What does PG&E’s bankruptcy mean for wildfire victims?
Under the weight of mounting liabilities tied to catastrophic wildfires, Pacific Gas & Electric Co. sought bankruptcy protection Tuesday to help the utility maintain gas and electric services for its 16 million customers and keep the company’s employees on the job.
The move, however, sets up an uncertain future for thousands of people suing the utility in the wake of deadly and devastating wildfires that have swept across Northern California over the past two years, including 17 infernos in 2017 the state has said were sparked by PG&E equipment.
Though the state last week cleared PG&E of blame for starting the Tubbs fire in Sonoma and Napa counties, many who lost homes here said they still held the utility responsible, making Tuesday’s bankruptcy another unwelcome blow. They cited the utility’s documented failures to maintain its power grid and prepare for significant weather-related events.
“I’m disgusted,” said Eric Edenfield, who lost his Coffey Park home in the Tubbs fire and then sued PG&E for damage to his property. “Who is looking out for us?”
The utility listed assets of $71.2 billion and debts of ?$51.4 billion in its bankruptcy petition. Two weeks ago when it signaled bankruptcy was forthcoming, PG&E had estimated wildfire liabilities at $30 billion, but it was unclear if that was included as part of the debts listed in Tuesday’s filing.
The utility’s legal maneuver puts a hold on all civil lawsuits against PG&E, while the San Francisco-based company undergoes a reorganization process that could take two years. Ultimately, the legal claims thousands of wildfire victims have leveled against the utility in state court could be settled through federal bankruptcy court.
“This is enormous. It’s one of the biggest bankruptcy cases of all time,” said Jared Ellias, an associate professor of law and bankruptcy expert at UC Hastings in San Francisco.
PG&E’s interim CEO and general counsel John Simon, who took the helm during a recent shakeup of the company’s top executives, said this legal step would ensure customers see no power interruptions while the company undergoes a transformation “to create a more sustainable foundation for the delivery of safe, reliable and affordable service in the years ahead.”
“The power and gas will stay on,” Simon said in a written message to the utility’s 16 million customers.
The company provides electric and gas services across 70,000 square miles of Northern and Central California and employs 24,000 people, including more than 700 in Sonoma County.
The company said the bankruptcy process will allow it to continue spending the money it needs to improve the safety of its electrical grid, which has been blamed by the state’s fire service for igniting 17 of the 18 major Northern California fires in 2017.
“We are fully committed to enhancing our wildfire safety efforts, as well as helping restoration and rebuilding efforts across the communities impacted by the devastating Northern California wildfires,” Simon said in a separate statement.
Tuesday’s petition to reorganize under Chapter 11 in U.S. Bankruptcy Court in San Francisco came two weeks after PG&E disclosed its plans as an effort to address a mountain of liabilities, including those tied to legal cases stemming from the 2017 and 2018 wildfires.
The utility was required to announce its plans in advance because of a new California law passed last year that created a way for PG&E to offset some of its wildfire liabilities through a bond program covered over time by customers.
In response to PG&E’s bankruptcy filing, Gov. Gavin Newsom said his administration would work to “ensure that Californians have access to safe, reliable and affordable service, that victims and employees are treated fairly, and that California continues to make forward progress on our climate change goals.”
The company said it secured a $5.5 billion loan from a group of banks to ensure it can operate its business on a daily basis while its debt reorganization moves through bankruptcy court.
The high-stakes case will be overseen by U.S. Bankruptcy Judge Dennis Montali, a veteran member of the bench who oversaw PG&E’s bankruptcy and restructuring in 2001 after California’s energy crisis. That case is not yet closed.
The new bankruptcy petition is more extensive with a longer list of creditors - a number PG&E said Tuesday was between 50,000 and 100,000 - including bondholders, credit holders, shareholders, employees, state regulators and wildfire victims.
Bankruptcy gives the company several legal tools to manage its growing debts, starting with the bank loan to stabilize the business operations. From there, the court will begin evaluating the company’s debts. Wildfire victims will have a voice in the proceedings through creditors’ committees that also will include all the other stakeholders.
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