PG&E lists $51.69 billion in debts, while warnings erupt of higher power bills due to bankruptcy case
By George Avalos, THE MERCURY NEWS
January 29, 2019
PG&E filed for a Chapter 11 bankruptcy on Tuesday, staggered by billions of dollars in debts and liabilities in the wake of a series of deadly wildfires that torched Northern California in 2017 and 2018, and a key state lawmaker said the focus must now be on protecting customers, fire victims and company workers.
“It’s now time for the state Legislature and the governor to step up and be counted,” state Sen. Jerry Hill, a Democrat who represents parts of Santa Clara County and San Mateo County, said Tuesday. “There has to be some backstop, some protection mechanism in place to guarantee that ratepayers, fire victims and employees are not harmed by the final restructuring of PG&E.”
San Francisco-based PG&E listed $51.69 billion in debts and $71.39 billion in assets, according to the filing with the U.S. Bankruptcy Court in Northern California.
“We are not ‘going out of business,’ and we expect that there will be no disruption to the services you expect from us as a result of the Chapter 11 process,” PG&E stated in a post on its website to explain the bankruptcy.
However, the bankruptcy filing could lead to higher monthly power bills for PG&E customers, depending on the plan for financial reorganization that is approved by the bankruptcy judge and eventually reviewed by the state Public Utilities Commission, according to a one-time member of the powerful state regulatory agency.
“We can’t have any confidence that the PUC will protect ratepayers from higher monthly bills as a result of this bankruptcy,” Loretta Lynch, a former PUC commissioner, told this news organization.
Plus, people who are victims of the infernos that torched the North Bay Wine Country and nearby regions in 2017, as well as those who were victimized by wildfires that roared through Butte County in 2018 will likely find that their liability claims against PG&E could take a back seat to the financing package that PG&E is seeking to help it operate during the bankruptcy.
PG&E filed a motion to gain bankruptcy court approval for $5.5 billion in a funding package known as debtor-in-possession financing, PG&E stated in a prepared release. That funding is being provided by a consortium of large banks.
“The banks providing the financing have first dibs on being paid back,” Lynch said. “That means the fire victims, the company’s workers and the ordinary creditors will be placed at a disadvantage to be paid back and compensated.”
BlueMountain Capital Management, a large investor in PG&E, said it was “deeply disappointed” PG&E’s board of directors had decided to pursue a “reckless and irresponsible” bankruptcy proceeding. BlueMountain added, “Today’s filing is the latest example of how the PG&E board continues to fail the company, wildfire victims, customers, employees, creditors, shareholders and the people of California.”
State fire investigators have determined that PG&E’s equipment was the cause of 17 destructive fires in 2017. However, PG&E was found not to be the cause of the lethal Tubbs Fire, which was one of the October 2017 infernos, state fire investigators ruled earlier this month.
PG&E has disclosed that it suffered equipment failures near the point of origin of the Butte County blaze in 2018, which killed at least 86 people and essentially destroyed the town of Paradise. That inferno, known as the Camp Fire, is deemed to be the most deadly and catastrophic wildfire in California history.
“We have heard the calls for change,” PG&E interim Chief Executive Officer John Simon said. “We are determined to take action throughout this process to build the energy system our customers want and deserve.”
PG&E’s bankruptcy is the latest in a series of calamities to bedevil PG&E and its customers over the last several years.
Even before the deadly wildfires linked to PG&E’s electricity system, PG&E became a convicted felon in 2016 for crimes it committed before and after a fatal gas explosion that killed eight and destroyed a San Bruno neighborhood in 2010.
Federal investigators determined the San Bruno disaster was caused by a deadly combination of PG&E’s flawed record keeping, shoddy maintenance and the PUC’s lazy supervision of the utility.
PG&E’s shares jumped 16 percent in mid-session trades, an indication that Wall Street players believe the bankruptcy case could help PG&E ward off wildfire liabilities and assure a steady revenue stream.
Also favorable for PG&E: a decision by the PUC on Monday to approve what skeptics call a $6.1 billion bailout of the company by agreeing to the financing package to enable PG&E to keep the lights on and the heat flowing during the bankruptcy case.
“The PUC voted to put the interests of PG&E over that of ratepayers, who will bear the cost of the billions in bonds without conditions, and wildfire victims, who will be in line behind banks and lawyers to get paid in bankruptcy,” said Jamie Court, president of Consumer Watchdog. The consumer group urged that the four PUC members that former Gov. Jerry Brown appointed be ousted and replaced.
PG&E monthly bills rose by an average of $1,300 to $1,700 over a 10-year period due to PUC decisions taken in connection with the settlement of PG&E’s prior bankruptcy in 2001. Lynch and Sen. Hill want to avoid a repeat.
“The whole thing will be a major reorganization of PG&E over the next couple of years,” Hill said. “Everyone will be jockeying for positions that suit their own interests. We have to be sure that customers, workers and fire victims are not ignored.”
George Avalos is a business reporter for the Bay Area News Group.