Drone flyover shows Camp Fire destruction in Paradise
PG&E, facing billions in potential losses from the Camp Fire and other wildfires, is reportedly exploring the sale of its natural gas division or a bankruptcy filing as it tries to deal with its staggering financial liabilities.
NPR, quoting anonymous sources, said Friday that PG&E might sell the gas division as well as some of its real estate, including its headquarters in San Francisco, to raise cash for wildfire claims. The entire effort is part of a strategy code-named “Project Falcon,” NPR reported.
Separately, Reuters reported that PG&E is again considering filing for bankruptcy as a way of dealing with its liabilities. PG&E’s chief executive, Geisha Williams, first publicly raised the possibility of bankruptcy last summer, when the Legislature was considering a bailout plan for the utility. The Legislature approved some protections for the company in September.
The Reuters report sent PG&E’s stock price tumbling $5.10 a share, to $19, in after-hours trading following the close of the market. PG&E issued a statement saying its “board and management are working diligently to assess the company’s potential liabilities ... and the options for addressing those liabilities.” PG&E filed for bankruptcy during the energy crisis in 2001.
As for the NPR report, Pacific Gas and Electric Co. would only say it is “reviewing structural options to implement necessary changes while meeting customer and operational needs.” The embattled utility also announced an initiative to beef up its board of directors with more experts on wildfire safety.
The possibility of a breakup has already been floated by the state Public Utilities Commission, which launched a major investigation into PG&E’s safety practices following the Camp Fire. Two devastating seasons of deadly wildfires, many of them blamed on power lines and other PG&E equipment, have put the company under intense scrutiny and caused investors to flee. Federal prosecutors who secured criminal convictions against PG&E in a deadly 2010 San Bruno pipeline explosion are looking into the wildfires.
A faulty transmission tower appears to be the main focus of Cal Fire’s investigation into the Camp Fire, which killed 86 people — more than any other in state history.
Mike Danko, a Bay Area lawyer suing Pacific Gas and Electric Co. on behalf of hundreds of Camp Fire survivors, called the potential sale of the gas business a cop-out by PG&E to avoid more legal hassles without addressing the major safety issues the utility must confront.
“This is an issue by management to preserve themselves — ‘how can we save ourselves?’ ” Danko said. “It is desperation in that it totally avoids the issues that matter. This is a way to limit their liability. They still don’t get it. How can they fix things so they don’t blow people up and burn down communities in the future? None of this has anything to do with that.”
Yet economist Severin Borenstein, of the University of California Energy Institute, said spinning off the gas division could make sense as a way to generate money.
“It would be very messy ... but that would be the easiest split they could do,” Borenstein said. That would be a lot simpler than one of the alternatives raised by the PUC — breaking up the company’s electricity divisions geographically — he said.
“That would be a lot messier,” he said.
PG&E critic state Sen. Jerry Hill, a San Mateo Democrat, said he thinks PG&E’s announcement about “reviewing structural options” may be a reaction to the PUC’s recent talk about forcing a restructuring of the utility company.
“It seems that with the PUC breathing down their neck over structural changes and the potential for breakup, they decided to try and get ahead of the public relations challenges they are facing,” Hill said.
Of PG&E’s $17 billion in annual revenue in 2017, about $4 billion came from natural gas. The company reported profits of $1.66 billion that year.
According to NPR, utility executives began exploring the asset sales after the 2017 wine country fires and accelerated the discussions after the Camp Fire destroyed most of the town of Paradise.
PG&E filed for Chapter 11 bankruptcy in 2001 under the crushing weight of wholesale electricity costs.
Although the Legislature enacted a partial buffer for wildfire claims last fall, enabling the PUC to shift some of the burden to ratepayers, the mounting costs from the Camp Fire and the 2017 wine-country fires could overwhelm PG&E’s ability to pay. Scores of survivors have sued the company, as well as three major property-casualty insurers.
PG&E’s share price has fallen in half since the Camp Fire started Nov. 8. Its 52-week high was $49.42.