6 things to know about the PG&E bankruptcy filing and how it affects you
Another fire season is looming and California’s largest utility, already blamed for at least a dozen major wildfires since 2017, is headed into bankruptcy. Does struggling PG&E have the wherewithal to secure its 100,000 miles of power lines and transmission towers? Or will PG&E’s wobbly finances leave the north state vulnerable to another round of catastrophic wildfires in 2019?
The answer could begin to take shape over the next two weeks in a pair of San Francisco courtrooms.
A federal judge overseeing PG&E’s criminal probation from the 2010 San Bruno gas line explosion case is threatening to order PG&E to re-inspect its entire grid this spring and “remove or trim all trees that could fall onto its power lines, poles or equipment in high-wind conditions.” The judge’s goal is “to reduce to zero the number of wildfires caused by PG&E” in 2019.
U.S. District Judge William Alsup said he wants the inspections completed by June 21, the unofficial start of the summer and fall fire season. For any portion of the grid “not yet rated as safe by PG&E,” he warns he might require the utility to impose blackouts when dangerously high winds kick up.
“That inconvenience, irritating as it will be, will pale by comparison to the death and destruction that otherwise might result from PG&E-caused wildfires,” Alsup wrote in his proposed order Jan. 9.
Alsup gave Pacific Gas and Electric Co. until noon Wednesday to respond in writing, and has asked the California Public Utilities Commission to weigh in by Friday if it has “a better plan for insuring the safety of California before the 2019 wildfire season.” The PUC said it will submit a plan.
Complying with Alsup’s mandate could be a tall order, though, given PG&E’s financial situation. PG&E’s program calls for inspecting 5,500 miles of lines in high-risk areas this year, said company spokeswoman Lynsey Paulo. The judge wants the entire grid inspected, from Eureka to Bakersfield, a chore taking in 100,000 miles of lines.
There could be more. In a followup order Thursday, Alsup said it appears uninsulated power conductors have played a significant role in the destructive wildfires of 2017 and 2018, suggesting he could order major upgrades in the utility’s infrastructure.
Michael Wara, director of Stanford University’s climate and energy policy program, said PG&E’s financial woes could seriously complicate its ability to perform “system hardening” upgrades such as planting equipment underground. “They can trim trees, but it will be hard for them to engage in system hardening, under-grounding utilities ... and replacing uninsulated wires,” Wara said.
PG&E officials declined to predict how the utility will respond to Alsup’s ruling, although Senior Vice President Steve Malnight said “we share Judge Alsup’s commitment and focus on community safety.”
PG&E was already in the process of implementing its 9-month-old “community wildfire safety program” and plans to spend almost $1.3 billion on reducing fire risk this year, including tree and vegetation management, Paulo said. That compares with $824 million last year, she said. Besides increasing its tree-pruning operations, the company plans more intensive inspections of poles, towers and lines, and could conduct deliberate blackouts in high-risk conditions.
Paulo wouldn’t say how much it would cost to comply with Alsup’s proposed order. But the company argues that filing for Chapter 11, by stabilizing the utility’s finances, will allow it to keep the safety program on track instead of undermining its commitment to reducing risks. The company is seeking bankruptcy because it says it can’t handle the $30 billion in potential liabilities from November’s Camp Fire and the 2017 north state fires.
As part of the bankruptcy, PG&E is lining up $5.5 billion in new “debtor-in-possession” financing that’s expected to ease its cash problems. Paulo wouldn’t say how much of that money would be spent on the wildfire safety program but said the financing will help PG&E “make critical investments ... to improve safety.”
Still, the Chapter 11 filing puts Alsup’s plans on a potential collision course with the bankruptcy proceedings. Alsup could make his final ruling at a hearing Jan. 30 — one day after the utility and its parent company, PG&E Corp., expect to enter bankruptcy.
The bankruptcy judge — whose courtroom is located three floors below Alsup’s in the Phillip Burton Federal Building, two miles west of PG&E’s headquarters — has a different task than Alsup. Bankruptcy cases are generally about ensuring that creditors, including lenders and the wildfire survivors suing PG&E, get paid as much as possible.
Ordinarily, PG&E’s bankruptcy filing would put a halt to all other legal proceedings, including Alsup’s order. “Under the constitutional system, bankruptcy court is supreme,” said Jared Ellias, a bankruptcy law expert at UC Hastings College of Law in San Francisco.
