PG&E’s long-running bankruptcy saga enters pivotal stage
Trial will examine viability of utility’s $58 billion plan
BERKELEY >> Pacific Gas & Electric limped into bankruptcy vilified for its longrunning neglect of a crumbling electrical grid that ignited a succession of horrific Northern California wildfires that left entire cities in ruins.
After nearly a year-and-ahalf of wrangling during one of the most complex bankruptcy cases in U.S. history, it’s unclear if PG&E is now any better equipped to protect the 16 million people who rely on it for power.
The drama is scheduled to enter its latest act starting Wednesday in a trial examining PG&E’s $58 billion plan to get out of bankruptcy. That proceeding, known as a confirmation hearing, will overlap with a hearing by state power regulators who also must approve PG&E’s plan.
The outcome will affect the future of a sprawling service territory that includes San Francisco, Northern California’s world-famous wine country, Yosemite National Park and the Silicon Valley home of Apple, Google and Facebook.
The utility has been blamed for more than 100 deaths in the past decade, including 84 felony counts of involuntary manslaughter in a blaze that destroyed the town of Paradise.
“PG&E has a narrow tightrope to walk when it comes to doing what it needs to prevent wildfires, remain financially solvent and to keep rates from skyrocketing,” said Mark Toney, executive director of The Utility Reform Network, an activist group and frequent foil of the company.
PG&E believes it is ready to navigate that gauntlet. The company plans “to implement needed changes across our business to improve our operations and governance for the long term,” chief financial officer,
Jason Wells, assured state power regulators in a May 14 letter.
That confidence isn’t widely shared.
Some of the lawyers representing wildfire victims are worried a $13.5 billion settlement they helped negotiate is turning out to be an illusion. They contend PG&E may only end up paying $5.4 billion in cash, with $1.3 billion in future payments tied to uncertain tax benefits. Another $6.75 billion in company stock is in danger of plunging in value during a pandemic-driven recession or, worse, if PG&E causes another disaster in a wildfire season that is expected to be even more dangerous than usual.
Meanwhile, PG&E’s intention to nearly double its debt load as part of its financial rehabilitation is raising fears about its ability to raise the additional money for an estimated $40 billion in improvements to electrical equipment. Its infrastructure is in such bad shape that PG&E expects to deliberately shut off power for several years to avoid igniting more wildfires during the dry, windy conditions that are an annual rite of Northern California autumns.
Footing those bills ultimately may fall on PG&E’s customers, who are already being asked to help pay for high insurance premiums for the utility’s past negligence. In 2010, its poorly maintained natural gas lines blew up a neighborhood in San Bruno, killing eight people and leading to the company’s felony convictions.
A federal judge overseeing PG&E’s five-year probation remains so appalled by its shoddy safety practices that he is seeking stricter requirements on the utility before his supervision ends in January 2022.
“This failure is upon us because for years, in order to enlarge dividends, bonuses, and political contributions, PG&E cheated on maintenance of its grid,” U.S. District Judge William Alsup wrote last month.
The San Bruno explosion occurred six years after PG&E finished its first bankruptcy, triggered by illegal manipulation of California’s then-deregulated power market. That was widely seen as a squandered opportunity to force PG&E to invest in safety measures instead of boosting profits.
Besides the tragedy in San Bruno, PG&E equipment has been blamed for a series of wildfires that caused more than $50 billion in losses. It used the bankruptcy process to settle those claims for $25.5 billion, including the $13.5 billion nominally promised to more than 80,000 people who lost family, homes and businesses in the wildfires.
To finance those deals and other obligations, PG&E’s debt will nearly double to almost $40 billion if its plan is approved by U.S. Bankruptcy Judge Dennis Montali and state regulators.
California’s political leaders and regulators promised to seize on PG&E’s latest bankruptcy to ensure the utility would emerge on solid financial ground and move toward protecting customers.