Released January 15, 2019 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Chaos has engulfed Pacific Gas and Electric Company (San Francisco, California) and its corporate parent, PG&E Corporation (NYSE:PCG) (San Francisco), since the utility disclosed to its employees that the potential liabilities for wildfires in California could cause it to file a Chapter 11 bankruptcy petition. On Monday, the utility and its corporate parent said a Chapter 11 bankruptcy petition for both entities would be filed later this month.
"We believe a court-supervised process under Chapter 11 will best enable PG&E to resolve its potential liabilities in an orderly, fair and expeditious fashion," John Simon, the company's general counsel and interim chief executive officer, said Monday.
Bankruptcy is not expected to interrupt electric or gas service to customers.
PG&E is one of the nation's largest utilities, providing electric and gas service to an estimated 16 million people in a service territory that extends from north of Los Angeles to the Oregon border. The stock lost half its value within the first hour of trading on Monday, and shares fell to about $9 from more than $17 on Friday, January 11.
As recently as last October, the stock traded for about $47 per share. But a stream of bad news about PG&E's potential liabilities for wildfires in 2017 and 2018 pummeled the shares in recent months. Its most recent high had been about $70 per share in August 2017. The utility could face more than $30 billion in liabilities for wildfires, it estimated.
The warnings to employees over the weekend quickly made their way into the news media. In the wake of the tumult, the utility's chief executive, Geisha Williams, stepped down. The company will be led on an interim basis by its general counsel.
Utility bankruptcies are unusual: there have only been a handful in the last 75 years. But PG&E declared bankruptcy once before, in 2001, after it and other utilities and customers were victimized by California's electric restructuring, which was manipulated by now-defunct Enron.
More recently, PG&E has struggled to recover from the 2010 explosion of a 30-inch-diameter gas pipeline in San Bruno, near the San Francisco International Airport, that killed eight people. The company eventually paid more than $2 billion in fines and penalties, and pledged to enhance its safety efforts. Critics claimed the utility scrimped on safety measures in order to keep earnings up.
A significant portion of PG&E's Northern California service area is heavily forested, and electric equipment failures, whipped by high winds, caused numerous wildfires in 2017. State fire investigators have said the utility's equipment sparked 18 wildfires in October 2017 that killed 22 people, destroyed 3,256 structures, and burned an estimated 200,000 acres of land.
Last November, an equipment failure sparked a wildfire that incinerated the city of Paradise, California, killing 86 people, destroying 14,000 structures and charring about 153,000 acres of land. The Camp Fire reportedly caused about $16.5 billion of damage. The utility or its parent also could face murder charges in the Camp Fire, though the cause of that fire has not been determined.
Since June 2014, when PG&E was compelled to report the number of fires caused by its equipment, the utility reported its equipment caused about 1,550 fires, according to The Wall Street Journal. Most of those fires were small and were snuffed out within minutes, but some, whipped by high winds, spread quickly through tinder-dry forests.
California regulators and lawmakers have been considering various measures to help the utility survive. One was to split the company's electric and gas operations. Another was to sell portions of it to other companies. A third was a measure to "securitize" its wildfire liabilities by floating bonds to cover out-of-pocket insurance claims, and have customers pay for those bonds. The state approved securitizing the liabilities for fires caused by PG&E in 2017, but not 2018.
Despite a stepped-up tree-trimming budget, PG&E has not been able to get ahead of Mother Nature. A year ago, the utility had estimated there were as many as 120 million trees that could come into contact with its electrical lines. It set out to trim 1.4 million trees per year.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
"We believe a court-supervised process under Chapter 11 will best enable PG&E to resolve its potential liabilities in an orderly, fair and expeditious fashion," John Simon, the company's general counsel and interim chief executive officer, said Monday.
Bankruptcy is not expected to interrupt electric or gas service to customers.
PG&E is one of the nation's largest utilities, providing electric and gas service to an estimated 16 million people in a service territory that extends from north of Los Angeles to the Oregon border. The stock lost half its value within the first hour of trading on Monday, and shares fell to about $9 from more than $17 on Friday, January 11.
As recently as last October, the stock traded for about $47 per share. But a stream of bad news about PG&E's potential liabilities for wildfires in 2017 and 2018 pummeled the shares in recent months. Its most recent high had been about $70 per share in August 2017. The utility could face more than $30 billion in liabilities for wildfires, it estimated.
The warnings to employees over the weekend quickly made their way into the news media. In the wake of the tumult, the utility's chief executive, Geisha Williams, stepped down. The company will be led on an interim basis by its general counsel.
Utility bankruptcies are unusual: there have only been a handful in the last 75 years. But PG&E declared bankruptcy once before, in 2001, after it and other utilities and customers were victimized by California's electric restructuring, which was manipulated by now-defunct Enron.
More recently, PG&E has struggled to recover from the 2010 explosion of a 30-inch-diameter gas pipeline in San Bruno, near the San Francisco International Airport, that killed eight people. The company eventually paid more than $2 billion in fines and penalties, and pledged to enhance its safety efforts. Critics claimed the utility scrimped on safety measures in order to keep earnings up.
A significant portion of PG&E's Northern California service area is heavily forested, and electric equipment failures, whipped by high winds, caused numerous wildfires in 2017. State fire investigators have said the utility's equipment sparked 18 wildfires in October 2017 that killed 22 people, destroyed 3,256 structures, and burned an estimated 200,000 acres of land.
Last November, an equipment failure sparked a wildfire that incinerated the city of Paradise, California, killing 86 people, destroying 14,000 structures and charring about 153,000 acres of land. The Camp Fire reportedly caused about $16.5 billion of damage. The utility or its parent also could face murder charges in the Camp Fire, though the cause of that fire has not been determined.
Since June 2014, when PG&E was compelled to report the number of fires caused by its equipment, the utility reported its equipment caused about 1,550 fires, according to The Wall Street Journal. Most of those fires were small and were snuffed out within minutes, but some, whipped by high winds, spread quickly through tinder-dry forests.
California regulators and lawmakers have been considering various measures to help the utility survive. One was to split the company's electric and gas operations. Another was to sell portions of it to other companies. A third was a measure to "securitize" its wildfire liabilities by floating bonds to cover out-of-pocket insurance claims, and have customers pay for those bonds. The state approved securitizing the liabilities for fires caused by PG&E in 2017, but not 2018.
Despite a stepped-up tree-trimming budget, PG&E has not been able to get ahead of Mother Nature. A year ago, the utility had estimated there were as many as 120 million trees that could come into contact with its electrical lines. It set out to trim 1.4 million trees per year.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
