Gas and electricity consumers won’t notice immediate changes from PG&E when the Northern California behemoth files for Chapter 11 bankruptcy in the face of liability problems from back-to-back historic fires.
Longer term, however, both consumers and environmentalists might be in for rocky rides as PG&E attempts to weather the storm.
“For now, no one will see much new with their electric bill,” Severin Borenstein, faculty director of the Energy Institute at UC Berkeley’s Haas School of Business, says. “In the longer run, though, people may be looking at a lot of uncertainty.”
That’s particularly true in the area of green energy. California is a leader in efforts to try to turn the tide of climate change. PG&E has been part of that, but now figures to be sidelined.
“This is not good for California climate policy,” Borenstein says. “Once the company is in bankruptcy, which is likely by the end of the month, it will be put in the hands of a bankruptcy judge. And it would be no surprise if the bankruptcy judge just says, ‘Climate issues are not my problem.’ “
So, issues having to do with solar power, electric vehicles and other green energy platforms suddenly have the potential to be pushed to the side. PG&E will have much less flexibility to act once it enters bankruptcy. The judge will have to sign off on any new initiative, any expansion, any response to concerns put forward by the governor or legislature and any changes in programs.
Investigators determined that PG&E equipment contributed to 18 of 21 major fires in California in 2017, and are looking closely at electrical equipment as a culprit in last year’s fires. Two areas of investigation are whether the failure to trim trees near power lines and equipment failure caused or contributed to many of the fires in the northern half of the state.
As a result, the company has seen the value of its stock and its credit rating both take dives while lawsuits begin to mount.
In the end, there may be no more PG&E as such, Borenstein says. Even before the bankruptcy filing, he says, there was talk of splitting the company up and separating out the gas division from the electricity side.
“There were already questions about whether PG&E could continue in its current form doing both gas and electric,” Borenstein says. “And there was talk about whether the electric side of the company should be broken down into small regions, and whether those smaller bits should be investor-owned or municipal-owned, where the government actually owns the utility. Those questions will accelerate.
“I think what it means is that it’s time for the state to step up and play a role. It was already headed in that direction, and this will accelerate things. The courts and the legal process will work on a reorganization of the company. I don’t think the state has settled on what it wants to do, and rightly. I think they should take their time. These are huge decisions.”
There is a chance, Borenstein says, that PG&E could be taken over as an arm of some government organization, although “I am not aware of any utility being made into a public entity as a whole.” A few years ago there was a move to have SMUD (Sacramento Municipal Utility District) take over a small part of PG&E’s territory, but it ultimately did not succeed.
No matter what the ultimate outcome, it’s going to be a long journey. Any smaller bits the company is broken into would have to be valued, the funds would have to be raised and creditors would have to enter the negotiations.
“Nothing will happen in weeks or months,” Borenstein says. “This will only happen over many years.”