On Tuesday morning, California utility Pacific Gas and Electric (PG&E) filed for Chapter 11 bankruptcy (PDF), citing billions of dollars in potential damages and fines stemming from liability in several 2017 and 2018 wildfires.
The utility noted in its Tuesday filing that it has secured $5.5 billion in debtor-in-possession financing to continue operating while it restructures.
PG&E announced that it would file for bankruptcy earlier this month, as investigations into some of California’s deadliest wildfires pointed to sparks from PG&E’s transmission equipment as the causes of more than a dozen fires over the last two years. Investigators have implicated PG&E in 18 wildfires that occurred during October 2017, according to . The fires “burned nearly 200,000 acres, destroyed 3,256 structures, and killed 22 people,” the noted.
Investigators are still looking into whether PG&E’s equipment sparked the deadly Camp Fire that ripped through northern California last fall, killing 86 people. Late last week, the California Department of Forestry and Fire Protection announced (PDF) that PG&E was not responsible for the deadly October 2017 Tubbs Fire, which killed 23 people. That fire, the department said, was caused by a “private electrical system adjacent to a residential structure.”
Still, despite not being held responsible for the Tubbs Fire, PG&E says it could be on the hook for more than $30 billion in damages and fines related to California’s wildfires. Climate change has exacerbated wildfires in California, and the state allows fire victims to bring lawsuits against utilities whose equipment sparks a wildfire, even if that utility hasn’t been found negligent.
Starting the fire
On Monday, the reported that California’s utility companies—including PG&E, Southern California Edison, and San Diego Gas and Electric—had caused more than 2,000 fires between June 2014 and the end of 2017.
The damage caused by each fire ranged in size from just a few meters to thousands of acres. The data came from the California Public Utilities Commission (CPUC), which noted that, just because a utility’s equipment sparks a fire, the utility is not necessarily negligent in its maintenance of the equipment.
But the sheer volume of the number of wildfires that are caused by electrical equipment suggests that better regulation is needed. “Lacking the manpower and sophisticated technology necessary to monitor more than 250,000 miles of power lines across the state, regulators rely on something of an honor system, with utilities responsible for ensuring all trees and vegetation are cut back far enough from electrical equipment before the onset of dry, high-fire danger conditions,” the writes. The CPUC has a team of just 19 people to conduct safety audits and investigate wildfires.
Some lawmakers are reportedly considering making safety guidelines for high-power transmission lines more explicit, and others have suggested appointing a safety representative within the state government to oversee the utilities. The CPUC has requested funding for 13 more positions to conduct utility-line safety audits. California’s new governor, Gavin Newsom, has recently signed an executive order directing the state to partner with private companies to roll out improved fire-detection technology throughout the state.
Fallout from PG&E’s bankruptcy
As the utility attempts to restructure, it looks poised to try to get out of or change several renewable-energy power purchase agreements (PPAs), according to the company’s filing on Tuesday.
PG&E argued that it has signed hundreds of contracts for renewable energy and storage (equivalent to 7.78 gigawatts of renewable contracts and 540 megawatts of storage) at high, early adopter prices. Now it wants to break those contracts and replace them with the cheaper solar, wind, and storage prices that currently prevail in the market.
“The Utility’s entrance into these PPAs has financed the building of thousands of megawatts of renewable energy generation resources and, in so doing, contributed to significant price reductions for renewable energy resources currently available in the market,” PG&E wrote.
“As a result, many of the Utility’s agreements to procure renewable energy resources… obligate the Debtors at rates that are significantly higher rates than are currently available in the renewable resources market,” the utility continued. “On the contrary, other load serving entities, i.e., the Debtors’ competitors, are able to procure required renewable energy resources at those lower rates.”
Wholesale power provider NextEra has petitioned the Federal Energy Regulatory Commission (FERC) to prevent PG&E from trying to change its renewable contracts. FERC has said it will look into the matter concurrently with the bankruptcy court.