SAN FRANCISCO (CBS SF) — Less than 24 hours after the company’s CEO stepped down, Northern California’s largest utility company — Pacific Gas & Electric — announced Monday it was going to file for Chapter 11 bankruptcy.
The company’s intent to file voluntary bankruptcy proceedings on or about Jan. 29 came in a one paragraph statement.
“PG&E expects that the Chapter 11 process will, among other things, support the orderly, fair and expeditious resolution of its potential liabilities resulting from the 2017 and 2018 Northern California wildfires, and will assure the company has access to the capital and resources it needs to continue to provide safe service to customers,” the company said.
The utility may face up to $30 billion in damages from devastating wildfires in California over the last two years. Investigators are looking closely at whether PG&E’s equipment ignited the Camp Fire, the deadliest fire in California history.
Over the last several months, shares of the utility’s stock have tumbled on Wall Street. Shares of PG&E plunged 55% in initial premarket trading following the filing and was still down 40% shortly after 5 a.m. PT.
The company said Monday that it has only about $1.5 billion in cash and cash equivalents on hand.
It said it believes bankruptcy is “appropriate, necessary and in the best interests of all stakeholders, including wildfire claimants,” as well as other creditors, its shareholders and customers.
The filing was the second time in recent history the utility has filed for Chapter 11 protection. It also filed in April 2001 saying it was $9 billion in debt.
- PG&E CEO Steps Down Amid Potential Bankruptcy Declaration
- PG&E Reportedly Eyeing Breakup, Bankruptcy In Wake Of Multiple Devastating Wildfires
- California’s Camp Fire ‘The World’s Costliest Natural Disaster Of 2018’
State Sen. Jerry Hill (D-San Mateo), a frequent PG&E critic, says it’s hard to trust PG&E on their claims.
“Last year, they came into the legislature with the narrative: either give us a bailout or we’re going bankrupt. But we know at that time they were in the background lying to us,” said Hill. “I think the problem we have is now, what can we trust?”
Hill added, “The problem we’ve had in the past is their safety culture isn’t there. They don’t have one. They prioritize profits over safety.”
Former San Bruno Mayor Jim Ruane said PG&E still needs to be held accountable for the 2010 explosion in that city that killed eight people and devastated the Crestmoor neighborhood, despite the $70 million in restitution already paid.
“Somebody needed to go to jail after San Bruno and that still is my feeling,” said Ruane. “They’ll really take it seriously when it starts to affect their lives personally and permanently.”
Gov. Gavin Newsom issued a statement early Monday about the bankruptcy announcement.
“PG&E provides gas and electric service to 16 million Californians,” he said in the statement. “From the moment I was elected, I have been closely monitoring the impact of PG&E’s existing and potential future liability for the deadly wildfires on the victims of the fires and the consumers who rely on PG&E for their electric and gas service.”
“When I took office one week ago today, I immediately instructed my team to meet with the California Public Utilities Commission, CAISO, PG&E, and labor unions representing the workers who work for PG&E. My staff and I have been in constant contact throughout the week and over the weekend with these stakeholders and regulators. Everyone’s immediate focus is, rightfully, on ensuring Californians have continuous, reliable and safe electric and gas service.”
“While PG&E announced its intent to file bankruptcy today, the company should continue to honor promises made to energy suppliers and to our community.”
Newsom later spoke with reporters in Sacramento, saying that “safety, reliability and affordability” are his top concerns, alongside protecting wildfire victims and ratepayers, in confronting the potential bankruptcy. He sought to assure the public that this potential bankruptcy won’t result in power shutoffs.
He said addressing the pending bankruptcy, and potentially avoiding it, is a top priority for his new administration, but he hasn’t settled on what actions to take. He said the state has “no choice” but to work collaboratively with the utility even though it has not been a “trusted player” in the past.
The Utility Reform Network (TURN) Executive Director Mark Toney said that customers should not be concerned, as a lot can happen between now and an official filing.
“It’s important for people not to panic just because PG&E filed an intent to file bankruptcy. That’s all they are doing today is giving notice of bankruptcy,” said Toney. “Even if PG&E files for bankruptcy, it’s important to remember the lights are going to stay on; service is going to be provided.”
However, Toney admitted it likely won’t be good news for consumers.
“Their number one priority is going to be paying off the creditors — all the people that PG&E owes money to,” explained Toney. “And the creditors are going to be the ones that are on top and he ratepayers are going to be on bottom, because we will have to pay for it.”
After declaring bankruptcy, PG&E will have a hard time borrowing money. That may mean higher rates for consumers and less money for green energy projects.
“For starters in means that everything we want to do with respect to clean energy just got more expensive and that probably means we can afford less of it,” said Michael Wara, Director of the Climate and Energy Policy Program at Stanford’s Woods Institute.
Wara also thinks a Chapter 11 bankruptcy will probably be bad news for fire victims, who would be treated like any other creditor.
“And what that likely means is that they will get paid some fraction — only a fraction — of their claim,” Wara.
And while PG&E is facing some $30 billion in liabilities for those fires, Wara told KPIX it is the prospect of future payouts that’s really driving this bankruptcy
“It’s not so much these liabilities that are killing the company,” said Wara. “What’s really killing this company is the perception that, as Governor Brown said, this is the new abnormal.”
Attorney Frank Pitre and his firm represent more than 600 victims from the Camp and Wine Country wildfires in lawsuits against the utility.
“PG&E opted to jump the gun and use bankruptcy as a weapon as a way to resolve these claims,” said Pitre. “It’s most unfortunately and horribly disappointing to the thousands of people who have been impacted.”
Pitre did allow that the move by the utility could slow the lawsuits.
“They will get justice. If I or any of the lawyers who represent these victims have anything to say, they will get justice. But in this case, going through bankruptcy, is a delay of justice,” said Pitre.
PG&E CEO Geisha Williams stepped down from her position on Sunday.
The company’s board of directors has named John Simon Interim Chief Executive Officer as the search for a new CEO continues.
“On behalf of the Board, I want to thank Geisha for her service and her tireless commitment to our employees and the 16 million Californians we serve,” said Richard C. Kelly, Chair of the Board of PG&E Corporation, in a statement.
“While we are making progress as a company in safety and other areas, the Board recognizes the tremendous challenges PG&E continues to face. We believe John is the right interim leader for the company while we work to identify a new CEO. Our search is focused on extensive operational and safety expertise, and the Board is committed to further change at PG&E.”
Williams was CEO for less than two years, but she had been with PG&E since 2007. In 2017, she became the first Latina CEO of a Fortune 500 company.
Her severance package will be worth $2.5 million dollars, according to the San Jose Mercury News.
This is the second time PG&E filed for bankruptcy in two decades. Back in 2001, the earlier filing followed widespread blackouts in the state that led to a negotiated rate increase that customers are still paying for on our bills today.
© Copyright 2019 CBS Broadcasting Inc. All Rights Reserved. The Associated Press and CNN contributed to this report.