Some of California’s most destructive wildfires on record occurred in 2017 and 2018. The state’s largest utility, Pacific Gas&Electric (PG&E) has already been named in over 100 lawsuits that allege it bears responsibility for the damages, largely due to equipment malfunctions that created volatile conditions that ignited fires.
People familiar with the situation said on Friday the company was considering bankruptcy as an option, something it did do in 2001 during the California energy crisis. It is still not certain that the company will take this route.
However, State Senator Jerry Hill, an outspoken PG&E critic, said the company has used bankruptcy before as leverage when seeking state assistance in paying its wildfire liabilities.
“Last year, they were able to fool the legislature with the narrative of bankruptcy or bailout, and the legislature gave them a bailout,” said Hill.
(August 8, 2018)
According to National Public Radio, a former employee who wishes to remain anonymous says the utility is looking at ways to cover liability costs and avoid bankruptcy, including a plan dubbed “Project Falcon.” Under the plan, the company would sell its natural gas division this spring.
The proceeds from the sale of its natural gas division would be used to set up a fund to pay the billions of dollars in potential claims of damages from the wildfires. The “Camp Fire” alone killed 85 and destroyed close to 14,000 homes. The town of Paradise was destroyed.
To add to the San Francisco-based company’s woes, PG&E shares were trading at $19.71 per share in late after-hours trading Friday, down $4.69 or almost 20 percent, according to the San Francisco Business Times.
“PG&E’s board and management are working diligently to assess the company’s potential liabilities as a result of the wildfires and the options for addressing those liabilities. We recognize the need to balance the interests of many stakeholders while maintaining safe, reliable and affordable services for our customers, which is always our top priority,” the company said in a statement
Liabilities could exceed the market value
One Citigroup analyst estimates that PG&E could be on the hook for up to $15 billion in damages, meaning it’s possible its liabilities could exceed the company’s market value. A number of insurance companies, including Allstate, State Farm, and USAA have filed lawsuits against PG&E, putting the blame on PG&E for the devastating “Camp Fire.”
And it looks like the courts may not have a lot of compassion for the utility, either. In 2017, PG&E was placed on five years probation following its conviction on pipeline safety charges stemming from an explosion of one of its pipelines in the San Francisco Bay Area.
This means the court could find that PG&E violated the terms of its probation if they are found to be culpable for any of the 2018 fires. The California attorney general said Friday that PG&E could face charges as serious as involuntary manslaughter or murder if investigators find that “reckless operation or maintenance of power equipment” caused any of the 2018 fires.
