PG&E files for bankruptcy over wildfire claims, 'extraordinary financial challenges' - Insurance News | InsuranceNewsNet

InsuranceNewsNet — Your Industry. One Source.™

Sign in
  • Subscribe
  • About
  • Advertise
  • Contact
Home Now reading Newswires
Topics
    • Advisor News
    • Annuity Index
    • Annuity News
    • Companies
    • Earnings
    • Fiduciary
    • From the Field: Expert Insights
    • Health/Employee Benefits
    • Insurance & Financial Fraud
    • INN Magazine
    • Insiders Only
    • Life Insurance News
    • Newswires
    • Property and Casualty
    • Regulation News
    • Sponsored Articles
    • Washington Wire
    • Videos
    • ———
    • About
    • Meet our Editorial Staff
    • Advertise
    • Contact
    • Newsletters
  • Exclusives
  • NewsWires
  • Magazine
  • Newsletters
Sign in or register to be an INNsider.
  • AdvisorNews
  • Annuity News
  • Companies
  • Earnings
  • Fiduciary
  • Health/Employee Benefits
  • Insurance & Financial Fraud
  • INN Exclusives
  • INN Magazine
  • Insurtech
  • Life Insurance News
  • Newswires
  • Property and Casualty
  • Regulation News
  • Sponsored Articles
  • Video
  • Washington Wire
  • Life Insurance
  • Annuities
  • Advisor
  • Health/Benefits
  • Property & Casualty
  • Insurtech
  • About
  • Advertise
  • Contact
  • Editorial Staff

Get Social

  • Facebook
  • X
  • LinkedIn
Newswires
Newswires RSS Get our newsletter
Order Prints
January 29, 2019 Newswires
Share
Share
Post
Email

PG&E files for bankruptcy over wildfire claims, ‘extraordinary financial challenges’

Sacramento Bee (CA)

Jan. 29--Unable to cope with wildfire claims, PG&E made good on its vow to file for bankruptcy Tuesday, launching a perilous journey with major implications for ratepayers, investors, state officials and the thousands of California wildfire victims who are suing the utility.

Citing "extraordinary financial challenges" and a rapidly deteriorating cash position, Pacific Gas and Electric Co. and its parent PG&E Corp. sought Chapter 11 bankruptcy protection in an electronic filing shortly after midnight. It's the second time this century PG&E has gone bankrupt.

The company's most pressing concern is "over $30 billion in potential exposure" from the 2017 and 2018 wildfires, according to court papers, including the November Camp Fire in Butte County.

Legal experts say the bankruptcy will leave wildfire survivors unlikely to collect in full because they'll be lumped in with other unsecured creditors, including bondholders who are owed $18 billion. But PG&E insisted it isn't using bankruptcy as a refuge from wildfire claims -- and said the case will actually help fire victims recover money more quickly.

Bankruptcy can resolve wildfire lawsuits "more quickly and more equitably than ... the state court system," PG&E Chief Financial Officer Jason Wells said in court papers. Bankruptcy isn't "a strategy or attempt to avoid PG&E's responsibility for the heartbreaking and tragic loss of life, devastating damage and destruction to homes and businesses," he added.

Victims' lawyers disagreed. "Why do this other than to keep money away from victims," said Mike Danko, a Bay Area attorney representing survivors of several fires. "Typically you don't let the perpetrator decide what is best for victims. The perpetrator is a convicted felon that continues to violate the terms of its probation. What they say is best for victims is inappropriate and suspicious." PG&E was convicted of multiple felonies after the 2010 San Bruno pipeline explosion.

The filing wasn't a surprise; PG&E warned 15 days ago it was planning a bankruptcy case, as required by a state law enacted last fall. In court papers, utility lawyers said the warning actually accelerated the depletion of its finances as it was forced by suppliers to pre-pay for power and other needs.

The company's cash position fell by $811 million during the two-week run-up to the actual bankruptcy filing, the lawyers wrote. That reduced the utility's cash holdings to $240 million; the parent corporation has an additional $370 million.

However, PG&E said it has lined up $5.5 billion in bankruptcy financing which it says it needs to keep going during a process that will likely take several years. The state Public Utilities Commission, at a contentious meeting interrupted by protestors Monday, agreed to let PG&E borrow the money; the bankruptcy court must approve as well.

