PG&E Stock Tumbles on Bankruptcy Filing

Anna Jefferson
January 15, 2019

PG&E in a news release Monday said the company "and its wholly owned subsidiary Pacific Gas and Electric Company now intend to file petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code on or about January 29, 2019".

While investigators have determined PG&E starting multiple California wildfires in 2017, PG&E is facing allegations that its equipment started the 2018 Camp Fire, the deadliest and most destructive blaze in state history.

In a Monday filing with the Securities and Exchange Commission, the company said the amount of liability it faces from 2017 and 2018 wildfires could exceed $30 billion, not including punitive damages, fines and penalties.

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The reorganization will involve investments by PG&E's to make is distribution systems safer as the company looks for alternative ways to provide "safe delivery of natural gas and electric service". Her departure follows the exit of three PG&E executives earlier this month - Patrick Hogan, senior vice president of electric operations at PG&E's utility unit; Kevin Dasso, vice president of electric asset management; and Gregg Lemler, vice president of electric transmission.

According to Bank of America Merrill Lynch, the move to file for Chapter 11 bankruptcy is an "accelerated attempt to stem forthcoming claims and place existing claims in tandem with unsecured creditors". The utility went through a reorganization from 2001 to 2004, which resulted in a settlement that was estimated to cost the average customer anywhere from $1,300 to $1,700, according to the Los Angeles Times. He called on the company to "honor promises" made to energy suppliers and the broader community, and committed his office to helping resolve PG&E's financial crisis.

California law compels utilities to pay for damages from wildfires if their equipment caused the blazes - even if the utilities weren't negligent through, say, inadequate maintenance.

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The PG&E board of directors is pushing Williams out as CEO over fallout from the company's liability in sparking deadly wildfires across California.

Williams, who became CEO in March 2017, was in elite company as one of the only women to run a power company and one of only about two dozen women running an S&P 500 company. In light of today's bankruptcy announcement, the immediate focus is on ensuring that Californians continue to have safe and reliable electric and gas service, said Newsom. He added that the bankruptcy "will enable PG&E to access the capital and resources we need to continue providing our customers with safe service".

California's power companies have argued that climate change and urban development in fire-prone wilderness areas should shoulder much of the blame for the increasing number of fires in the state. It also indicated that it will continue to provide natural and electric to its customers during the restructuring phase.

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Simon, the interim CEO, said: "The people affected by the devastating Northern California wildfires are our customers, our neighbors and our friends, and we understand the profound impact the fires have had on our communities and the need for PG&E to continue enhancing our wildfire mitigation efforts".

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