in funding for PG&E's clean energy initiatives, which are key to California's environmental goals".

As for the lawsuits, PG&E will negotiate with the plaintiffs and its other creditors a reorganization plan based on how much the utility is able to pay, said Hugh Wynne of Sovereign Research, an investment research firm.

Cavanagh said that another casualty of bankruptcy could be billions of dollars of funding for clean energy initiatives created to fight the effects of climate change.

"There's going to be electricity that's not going to go away", Sorrells said. "Other threatened initiatives involve grid upgrades, small-scale "distributed" resources and technology innovation".

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