PG&E files for bankruptcy after devastating California wildfires

The US's largest utility faces billions of dollars in potential damages after blazes swept through parts of California.

    PG&E cited hundreds of lawsuits from victims of that blaze and others in 2017 and 2018 when it announced this month that it planned to file for bankruptcy [File: Eric Thayer/Reuters]
    PG&E cited hundreds of lawsuits from victims of that blaze and others in 2017 and 2018 when it announced this month that it planned to file for bankruptcy [File: Eric Thayer/Reuters]

    The largest utility in the United States, Pacific Gas & Electric Corp (PG&E), filed for bankruptcy on Tuesday as it faces billions of dollars in potential damages from wildfires in California.

    The utility filed documents in a US court seeking Chapter 11 reorganisation despite state investigators determining last week that its equipment was not to blame for a 2017 fire that killed 22 people in Northern California wine country.

    The company cited hundreds of lawsuits from victims of that blaze and others in 2017 and 2018 when it announced this month that it planned to file for bankruptcy. The fires included the nation's deadliest in a century - a November blaze that killed at least 86 people and destroyed 15,000 homes in Paradise, California and surrounding communities.

    The cause of that fire remains under investigation, but speculation has centred on PG&E after the utility reported power line problems nearby around the time it started.

    Less money for victims

    The bankruptcy filing immediately puts a halt to the wildfire lawsuits and consolidates them in bankruptcy court, where legal experts say victims will likely receive less money. 

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    Wildfire victims have little chance of getting punitive damages or taking their claims to a jury in a bankruptcy proceeding. Instead, they will have to tussle with PG&E's creditors, including bondholders, for a payout from the company.

    Consumer activist Erin Brockovich, who famously took on PG&E in the 1990s, had urged California politicians not to let the utility go bankrupt because it could mean less money for wildfire victims.

    PG&E faced additional pressure not to move forward with the bankruptcy filing after state fire investigators said a private electrical system, not utility equipment, caused the wine country blaze that destroyed more than 5,600 buildings in Sonoma and Napa counties in October 2017.

    Governor Gavin Newsom's office estimated that more than half of the roughly $30bn in potential damages that PG&E said it was facing was from that fire.

    Paradise, California was almost completely destroyed [Josh Edelson/AFP] 

    Legal experts say the bankruptcy will likely take years to resolve and will result in higher rates for PG&E customers. The company provides natural gas and electric service to 16 million people over 18 million hectares in Northern and Central California.

    A bankruptcy filing would not affect electricity or natural gas service but allow for an "orderly, fair and expeditious resolution" of potential liabilities from the wildfires, the company has said on its website.

    PG&E said it was committed to helping those affected by the wildfires and could not speculate on any changes to customers' bills, noting that the California Public Utilities Commission sets electric and gas rates.

    "Throughout this process, we are fully committed to enhancing our wildfire safety efforts, as well as helping restoration and rebuilding efforts across the communities impacted by the devastating Northern California wildfires," PG&E interim Chief Executive Officer John Simon said.

    The utility also filed for bankruptcy in April 2001 near the height of an electricity debacle marked by rolling blackouts and the manipulation of the energy market.

    PG&E emerged from bankruptcy three years later but obtained billions of dollars in higher payments from ratepayers.

    The San Francisco-based company provides electricity and natural gas to more than six million customers in Northern California.

    SOURCE: News agencies