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Concerns grow as California braces for PG&E bankruptcy

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Concerns grow as California braces for PG&E bankruptcy

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California Gov. Gavin Newsom speaks Jan. 8, 2019, in Colfax, Calif., on wildfire recovery and prevention.
Source: California Governor's Office of Emergency Services

In the wake of PG&E Corp.'s Jan. 14 disclosure that it and its utility subsidiary Pacific Gas and Electric Co., or PG&E, are preparing to seek Chapter 11 bankruptcy protection related to billions of dollars of potential liabilities from devastating 2017 and 2018 wildfires in Northern California, Gov. Gavin Newsom, along with state lawmakers and regulators, vowed to keep the lights on while protecting ratepayers and fire victims.

"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," the governor said in a Jan. 14 news release. "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."

Newsom, who took the reins from Jerry Brown on Jan. 7, said he and his staff have been meeting with PG&E, energy regulators, the California ISO and labor unions representing the utility. "Everyone's immediate focus is, rightfully, on ensuring Californians have continuous, reliable and safe electric and gas service," Newsom said.

PG&E Corp. made the announcement one day after the departure of CEO Geisha Williams and amid heightened alarm over intensifying wildfires caused by climate change and, in some cases, electricity infrastructure.

Assemblyman Chris Holden, who chairs the Assembly Utility and Energy Committee, called the utility's likely bankruptcy "deeply concerning news for the state, fire victims, and ratepayers." In an emailed statement, Holden, a Democrat from Pasadena who backed a 2018 bill that offered PG&E limited relief from liabilities related to 2017 wildfires, said he would work with Newsom, regulators and legislators to "ensure that the interests of fire victims are protected and ratepayer expectations for safe, affordable and reliable power needs are met."

'We just need to take a step back'

Senator Jerry Hill, however, who opposed SB 901 as "a bailout," is skeptical of the bankruptcy announcement. "I am concerned about legislation my colleagues may introduce," the Democrat from San Mateo said in an interview. "My first priority is to see how truthful PG&E is being ... We just need to take a step back and look at all the options and consequences of bankruptcy and not-bankruptcy."

Some analysts are also skeptical. In a Jan. 14 note, CreditSights analysts said PG&E's announcement may be driven more by politics than by financial pressure. "It appears the timing of a near-term bankruptcy is being driven behind the scenes by ... Newsom rather than any pressing liquidity or covenant trigger," the analysts said. "The sooner [PG&E] files, the easier it is for Governor Newsom to rightfully distance himself from the issue by blaming it on events/regulations before he took office."

Hill, who represents the San Bruno community hit by a deadly 2010 gas explosion on a PG&E pipeline, says the utility must take responsibility for its pattern of negligence on safety issues. "I want to make sure it's not the ratepayers saddled with cost," Hill added. "It should be the shareholders and executives of PG&E."

For the moment, energy regulators do not see electric and gas services at risk. "At this point, PG&E has sufficient resources to continue to safely meet its core responsibilities and obligations," a California Public Utilities Commission spokeswoman said in an email.