PG&E hasn’t run out of money. So why is it planning to file for bankruptcy?
California’s largest power company plans to file for bankruptcy as soon as next week, in the face of wildfire liabilities that could cost tens of billions of dollars. But a growing chorus of shareholders, ratepayer advocates and lawyers for fire victims says there’s no need for Pacific Gas & Electric to enter bankruptcy. Those critics point to the $1.5 billion in cash or cash equivalents PG&E says it has on hand, and to the company’s claim that it could raise “a significant amount” of additional capital even without a Chapter 11 filing. Critics also say wildfire liability is far from the urgent crisis PG&E is making it out to be because it could be years before the company is forced to pay a single penny to fire victims.
The groups questioning PG&E’s decision are strange bedfellows, although many of them have a financial interest in keeping the utility out of Bankruptcy Court. One leading critic of a bankruptcy filing is BlueMountain Capital Management LLC, which owns more than 11 million shares of PG&E stock that could be wiped out. Then there are lawyers for victims of the Northern California fires, who might see court awards reduced by a bankruptcy judge. Some of those lawyers have joined forces with famed consumer advocate and PG&E foe Erin Brockovich. Ratepayer watchdogs groups also suspect PG&E is seeking bankruptcy protection not out of necessity but as a business strategy.
Loretta Lynch feels like she’s seen this movie before. Lynch was president of the California Public Utilities Commission the last time PG&E filed for bankruptcy, during the energy crisis in 2001. At the time, the San Francisco-based utility said it needed relief from $9 billion in debt, incurred after a failed deregulation plan allowed Enron Corp. and other energy traders to manipulate markets and send prices skyrocketing. PG&E emerged from its previous bankruptcy with a reorganization plan that saw investors largely made whole. The company was also allowed to boost its regulated profits for years to come. Customers, meanwhile, were saddled with higher rates.
The reorganization plan was approved by the Public Utilities Commission in a 3-2 vote, with Lynch in the minority. She called it “the richest bailout I’ve ever seen.” “PG&E was sitting in dough, the ratepayers were paying and paying, all the creditors were happy, everybody was a pig at the trough. And who paid? The California ratepayer,” Lynch said. “Why wouldn’t you want to try that again?”
PG&E officials say bankruptcy is the company’s only option for addressing potential wildfire liabilities, especially after recent credit agency downgrades. In an emailed statement, PG&E spokeswoman Lynsey Paulo said the company’s board unanimously chose to pursue a Chapter 11 filing “following a comprehensive review with the assistance of outside experts and at management’s recommendation.” “Resolving our legal liabilities and financial challenges will be enormously complex,” Paulo said, “and will require us to address multiple stakeholder interests, including thousands of wildfire victims and others who have already made claims and likely thousands of others we expect to make claims.”
https://www.latimes.com/business/la-fi-does-pge-need-bankruptcy-20190124-story.html