Pacific Gas & Electric, a California-based energy and power provider and owner of the country’s biggest power utility, has filed for Chapter 11 bankruptcy protection on January 29, after the company became overwhelmed by the liabilities resulting from the Northern California wildfires of 2017 and 2018.
In a published statement, the company, which owns the largest power utility in the United States, is seeking approval from the court for a $5.5 billion debtor-in-possession financing.
A court document filed with the United States Bankruptcy Court for the District of Northern California showed that the company had assets totaling $71.39 billion, while its liabilities totaled $51.69 billion.
PG&E Interim Chief Executive Officer John Simon remarked about the filing:
Throughout this process, we are fully committed to enhancing our wildfire safety efforts, as well as helping restoration and rebuilding efforts across the communities impacted by the devastating Northern California wildfires.
The company also added that it intends to make payments to suppliers in full under the conditions for goods and services provided to the company on or after the Chapter 11 filing has been approved.
The news of the Chapter 11 filing is coming about three weeks after the company confirmed that Geisha Williams, its former Chief Executive Officer, would be stepping down.
Williams, who took over leadership of the company in March 2017, was at the helm of affairs during one of the most difficult periods in PG&E’s history, as the company faced numerous allegations over the Northern California wildfires.
The company also stated that she would receive severance payments between $2.36 million and $4.46 million, depending on the category of her departure. However, depending on the outcome of the bankruptcy filing, Williams’ unvested stock, as well as her $3.1mmilion in pension payments, might end up being wiped out.
The company cited the hundreds of lawsuits that it currently faces from the victims of the disastrous 2017 fire that killed 22 people in Sonoma County, Northern California, as well as a November 2018 fire that killed at least 86 people and destroyed over 15,000 homes in Paradise Northern California, and surrounding communities.
The exact cause of the fire remains under investigation, but PG&E, which reported issues with its nearby power line around the time it started, has borne the brunt of the blame.
The company was however cleared of any responsibility in the 2017 fires on January 24. A statement from the California Department of Forestry and Fire Protection claimed that the 2017 Tubbs Fire in Sonoma County was started by electrical equipment in a private home. However, the fire department was unable to diagnose the exact cause of the fire, as it engulfed much of the equipment, as well as over 5,000 buildings.
The fire department’s announcement caused an immediate surge in PG&E stock, which ended up closing at $13.95 on January 24.
The bankruptcy filing will put a halt to the lawsuits and have them all consolidated in bankruptcy court, where the victims suing the company are expected to receive minor settlements. The victim will have a slim chance of receiving punitive damages from a bankruptcy proceeding. Rather, they along with the company’s creditors and suppliers, will need to tussle for a payout from the company.