The Riggs Report: PG&E’s Bankruptcy Move

Now that PG&E has filed notice that it plans to file for Chapter 11 bankruptcy protection at the end of the month, will the utility pull the trigger? Or can it be avoided?

Gov. Gavin Newsom wasn’t able to offer much clarity on that question earlier this week during a Capitol news conference, and he’s not alone. To say the least, it’s complicated, and the impacts of bankruptcy would have a substantial ripple effect.

I’m told that there are urgent discussions underway between the administration, regulators, insurers, attorneys and other stakeholders to explore whether it’s possible to reach some sort of settlement on who gets paid for what could be as much as $30 billion in potential liability costs arising from wildfires over the last two years. If those talks fail, then bankruptcy would follow.

A 2019 bankruptcy for PG&E would look far different from the company’s 2001 bankruptcy. Back then, the state was facing an energy crisis, with rolling blackouts and electrical shortages caused by market manipulation later pinned on wholesalers like Texas-based Enron. In the current case, the shortage is not power, but resources available to cover potential liabilities stemming from the wildfires.

The lights would stay on, in other words. Company workers would stay on the job. One of the most apparent impacts of a bankruptcy filing would be on wildfire victims who are pursuing lawsuits against PG&E. Those legal claims would be placed on hold, pending a reorganization plan for the company. The bankruptcy court would have to approve that plan, and ultimately sort out who gets paid and how much.

Another key question is how ratepayers would be affected. Following the 2001 crisis, utility customers were on the hook to pay more in order to pay off company debt. It seems likely that would be the case this time as well.

Bankruptcy would also impact California’s efforts to move toward greater reliance on renewable energy sources like solar and wind, as PG&E is a big player in those efforts. There are also questions about how or if bankruptcy would affect current plans to shut down the Diablo Canyon nuclear power plant near San Luis Obispo. The plant is due to be decommissioned by 2025, and there are substantial costs associated with that.

Last year, lawmakers at the Capitol approved a measure that allowed utilities to bill customers for future legal settlements tied to the 2017 wildfires. It also set up a process for the Public Utilities Commission to determine, in future fires, what legal costs for damage could be passed on to customers based on a utility’s behavior.