PG&E: What Bankruptcy Means for the Utility

Jan 17, 2019, 01:57
PG&E: What Bankruptcy Means for the Utility

The announcement follows the resignation of chief executive Geisha Williams a day earlier. Williams had been CEO since 2017.

Prior to being appointed interim CEO, Simon served as executive vice president and general counsel for PG&E.

"PG&E expects that the Chapter 11 process will, among other things, support the orderly, fair and expeditious resolution of its potential liabilities resulting from the 2017 and 2018 Northern California wildfires", the utility stated in a press release.

However, analysts warned the bankruptcy filing will likely lead to higher costs for consumers unless the state government is able to quickly restore investor confidence.

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Action News Now reporter Christina Vitale spoke with a lawyer to break down what bankruptcy means for the company.

As a result, PG&E as engaged in discussions with potential lenders when it comes to Debtor-in-Possession ("DIP") financing. But estimates of up to $30 billion in liabilities for wildfires in California appear to be too much to overcome in an environment where the power plant and utility business is becoming less profitable. Last year, PG&E said it expected to have to pay at least $2.5 billion to cover lawsuits from the fire; far beyond its 2017 profit of $1.66 billion. The company could face murder charges if found responsible for starting the Camp Fire, and it is already facing numerous lawsuits.

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. "We remain committed to helping them through the recovery and rebuilding process".

"The Chapter 11 process allows us to work with these many constituents in one court-supervised forum to comprehensively address our potential liabilities and to implement appropriate changes".

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PG&E said it "does not expect" bankruptcy to impact service to customers, or pay and benefits to employees.

"Following a comprehensive review with the assistance of our outside advisors, the PG&E Board and management team have determined that initiating a Chapter 11 reorganization for both the Utility and PG&E Corporation represents the only viable option to address the Company's responsibilities to its stakeholders", said Richard C. Kelly, chair of the board of directors at PG&E. It said it believes bankruptcy is in the best interests of not just wildfire claimants but also other creditors, its shareholders and customers.

PG&E assured its customers that there would be no impact to electric or natural gas services for its customers because of the bankruptcy.

The legislature and the governor could decide to allow PG&E to pass along the costs associated with victim lawsuits and other fire losses to ratepayers, as they did past year for a series of deadly northern California blazes in 2017. It also indicated that it will continue to provide natural and electric to its customers during the restructuring phase.

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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. The company made a decision to prepare to file for bankruptcy in part to address that issue, known as "inverse condemnation".