The case will be heard in U.S. Bankruptcy Court in San Francisco, about two miles from PG&E's headquarters. Judge Dennis Montali, who oversaw PG&E's first bankruptcy in 2001, will preside.

"We are continuing to provide safe and reliable electric and natural gas service," the company said on its website. "We are not 'going out of business,' and we expect that there will be no disruption to the services you expect from us as a result of the Chapter 11 process.

"Our extensive restoration and rebuilding efforts to help communities recover from the devastating wildfires are continuing. We are committed to these efforts and safety remains our most important responsibility."

The bankruptcy will force state officials to deal with the concerns of ratepayers and wildfire survivors while at the same time ensuring the company is healthy enough to keep operating. In the long term, PG&E could be forced to spin off assets to raise cash. Some critics have been calling for a breakup of the utility or some sort of government takeover, while PG&E executives said they're committed to overhauling how they do business.

"To be clear, we have heard the calls for change and we are determined to take action throughout this process to build the energy system our customers want and deserve," John Simon, the company's interim chief executive officer, said in a press release.

Gov. Gavin Newsom, in a prepared statement, said the bankruptcy "does not change my focus, which remains protecting the best interests of the people of California. My administration will continue working to ensure that Californians have access to safe, reliable and affordable service, that victims and employees are treated fairly, and that California continues to make forward progress on our climate change goals."

Claims against PG&E have been building since shortly after the wine country fires in October 2017. Lawyers representing thousands of victims have filed more than 750 lawsuits against PG&E; more than 40 insurance companies are suing the utility as well.

The utility did win a partial reprieve last week when Cal Fire said PG&E's power lines weren't to blame for the Tubbs Fire, the costliest and deadliest of the 2017 fires. It wasn't enough to stave off bankruptcy. In deciding to file for bnakruptcy, the company factored in its "longstanding belief" that it didn't cause the Tubbs Fire, the company said in a press release Tuesday.

Legislators last year enacted a partial bailout for the company, saying it could pass on at least some wildfire liability costs to ratepayers if the utility's finances couldn't absorb the total hit.

But the legislation, SB 901, didn't cover any 2018 fires, including the Camp Fire, which destroyed 13,000 homes in Paradise in November and killed 86 people, the most in California history. Legislators have indicated they're in no mood to extend SB 901's protections to help PG&E with the Camp Fire.

"Given its track record of obfuscation and mismanagement, I'm not surprised PG&E claims it can no longer meet its financial obligations," said state Sen. Bill Dodd, D-Napa, who authored SB 901. "It's extremely disappointing and underscores the need for change at PG&E in both its leadership and corporate culture .... Wildfire victims shouldn't have to deal with the uncertainty this causes, which in many respects re-victimizes them."

The official investigation isn't complete, but PG&E has disclosed that it experienced problems on a high-voltage transmission tower near the apparent ignition point, minutes before the Camp Fire began.

Experts say PG&E's bankruptcy will bring pain for practically everyone involved. Wildfire survivors who are suing PG&E will become unsecured creditors with no higher priority on PG&E's assets than the company's bondholders -- who are owed $18 billion.

Rates will likely go up -- to help PG&E with the 2017 liabilities, if not the Camp Fire claims. PG&E customers paid billions in higher rates following the company's first bankruptcy in 2001, which was caused by runaway power prices during the energy crisis.

Meanwhile, PG&E's stockholders are likely to lose billions if, as some have speculated, the company sells some of its assets to pay debts. The stock has lost nearly three-fourths of its value since the Camp Fire, although it rose 12 percent in early trading Tuesday on the New York Stock Exchange to $13.52 a share.

The federal judge overseeing PG&E's probation, stemming from its criminal conviction in the 2010 San Bruno pipeline disaster, has a hearing set for Wednesday on his proposal to impose stringent wildfire-safety rules on the utility this year. That would include mandatory re-inspections of all 100,000 miles of PG&E power lines and extensive tree-cutting operations before the fire season begins in June.

PG&E has pushed back on the plan as unrealistic and said it would cost at least $75 billion to implement. The Public Utilities Commission has also objected, saying the judge has gone too far and should leave wildfire safety to state officials.

___

(c)2019 The Sacramento Bee (Sacramento, Calif.)