But this could be the exception, he said. The U.S. Justice Department, which brought the San Bruno criminal case against PG&E, could argue that Alsup’s efforts are an exercise of the government’s “police powers to protect the public,” he said. That could persuade the bankruptcy judge to allow Alsup’s order to remain in force.
In any event, PG&E’s response to Alsup could provide an early glimpse into the company’s mindset on fire safety spending in 2019 and beyond. The company will probably submit considerably more detailed statements on that score in bankruptcy court in the weeks and months to come.
Some of PG&E’s long-range plans for fire risk will depend on regulators and the outcome of the bankruptcy case. The utility wants to increase wildfire-safety spending in 2020, but that’s contingent on a rate-hike request pending before the Public Utilities Commission, according to Paulo.
Certainly, the company has every incentive to curtail – if not eliminate – fires this year. Based on its experience in the San Bruno pipeline explosion, the total costs from the 2017 and 2018 wildfires could nearly triple the $30 billion it could face in paying claims to fire survivors, according to a statement filed with the Securities and Exchange Commission. Those costs could include cleanup, firefighting, fines and other penalties.
“It’s hard to speculate in the longer term because when the bankruptcy court finishes their work, we don’t know what (corporate) structure might exist. But certainly in the short term, they continue to have an obligation, by law, to maintain safe and reliable service,” said Elizabeth Echols, director of the PUC’s public advocates office. “The PUC will continue to hold them to that.”
Still, some experts say the company could be hard-pressed to implement as robust a wildfire-safety program this year as the public and state lawmakers expect. State Sen. Bill Dodd, D-Napa, author of a new law that gave PG&E partial protection from 2017 wildfire claims, said he’s concerned PG&E might struggle to pay the tree trimmers who work the front lines in the battle to keep utility wires from igniting fires. He said CPUC officials this week told him those workers will stay on the job.
“I was concerned about these hundreds of independent contractor tree trimming companies,” he said. “If they don’t get paid, how will they stay afloat?
“We have to keep our eye on the prize, which is a safe grid,” he added.
That could mean mandatory blackouts to a degree never seen before in California. Alsup is considering ordering PG&E to impose blackouts this summer in risky, high-wind conditions.
San Diego Gas & Electric pioneered the concept in 2013, and has used it about a dozen times since. Last November, SDG&E shut off power for several days to 24,000 customers amid 86-mph Santa Ana winds and dry conditions. The utility sent out helicopters and foot patrols to check lines before turning the power back on.
PG&E shied away from deliberate blackouts until last year, when it said blackouts would become part of its new community-safety initiative.
Last October, it cut service to 59,000 customers for as long as 48 hours in parts of several counties: El Dorado, Amador, Lake, Napa, Sonoma, Butte, Nevada, Placer, Plumas, Sierra, Yuba and Calaveras. No fires broke out during those blackouts.
The company planned a second blackout for parts of several counties, including Butte, the morning of Nov. 8, the day the Camp Fire started, but backed off. Even if it had gone ahead with the blackout, PG&E says it wouldn’t have shut power to the high-voltage transmission tower that’s been implicated in the Camp Fire. The state is still investigating the cause of the fire, which killed 86 people.
Alsup’s order would force PG&E to cut service in any area this summer, or future years, if the lines haven’t been inspected and an engineer hasn’t certified under oath, in writing, that they could withstand strong winds.
“In light of PG&E’s history of false reporting, PG&E may not rely upon its early inspection reports as substitutes for the new inspections,” the judge wrote.
Stanford’s Wara calls that proposed edict “super controversial.” But he said, “Alsup is 100 percent right in the direction he is suggesting. It will be complicated and will require coordination, especially with (state and county) emergency services (officials).”
Ratepayer advocates are leery, though. Mark Toney, head of The Utility Reform Network, warned that blackouts create other safety hazards for people who rely on electricity for medical equipment. “You have a lot of assisted living centers, nursing homes, a large number of people in precarious health situations that are going to be severely impacted by this,” Toney said.
He points out as well that once power is shut down, it requires time-consuming inspections along the line before the power can be turned back on. Toney said he believes Alsup will take that into account if he issues his order. “We are confident his final order will be more measured.”