Wildfire Liability Drives California Utility to Bankruptcy

Pacific Gas & Electric, the investor-owned utility that serves 43 percent of California, plans to file for bankruptcy later this month. The utility faces over $30 billion in insurance claims and other liabilities for damage caused by the 2017 and 2018 Northern California wildfires.

“The PG&E Board and management team have determined that initiating a Chapter 11 reorganization … represents the only viable option to address the Company’s responsibilities to its stakeholders,” Richard Kelly, chairman of the company’s board of directors, said in a news release.

Last year, California’s Department of Forestry and Fire Protection determined that 11 wildfires that burned in Northern California in 2017 were caused by trees falling on the PG&E power lines, PG&E conductors and lines falling to the ground, and an electrical fire associated with PG&E equipment.

California courts typically find utilities liable for damage caused by their equipment, even if the utility had been properly maintaining its power lines. Utilities can’t automatically pass the cost of such damage on to their ratepayers.

PG&E lobbyists flocked to the state Capitol in Sacramento last year in the hopes of convincing lawmakers to ease the state’s liability laws. Former Gov. Jerry Brown, a Democrat, pitched a plan to help utilities and signed a bill in September that gave utilities more leeway to pass on the cost of the 2017 fires and future disasters to their customers.

PG&E’s exposure to wildfire liabilities under current law could cause a bankruptcy judge to question the company’s viability, Reuters reported. And if the company’s equipment sparks additional wildfires during court proceedings, exiting bankruptcy would be difficult.

“While PG&E announced its intent to file bankruptcy today, the company should continue to honor promises made to energy suppliers and to our community,” Democratic Gov. Gavin Newsom said in a statement Monday. “Throughout the months ahead, I will be working with the Legislature and all stakeholders on a solution that ensures consumers have access to safe, affordable and reliable service, fire victims are treated fairly, and California can continue to make progress toward our climate goals.”