Visit The Sacramento Bee (Sacramento, Calif.) at www.sacbee.com

Distributed by Tribune Content Agency, LLC.

Older

AM Best Removes From Under Review With Negative Implications and Downgrades Credit Ratings of MAPFRE Insurance Company of New York

Newer

Best’s Market Segment Report: Emerging Risks, Greater Complexity Challenge Directors and Officers Insurers

Advisor News

  • Can your advisory firm survive without you?
  • I started using AI, but what now?
  • How to support an entrepreneur client with multiple businesses
  • Could a narrower focus help grow your practice?
  • U.S. debt hits $40 trillion: how to support concerned clients
More Advisor News

Annuity News

  • MassMutual Expands Lending Options With New Secured Credit Line
  • Corebridge Financial Introduces Progressive Trigger, a First-of-Its-Kind Index Annuity Strategy Designed to Turn Missed Years into Future Opportunity
  • Insurer proposes $1.1M deal to resolve CA teachers’ annuity fee lawsuit
  • IMOs get frustrated with slow carrier adoption of faster technology
  • New class-action lawsuit targets Delaware Life over annuity disclosures
More Annuity News

Health/Employee Benefits News

  • Benefit sustainability, affordability challenge employers
  • Transparent Medicare Advantage guidance: Putting consumers first
  • Legislators hear report on thin hospital margins, advance prior authorization reform
  • Hawthorne School Budget Faces New Pressure As Health Insurance Costs Jump Nearly 34%
  • Half the Coverage: What the TLC's Rideshare Insurance Cut Means for Queens Riders
More Health/Employee Benefits News

Life Insurance News

  • Virginia orders Atlantic Coast Life to halt new business Nov. 1
  • AM Best Affirms Credit Ratings of China Taiping Insurance (Singapore) Pte. Ltd.
  • AM Best Upgrades Credit Ratings of Fidelity Life Association, A Legal Reserve Life Insurance Company; Affirms Credit Ratings of Industrial Alliance Insurance and Financial Services Inc. and Its Life/Health Subsidiaries
  • 777 Partners founder pleads guilty to $500 million fraud scheme
  • AM Best Affirms Credit Ratings of Luen Fung Hang Insurance Company Limited
Sponsor
More Life Insurance News

NEWS INSIDE

  • Companies
  • Earnings
  • Economic News
  • INN Magazine
  • Insurtech News
  • Newswires Feed
  • Regulation News
  • Washington Wire
  • Videos

FEATURED OFFERS

Press Releases

  • Benefits Studio Launches to Fill the Missing Middle of Benefits Navigation at $49/mo
  • Lauren Sinnott Named to Ragan’s Top Women in Marketing Awards, Class of 2026 
  • Classic Car Insurer OpenRoad Insurance Expands to 40 U.S. States in Two Years
More Press Releases > Add Your Press Release >

How to Write For InsuranceNewsNet

Find out how you can submit content for publishing on our website.
View Guidelines

Topics

  • Advisor News
  • Annuity Index
  • Annuity News
  • Companies
  • Earnings
  • Fiduciary
  • From the Field: Expert Insights
  • Health/Employee Benefits
  • Insurance & Financial Fraud
  • INN Magazine
  • Insiders Only
  • Life Insurance News
  • Newswires
  • Property and Casualty
  • Regulation News
  • Sponsored Articles
  • Washington Wire
  • Videos
  • ———
  • About
  • Meet our Editorial Staff
  • Advertise
  • Contact
  • Newsletters

Top Sections

  • AdvisorNews
  • Annuity News
  • Health/Employee Benefits News
  • InsuranceNewsNet Magazine
  • Life Insurance News
  • Property and Casualty News
  • Washington Wire

Our Company

  • About
  • Advertise
  • Contact
  • Meet our Editorial Staff
  • Magazine Subscription
  • Write for INN

Sign up for our FREE e-Newsletter!

Get breaking news, exclusive stories, and money- making insights straight into your inbox.

select Newsletter Options
Facebook Linkedin Twitter
© 2026 InsuranceNewsNet.com, Inc. All rights reserved.
  • Terms & Conditions
  • Privacy Policy
  • InsuranceNewsNet Magazine

Sign in with your Insider Pro Account

Not registered? Become an Insider Pro.