PG&E, the electrical utility threatened by possible liabilities in one of the deadliest wildfires in California history, told regulators Monday that it will seek bankruptcy protection as it grapples with safety improvements and payouts linked to its role in previous blazes.
The power company, which doesn’t expect any interruptions in service during its Chapter 11 proceedings, said it will keep helping victims of the wildfires in 2017 and 2018 while working to rebuild damaged portions of its network and restoring service. Under U.S. law, companies can use a Chapter 11 bankruptcy to reorganize and obtain new financing under court oversight; firms planning to go out of business typically opt for a Chapter 7 liquidation.
PG&E doesn’t yet know whether its equipment was responsible for the November 2018 Camp Fire, which destroyed the Northern California town of Paradise along with nearly 14,000 homes, killed at least 86 people, and heightened tension between the largely Democratic state and the Trump administration.
The company had renewed wildfire insurance coverage for a total of $1.4 billion in mid-2018, but its liability for the Camp Fire might be between $8.7 billion and $13 billion, JPMorgan Chase has estimated. The investment bank Goldman Sachs projected a range of $9.9 billion to $12.5 billion.
“The people affected by the devastating Northern California wildfires are our customers, our neighbors and our friends, and we understand the profound impact the fires have had,” John Simon, the interim CEO appointed after the weekend departure of Geisha Wiliams, said in a statement.
Williams, who became CEO in March 2017, qualifies for severance benefits, the company said in a regulatory filing that specified she wasn’t leaving because of any disagreements with the board. As of March, PG&E estimated that Williams might receive $7.45 million upon resignation or retirement.
PG&E, which expects to file its bankruptcy petition around Jan. 29, is required by California law to notify state officials 15 days in advance.
“We believe a court-supervised process under Chapter 11 will best enable PG&E to resolve its potential liabilities in an orderly, fair and expeditious fashion,” Simon said.
The company tumbled 54 percent to $8.17 in New York trading on Monday, widening its decline so far this year to 66 percent.
While a state law passed in 2017 creates a mechanism for electrical utilities to pass the costs of wildfire-related damages on to users, it applied to disasters in that year as well as those in 2019 and afterward. No specific provision was made for fires in 2018.
The White House approved California Gov. Jerry Brown’s request for a presidential disaster declaration in November, making federal funds available to buoy the state’s response to the Camp Fire as well as blazes in Los Angeles and Ventura counties.
President Trump, who initially blamed the wildfires on poor forest management by the state and threatened to withhold “Fed payments” — moves that prompted a furious response from California officials and others — later changed tack, approving government assistance rapidly and posting sympathetic comments on Twitter.
