A PG&E bankruptcy timeline: The road to Chapter 11 and beyond
When Pacific Gas & Electric (PG&E) raised the specter of bankruptcy earlier this summer, the investor-owned utility expected extensive charges related to liabilities from wildfires in 2017 and earlier, which were still being assessed and challenged.
Since then, Northern California has seen some of the most destructive fires in the state's history, such as the Camp Fire in November, which killed more than 80 people. Fire seasons in the state are anticipated to last longer and worsen, and the brunt of the responsibility for their start is being borne by California's regulated utilities under the state's inverse condemnation laws. The inverse condemnation doctrine makes regulated utilities in California vulnerable to liabilities from wildfires if their equipment is involved, regardless of negligence.
The utility secured $5.5 billion in financing, with an option to extend, to fund its operations during bankruptcy proceeding, despite the efforts of California's governors and utility regulators to avoid bankruptcy. PG&E expects the proceeding to last up to two years, while also facing extensive litigation regarding the wildfires.
PG&E's case was assigned to Federal Judge Dennis Montali, of the Northern District of California Bankruptcy Court — the same judge from PG&E's first bankruptcy declaration. However, the 2001 bankruptcy stemmed from the California energy crisis and was considered unavoidable as the utility hemorrhaged money.
The recent bankruptcy could hasten state legislative and regulatory actions to implement utility liability protections, disrupt the process of paying wildfire victim claims or affect generators like NextEra Energy, which have power purchase agreements in place with PG&E. This timeline will track all coverage relating to PG&E's bankruptcy, from the first-warning of its deteriorating financial situation in the late spring of 2018.
PG&E would follow its wildfire mitigation plan under a new order from Judge William Alsup, but would not have to comply with an extensive Jan. 9 proposed order it estimated could cost $150 billion.
The company announced a $10.5 billion pre-tax charge Thursday related to third-party claims from the 2018 fire, and said its total potential wildfire liabilities could exceed more than $30 billion.
"We disagree with the overall premise of the Wall Street Journal article," the utility said in a statement responding to the publication's coverage.
Splitting the bankrupt utility's natural gas and electricity businesses could bring safety improvements, PG&E officials said, but could also increase costs by duplicating services.
PG&E may want to exit older renewable energy contracts as part of a Chapter 11 bankruptcy proceeding, but FERC argued it must separately win approval from the agency to alter their terms.
All California utilities submitted their plans Wednesday, and critics of PG&E say the expanded shutoff policy is ineffective and necessitated by the utility's "repeated criminal behavior."
U.S. District Judge William Alsup denounced the utility's record in court on Wednesday, saying, "There is one clear pattern here: PG&E is starting these fires."
The Chapter 11 filing was widely anticipated, although investors offered $4 billion in funding to help the utility avoid bankruptcy. PG&E officials say they have lined up $5.5 billion in debtor-in-possession financing, to keep operations running while the bankruptcy proceeds.
The commission's recent order could give NextEra and other power producers an avenue to preserve contracts with PG&E if the utility invalidates them as part of its Chapter 11 proceeding.
Officials said a private electrical system caused the deadly fire, but the utility remains in financial jeopardy for its involvement in other blazes and is preparing to file for bankruptcy protection.
The federal judge overseeing PG&E's probation related to the 2010 San Bruno pipeline explosion is considering new conditions the utility says are infeasible, and a U.S. attorney says could interfere with other state and federal efforts.
PG&E expects the bankruptcy process to stretch two years, or possibly longer, leaving developers worried about getting paid for their existing power purchase agreements.
Federal Judge William Alsup gave PG&E and the U.S. Department of Justice until Jan. 23 to respond to the accuracy of his tentative conclusions.
PG&E will file for Chapter 11 bankruptcy protection near the end of the month, the company announced, as it attempts to deal with up to $30 billion of liabilities associated with the 2017 and 2018 wildfire seasons.
The CPUC opened a docket to determine how much PG&E can pay for wildfire damages on the same day that Moody's downgraded its credit rating four notches.
Democrat Gavin Newsom is reportedly having long conversations with PG&E executives as the utility hires several financial advisors to explore its options.
Increased federal oversight for the embattled California utility is also likely, energy lawyers told Utility Dive.
Any charges would need to be filed by local officials, but if PG&E's equipment was operated in a reckless manner and is found responsible for sparking wildfires, the utility could face criminal prosecution.
The Friday before Christmas, state regulators said they would evaluate whether to split Pacific Gas & Electric's natural gas and electricity divisions into separate companies.
While state officials have not made a final determination on the cause, PG&E's letter offers the clearest detail yet on how its power lines may have started the blaze.
PG&E cut off electricity service to nearly 60,000 this fall, but regulators want tighter rules on the practice as California wildfires worsen.
The move comes as California fire officials investigate the cause of the Camp Fire, which has killed 88 people and burned more than 150,000 acres.
The utility had issued a warning to proactively cut power off for public safety but chose not to ahead of the fire in Paradise, California.
A California assemblyman is preparing to introduce legislation that would extend provisions of SB 901, passed earlier this year to limit utility liability from 2017 wildfires, to include fires this year.
The report adds to the utility's involvement with the record blaze.
CPUC Chairman Michael Picker reportedly told financial analysts his agency would begin implementing a new state law that allows utilities to pass fire costs onto customers, while also expanding a probe into PG&E's corporate governance.
The utility withdrew its revolving credit lines this week as its equipment was linked to the deadly Camp Fire, a move that can presage a bankruptcy filing.
Lawsuit threats loom after two of the state's largest investor owned utilities alerted regulators to transmission issues near ground zero of blazes that started last week.
While the cause has not been determined, the utility reported that a line outage coincided with the most destructive blaze in California history, which has killed at least 29 people and burned 6,700 buildings.
The utility has incurred more than $2 billion in costs related to wildfires this year and faces billions more in potential liability, putting a premium on efforts to avert such disasters.
The CPUC opened a proceeding to review utility fire mitigation measures, including new requirements set by recent legislation.
Planned outages during dry, windy conditions are the "last resort" in a wildfire prevention plan rolled out by the utility last year.
The utility did not violate state regulations, CAL FIRE said, but California's insurance laws can hold it financially liable even if it did not break the law.
The state legislature wrapped up the 2018 session by passing bills including critical changes for utilities on wildfire liability laws.
State legislators are abandoning a proposal to reduce electric utility liability in instances where the company is not found to be negligent, hesitant to do anything that will look like a "bailout."
The company and its utility subsidiary have been highly critical of California laws that allow for wildfire liability even if standards and regulations are met, warning of the threat of bankruptcy and reorganization.
The proposal would change rules currently requiring utilities to pay all damage costs if their equipment was involved in a fire, regardless of negligence.
The Sacramento Superior court's opinion could provide a legal precedent regarding California utilities' liability for wildfires.
None of the changes would impact fire liability cases currently being dealt with, but changes to the rules could help utilities reduce liability payments in the future.
The utility told federal regulators that the charge does not include any amounts for potential penalties or fines.
In an 8-K filed with the SEC, PG&E said that based on current state law, it expects to "record a significant liability for losses" associated with 10 fires.
The state agency released its report into 12 wildfires last week, finding electrical equipment sparked each one.
State officials released their first investigations into the 2017 California wildfire season last week, which could pose up to a $12 billion liability for PG&E.
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