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Davis, California

Friday, March 1, 2024

PG&E files for bankruptcy

PG&E received claim of $30 billion, took necessary steps to figure out how to handle costs

The Camp Fire that consumed Butte County in 2018 and the Tubbs Fire that burned 36,000 acres in Santa Rosa in 2017 had one major commonality: the equipment was owned by PG&E. The Tubbs fire, however, was later said to be started by private equipment.

Most recently, the Camp Fire took 86 lives and destroyed 150,000 acres, resulting in $30 billion in claims. The fire was deemed the deadliest and most destructive wildfire in state history. With back-to-back years of wildfires, PG&E faced numerous lawsuits and liability claims, leaving minimal options but to file for bankruptcy.

On Jan. 14, that is exactly what the utility did. Under the state law signed by Gov. Jerry Brown, companies have to give notice before filing for bankruptcy. PG&E’s bankruptcy will be official on Jan. 29. About 12 hours before the company gave its notice and filed for bankruptcy, CEO Geisha Williams resigned.

PG&E’s connection to Valley Clean Energy — which provides UC Davis’ electricity — might be cause for concern for students and staff, but campus community members can be reassured that the lights will stay on.

“We are monitoring this situation very closely, and from my perspective, this situation will end up being similar to the 2001 situation where PG&E filed for bankruptcy and they still delivered energy,” said Jim Parks, the director of customer care and marketing for Valley Clean Energy. “We will post relevant details on our website and social media.”

It has been predicted that PG&E will be able to lower the $30 billion in claims to $22 billion. From there, the company will have to come up with a finance solution to overcome its debts.

“It’s difficult to say exactly what shape PG&E will take after bankruptcy,” said Dr. Keith Taylor, a community economic specialist and recognized leader in utility cooperative governance. “The only way that taxpayers and ratepayers can guard against a corporate bailout is a) if they demand a seat at the table, and b) if that seat results in some form of equity. This would require policymakers to seriously engage with the associations representing electric co-operatives, municipals or so-called ‘consumer-choice’ models.”

While this may be a loss to PG&E, it may prove to be another company’s gain.

“The ratepayer’s best ally right now is probably the National Rural Electric Cooperative Association, which represents over 40 million Americans who own their utility as co-ops; NRECA should absolutely be consulted with, and seen as a partner in making sure ratepayers get the best deal possible,” Taylor said. “Otherwise, the powerful lobbies representing investors and for-profit utilities will game the system in their favor.”

PG&E said in a press statement that it “does not expect any impact to electric or natural gas service for its customers,” according to The Sacramento Bee.

The company also made statements about its goals of investing in safer equipment and its continual efforts to update policies and the delivery of services in a fire-prone environment like California.

PG&E also filed for protection under chapter 11 and the federal bankruptcy code, as this chapter permits the company to stay running while dealing with its current situation. The downside to this is that Pacific Gas and Electric Co. is trying to get the authority to spike its rates by 6.4 percent next year. Having a rate increase like this would provide around $1.1 billion in additional revenue to support wildfire prevention and pay off its claim.  

“PG&E was able to issue bonds to cover damage from the 2017 wildfires — these bonds were passed through into hire electricity rates for consumers,” said Erich Muehlegger, an associate professor and graduate program chair in the economics department and member of the Davis Energy Economics Program. “Second, a bankruptcy will allow PG&E to renegotiate contracts for renewable power that were signed a decade ago at much higher prices.”

Although more time is needed to see how the situation will play out, everything will remain the same for PG&E customers, for now.

Written by: Lauren Tropio — city@theaggie.org


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