Pacific Gas & Electric Files for Bankruptcy as a Result of Its Liability for 2017 and 2018 Wildfires

February 13th, 2019

Pacific Gas & Electric, California’s largest utility, officially filed for bankruptcy in late January as a result of liability it likely will end up facing for the Camp Fire, the most disastrous wildfire in California’s history as well as other wildfires during the disastrous 2017 and 2018 wildfire seasons which were caused by the utility’s equipment.  This move ended months of speculation as to whether the utility would seek bankruptcy protection in an effort to limit its exposure as a result of the Camp Fire around the town of Paradise and other wildfires that are believed to either have been caused in the first place or exacerbated by the utility equipment or its failure to maintain brush and vegetation around the utility’s transmission equipment and lines.  Although recent reports had cleared the utility of responsibility for some of the fires in 2017 and 2018 that were thought to be connected to the utility, PG&E still is expected to face billions of dollars of liability for damages to home and property owners as a result of these wildfires. Therefore, it engaged in what some experts have called a defensive bankruptcy filing that will enable it to get itself on firmer financial footing by reducing the amount it owes some creditors, reject contracts that it signed when energy prices were much higher, and potentially limit its exposure to property owners whose homes or property were damaged or destroyed in fires caused by the utility’s actions in not properly maintaining the vegetation around its equipment or through other forms of negligence.    

PG&E’s Recent Struggles Leading It to File for Bankruptcy

PG&E has been under tremendous financial, political and legal 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. A November 2018 New York Times article reflected that, of the 21 major fires in Northern California in 2017, 17 of those blazes were caused by PG&E’s equipment.  (The company was recently cleared of responsibility for an 18th wildfire that it was previously believed to have played a part in starting.)  The company’s chief executive stepped down in mid-January, at which time the utility was estimated to face $30 billion exposure to liability for damages from the 2017 and 2018 wildfires among total liabilities of $50 billion when other contracts and non-wildfire related obligations were included in the total. This expected liability exceeded its available insurance and assets.  This led the company to finally take the step of formally seeking Chapter 11 protection on in what many experts called a “defensive bankruptcy filing” that will last an estimated two years and enable the company to streamline its finances and hopefully emerge a stronger company.

What Are the Consequences of PG&E Filing for Bankruptcy Protection?

According to one analysis, PG&E will continue running its operations, including delivering natural gas and electricity to customers, as it works through the bankruptcy process.     The utility’s customers will still get power, but that electricity may become more expensive in the future as PG&E tries to recoup its losses from the fires from the rates it charges customers. The company has asked the bankruptcy court to allow it to continue several reduced-rate programs for low-income residents of the areas of California that PG&E serves, however.

Bankruptcy may potentially make it easier for customers to file new claims against the company for damage in more recent fires because they will have a single consolidated proceeding within which to file their claims against the company, but PG&E filing for bankruptcy is likely to slow down payouts for claims that have already been filed against the utility because all payments made by the utility will now need to be approved by the bankruptcy judge overseeing the cases.  Bankruptcy offers the utility the opportunity to reduce how much it must pay those claimants while managing all of their claims in a single case before one judge. Given there is a limited pot of money from which all of the company’s creditors, including those whose homes or businesses were destroyed as a result of fires caused by the company’s negligence, holders of bonds previously issued by the company, to the company’s retirees who were owed pensions are all attempting to assert claims against, it is unlikely that everyone will get paid 100 cents on the dollar.  Therefore, no one is likely to emerge from the process with the same recovery they would have gotten if PG&E had not sought bankruptcy protection, so this was a win for the utility but likely will end up being a loss for homeowners or property owners in California whose homes or other property was destroyed or damage in wildfires caused by PG&E’s negligence.

Contact JT Legal Group if You Are a California Home or Property Owner Who Has Suffered Damages as a Result of Wildfires Caused by PG&E’s Negligence

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 either the Camp Fire in 2018 or the 2017 Wine Country Fires or any fire caused by a utility’s negligence, 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.  This process is likely to become even more difficult and torturous for those whose homes or other property was damaged in a fire caused by PG&E now that the utility has filed for bankruptcy. However, rest assured that the experienced property damage attorneys at JT Legal Group are here to assist you in connection with your claim regarding damage caused to your home or property as a result of a utility’s negligence. We understand that you may have many questions regarding damage caused by wildfire, what damage is and is not covered by homeowner’s insurance, the insurance claim process, as well as what effect the PG&E bankruptcy filing will have on your particular claim, so our team provides you with a no cost consultation to go over all your of wildfire damage.  If you have been a victim of a California wildfire, contact our firm immediately at info@jtlegalgroup.com or (888) 529-3111.

Has your property been damaged?If so, we can help – contact our firm immediately.

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Michael Avanesian, Esq.