What if California Utility Went Bankrupt?

What Would Happen?

An intriguing recent piece from CALMatters asked what the consequences would be if one of California’s utilities were allowed to go bankrupt as a result of the disastrous wildfires that have raged in the past two years across the entire state.  Subsequent investigations have shown that many of these blazes were either ignited in the first place, or their spread was hastened by, negligence on the part of the state’s utilities in not properly trimming trees and other low-hanging vegetation that is in the way of the company’s power lines.

PG&E’s Recent Struggles

Pacific Gas & Electric, or PG&E as it is more commonly known, has been under tremendous financial pressure recently as a result of wildfires in the past several years, the recent Camp Fire in Paradise In Northern California and the Wine Country fires in 2017 in particular. State investigators determined that the company’s equipment caused 11 of the 16 fires that came to be known collectively as the Wine Country fires.  The company’s stock was in free fall for a number of weeks earlier this year due to reports that some of the utility’s equipment was determined to have malfunctioned near the site of the Camp Fire before California Public Utilities Commission President Michael Picker announced the state had no interest in allowing any state utility to go into bankruptcy proceedings.  A recent PG&E securities filing with the Securities and Exchange Commission stated that “While the cause of the Camp Fire is still under investigation, if the Utility’s equipment is determined to be the cause, the Utility could be subject to significant liability in excess of insurance coverage that would be expected to have a material impact on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.”  The California Legislature has also been rumored to have been considering allowing PG&E to sell bonds to help cover the costs if it is found liable for causing the Camp Fire.

Would Allowing PG&E to Go Bankrupt Be a Good Idea?

While some believe allowing PG&E or another California utility to go bankrupt must be avoided at all costs, other commentators wonder whether the utility’s bankruptcy would really be a terrible outcome.  After all, if the utility were to go bankrupt, its shareholders would be wiped out, but some form of company would remain in its place to continue running the utility’s operations, including delivering natural gas and electricity to customers.  PG&E previously filed for bankruptcy protection in 2001 and used the process to reorganize itself and shed some debt and emerged from the process as a stronger company.  The process of going through some form of bankruptcy would permit the company to streamline its operations and financial obligations.

Nevertheless, it could potentially also leave California home and property owners holding the bag if the utility sought to limit its liability for the consequences of any fires which its own actions or inactions caused or contributed to. Even if a bankruptcy court did not allow the utility to get off scot-free for the consequences of fires which the utility either directly or indirectly caused or contributed to, the automatic stay applied to all pending lawsuits at the time a company or individual files for bankruptcy could cause years long delays in lawsuits that have already been filed against PG&E as a result of the Camp Fire as well as the inevitable avalanche of lawsuits likely to follow if the company is determined to have caused the fire.  Therefore, although the idea has some surface appeal, it could ultimately cost California property owners by not only impairing their ability to pursue their legal claims against the utility but could delay their ability to be made whole for those same losses, so allowing the utility to go bankruptcy likely is not a move that would ultimately benefit wildfire victims.

Contact JT Legal Group if You Are a California Home or Property Owner Who Has Suffered Damages as a Result of Wildfires

If you are a California homeowner or property owner who has suffered fire damage or other losses as a result of any of the state’s historic wildfires in the past several years, including the Camp Fire, it is in your best interest to retain an experienced California property damage attorney as soon as possible to assist you every step in the way in what can be a long, burdensome and time consuming process.  We understand that you may have many questions regarding damage caused by wildfire, what potential sources of recovery may help you in the rebuilding process and how to go about obtaining legal relief.  We can also assist you in deciding whether to pursue legal action against a utility or other party who caused or contributed to the fire.  We understand that you may have many questions regarding damage caused by wildfire, your legal rights, so our team provides you with a no cost consultation to go over the particulars of your individual situation and answer any questions you may have.  If you have been a victim of a California wildfire, contact our firm immediately at [email protected] or (888) 529-3111.

Has your property been damaged as the result of a California wildfire? Contact us immediately for further assistance.

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