By Marnette Federis & Lisa Pickoff-White, KQED Bay Area Public Radio
January 29, 2019
Pacific Gas & Electric Co. and its parent company officially filed for bankruptcy protection early Tuesday morning, saying it was necessary as the company tries to deal with tens of billions of dollars in potential liabilities from destructive wildfires in 2017 and 2018.
Though the move just after midnight was expected, reaction was nonetheless swift and overwhelmingly negative. Legislators, experts and consumer watchdog groups slammed the state’s biggest utility, saying it will ultimately benefit the company at the expense of ratepayers and fire victims.
'This is the easy way for them to go. This is the way they can move forward and put everyone at risk.'State Sen. Jerry Hill
Brad Sherwood, a resident of Sonoma County, said he and his family lost everything but their lives in the Tubbs Fire in 2017. Sherwood, who works for the Sonoma County Water Agency, said he and other survivors are concerned about the news of PG&E’s bankruptcy.
Sherwood said his family was not counting on the utility to help them rebuild, but he is most concerned with what bankruptcy will mean for future wildfire prevention efforts in Northern California.
“Wildfires won't stop because of a bankruptcy. Power, I believe, will still be going through those transmission lines ... fire prevention measures must continue, bankruptcy or not,” said Sherwood. “I think PG&E is behind the ball when it comes to fire prevention measures, and I'm concerned that bankruptcy will further put them behind the ball.”
PG&E Is Filing for Bankruptcy While Still Solvent
At its core, Chapter 11 bankruptcy is aimed at allowing a company to restructure its operations and get rid of some debts when it doesn’t have enough money to pay all those obligations.
But what's unusual about this bankruptcy filing is that the utility is still solvent. As part of its filing, PG&E estimated its liabilities at about $51 billion and its assets at more than $71 billion.
And some critics argue there's no reason for the company to go bankrupt.
“This is the easy way for them to go. This is the way they can move forward and put everyone at risk,” said state Sen. Jerry Hill (D-San Mateo), whose district includes San Bruno, the site of a 2010 gas explosion caused by PG&E equipment.
Hill points out that ratepayers ended up on the hook for billions of dollars in loans after the utility declared bankruptcy in 2001.
“The ratepayers, as we did with the last bankruptcy, will wind up paying a lot more,” he said. “The victims will probably not get dollar for dollar and PG&E will win. They will come out stronger at the end of the day and probably a more profitable company."
Calls for Serious Structural Change at PG&E
Bankruptcy will allow PG&E to reorganize, but some say the changes need to go deeper.
“[The bankruptcy] continues to underscore the need for change at PG&E both in its leadership and corporate culture,” said state Sen. Bill Dodd (D-Napa). “I think what we've got to focus on right now is safety, reliability and affordability of electric power in the state.”
In 2001, Loretta Lynch was the president of the California Public Utilities Commission, the agency that regulates utilities. She said the CPUC needs to stand up for ratepayers this time around. She said the last time around, the company got everything it wanted for "being belligerent" and fighting the state. She pointed out that no other utilities during that time chose the bankruptcy route.
"PG&E made out like a bandit. So here we are again 18 years later. None of the other utilities are threatening bankruptcy. Only PG&E. Why? Because they got the store the last time, and they're banking on the fact that this PUC will give them the store," she said.
"The PUC could come back with some strong requirements on that reorganization that puts the balance of power more in the hands of the ratepayers, more in the hands of the consumer and the victims, rather than in the pockets of PG&E shareholders," Hill said.
And some critics are going farther.
Jamie Court, president of Consumer Watchdog, called on Gov. Gavin Newsom to fire all of the CPUC commissioners, who unanimously voted to pre-approve up to $6.1 billion in credit and loans for PG&E on Monday.
“What many people don’t realize is this $6 billion credit line comes on top of the bailout the Legislature approved for PG&E and the other utilities over the 2017 fires,” said Court. “The PUC should be called the PG&E Underwriting Commission, not the Public Utilities Commission, because there was absolutely no public protection in this decision. There wasn’t even an opportunity for the public to comment, it happened so fast.”
Fire Survivors Not Optimistic on Payouts
Sonoma County residents, who lived through the Tubbs Fire in 2017, said the bankruptcy news was not a surprise, and many seemed resigned to the possibility that fire victims may have to get in line with shareholders, stockholders and creditors before getting any payout from PG&E.
'I really didn't think [PG&E] needed to declare bankruptcy ... They're hoping that they can pay less than what people might be entitled to after a liability determination.'James Gallagher, GOP assemblyman representing areas affected by the Camp Fire
"That's how it usually goes. Because of the power that they wield, those entities put themselves in first lien position every chance they get. That's how it tends to work," said Ken Cozine, a Santa Rosa resident who is an insurance agent. The flames of the Tubbs Fire missed his house by less than a mile.
Tim Rothchild, who was not directly impacted by the fire but knows people who had to evacuate, said, "PG&E will find a way to not pay out. That’s just going to happen.”
Last week, Cal Fire also released its finding that PG&E equipment was not at fault in the Tubbs Fire, which killed 22 people, destroyed more than 5,000 homes and was responsible for as much as $10 billion in insured property losses.
Republican Assemblyman James Gallagher, who represents areas affected by the Camp Fire, which killed 86 people and destroyed nearly 14,000 homes, told KQED's Lily Jamali:
"It's really disappointing and frustrating," he said. "I really just didn't think that they needed to declare bankruptcy. They still have viable assets. There's going to be a determination of liability with regard to these wildfires, but that hasn't been determined as of yet."
Gallagher is questioning the company's motive.
"I mean, it does seem suspect and I think there's already a lot of distrust of PG&E," he said. "I don't think there's any other way to look at it. They're hoping that they can pay less than what people might be entitled to after a liability determination."
Other lawmakers weighed in on the latest news.
“It’s disheartening that it has come to this," said state Sen. Ben Hueso (D-San Diego) in a written statement. "Bankruptcy is never an ideal option. It will now be crucial for the state to ensure that we are well positioned to protect ratepayers, wildfire victims, the utility workforce and vendors in the process moving forward. My focus and priorities during this process remain the same: ensuring that there is safe, reliable and uninterrupted service for consumers; and that wildfire victims are treated fairly and receive just compensation for their losses."
Lily Jamali, Marisa Lagos, Steve Mencher, Peter Jon Shuler and Brian Watt contributed to this report.