California's largest power company, facing up to $30 billion in potential liability over its role in recent California wildfires, said early Monday it intends to file for bankruptcy. Pacific Gas and Electric said it plans to file petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code on or about January 29, 2019.
The company was acting under a new state law requiring it to tell employees at least 15 days before a change of control in the company - including a bankruptcy filing.
The move will allow PG&E. to hold off creditors and continue operating while it tries to put its finances in order. The company said it does not expect the filing to affect the delivery of electricity or natural gas to its 16 million customers in Northern and central California.
State officials are investigating whether the utility's equipment sparked the deadliest, most destructive wildfire in California history, a blaze in Northern California in November that killed at least 86 people and burned down 15,000 homes. Fire investigators also blame the utility's power lines for causing a number of California wildfires last year and in 2017.
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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.
Chapter 11 reorganization represents "the only viable option to address the company's responsibilities to its stakeholders," Richard Kelly, chairman of PG&E's board of directors, said in a statement.
"The Chapter 11 process allows us to work with these many constituents in one court-supervised forum to comprehensively address our potential liabilities and to implement appropriate changes," Kelly added.
The bankruptcy filing will not make the lawsuits disappear, but it will result in all of the wildfire claims being consolidated into a single proceeding before a bankruptcy judge, not a jury. That could shield the company from runaway jury verdicts, and also buy time by putting a hold on the claims.
The utility said it would keep spending on system safety as it provides gas and electric "in an environment that continues to be challenged by climate change."
PG&E, the nation's largest utility by revenue, said it expects to have some $5.5 billion in financing in place to help it with ongoing operations when it formally declares bankruptcy.
It said it will continue working with regulators and stakeholders to consider how it can safely provide energy "in an environment that continues to be challenged by climate change."
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The announcement follows the resignation of chief executive Geisha Williams a day earlier.
The company's shares plunged as much as 50 percent on the news Monday morning, with PG&E's stock price down $8.45 to $9.13 at 9:45 a.m. Eastern Time.
Veteran New York bankruptcy lawyer H. Jeffrey Schwartz said Chapter 11 will allow the company to operate without being burdened by its liabilities.
"The liability is too great. It's too many claims, the aggregate amount is too great, and it looks at first blush to be indefensible because PG&E knew of this risk and didn't clear the line areas as it should have," he said.