6 things to know about the PG&E bankruptcy filing and how it affects you
Doreen Zimmerman lost her hillside home in the Camp Fire last November, fleeing with a dozen puppies in the family car as flaming embers rained down on Paradise. Now she feels she’s been made a victim again — by PG&E’s decision to file for bankruptcy Tuesday.
“The survivors — I call myself a survivor — we have been shorted,” said Zimmerman, who’s living in a rental home in Yuba City. “PG&E is going to go to victims and say, ‘We are going to pay you 60 cents on the dollar, or 50 cents or whatever.’ They are going to twist this and cry ‘Oh poor me,’ and go back in the boardroom and laugh their butts off. They are still going to get bonuses in high management.”
Zimmerman is among scores of Northern California wildfire victims left fuming and distrustful after PG&E filed for bankruptcy.
Citing $30 billion in potential liabilities from the 2017 and 2018 wildfires, utility officials contended the filing is the only way to keep the company going — and insisted that their decision will actually benefit fire survivors.
Bankruptcy can resolve wildfire lawsuits “more quickly and more equitably than ... the state court system,” PG&E Chief Financial Officer Jason Wells said in court papers. Bankruptcy isn’t “a strategy or attempt to avoid PG&E’s responsibility for the heartbreaking and tragic loss of life, devastating damage and destruction to homes and businesses.”
Wells added that bankruptcy is “in the best interests of all the debtors’ stakeholders, including their millions of customers, employees, wildfire claimants, other creditors ... and shareholders.”
PG&E’s assertion was met with considerable skepticism. Assemblyman James Gallagher, R-Yuba City, who represents the area hit by the Camp Fire, said “nothing should stand in the way of compensation for fire victims” – but pointedly adding that his anger is aimed at corporate executives in San Francisco, not the front-line workers who are out “battling the elements.”
“Frankly, I question whether or not they are really in a bankruptcy situation or if they are simply attempting to skirt their obligations,” Gallagher said in a press statement. “The bankruptcy court should do a full and thorough vetting of PG&E’s financial situation before allowing their Chapter 11 petition to proceed.”
Pacific Gas and Electric Co. and its parent PG&E Corp. sought Chapter 11 bankruptcy protection in an electronic filing shortly after midnight.
It puts the company’s fate largely in the hands of U.S. Bankruptcy Judge Dennis Montali, who oversaw PG&E’s first bankruptcy in 2001. State officials will play a role, too, as they try to accommodate ratepayers and wildfire survivors while ensuring the company is healthy enough to keep operating.
Gov. Gavin Newsom, in a prepared statement, said the bankruptcy “does not change my focus, which remains protecting the best interests of the people of California.”
PG&E was already reeling from the potential fallout from the 2017 fires. The Camp Fire pushed the company over the edge. The state’s investigation isn’t complete, but PG&E has disclosed it experienced problems on a high-voltage transmission tower near the apparent ignition point, minutes before the Camp Fire began.
Experts say PG&E’s bankruptcy will bring pain for practically everyone involved. Wildfire survivors who are suing PG&E will become unsecured creditors with no higher priority on PG&E’s assets than the company’s bondholders — who are owed $18 billion.
A wildfire victims’ attorney said PG&E is using bankruptcy as a dodge.
“Why do this other than to keep money away from victims,” said Mike Danko, a Bay Area attorney representing survivors of several fires. “Typically you don’t let the perpetrator decide what is best for victims. The perpetrator is a convicted felon that continues to violate the terms of its probation. What they say is best for victims is inappropriate and suspicious.” PG&E was convicted of multiple felonies after the 2010 San Bruno pipeline explosion.
Sheila Craft, whose home was destroyed in the Camp Fire, was struggling to make sense of the implications of the bankruptcy filing.
“From a victim’s standpoint, I don’t see how it necessarily helps me or doesn’t help me,” said Craft, whose family is living temporarily in Oroville but is buying a house in Magalia, just north of Paradise.
Either way, she doesn’t expect payment to come anytime soon.
“I don’t foresee anybody coming in and handing me a check,” she said. She also said she isn’t looking forward to what she believes is an inevitable rate hike. “Anytime PG&E ends up doing anything as a whole, rates go up,” she said.
Rates will likely go up, just as they did when PG&E emerged from bankruptcy the first time. Last year legislators enacted a partial bailout for the company, saying it could pass on at least some wildfire liability costs to ratepayers if the utility’s finances couldn’t absorb the total hit.
But the legislation, Senate Bill 901, didn’t cover any 2018 fires, including the Camp Fire, which destroyed 13,000 homes in Paradise in November and killed 86 people, the most in California history. Legislators have indicated they’re in no mood to extend SB 901’s protections to help PG&E with the Camp Fire.
PG&E could be forced to spin off assets to raise cash. Some critics have been calling for a breakup of the utility or some sort of government takeover, while PG&E executives said they’re committed to overhauling how they do business.
”To be clear, we have heard the calls for change and we are determined to take action throughout this process to build the energy system our customers want and deserve,” John Simon, the company’s interim chief executive officer, said in a press release.
The utility did win a partial reprieve last week when Cal Fire said PG&E’s power lines weren’t to blame for the Tubbs Fire, the costliest and deadliest of the 2017 fires. It wasn’t enough to stave off bankruptcy.
“Those claims are still there, they still represent significant claims,” said Steve Malnight, the utility’s senior vice president for energy supply and policy.
PG&E warned about the bankruptcy filing 15 days ago, as required by state law, and utility lawyers said the heads-up accelerated the deterioration of its finances. The company’s cash supply fell by $811 million as it was forced to pre-pay for power and other needs. The company has lined up $5.5 billion in new financing that the company says is necessary to keep operations going.
“We’re not going out of business,” Malnight said.
The federal judge overseeing PG&E’s probation, stemming from its criminal conviction in the 2010 San Bruno pipeline disaster, has a hearing set for Wednesday on his proposal to impose stringent wildfire-safety rules on the utility this year. That would include mandatory re-inspections of all 100,000 miles of PG&E power lines and extensive tree-cutting operations before the fire season begins in June.
PG&E has pushed back on the plan as unrealistic and said it would cost at least $75 billion. The Public Utilities Commission has also objected, saying the judge has gone too far and should leave wildfire safety to state officials.