Catastrophic wildfires push California’s biggest utility to consider bankruptcy

One lawyer accused PG&E of "skulking around in the shadows."

A fallen power line is seen on top of burnt out vehicles on the side of the road in Paradise, California after the Camp fire tore through the area on November 10, 2018.       (Credit: JOSH EDELSON/AFP/Getty Images)
A fallen power line is seen on top of burnt out vehicles on the side of the road in Paradise, California after the Camp fire tore through the area on November 10, 2018. (Credit: JOSH EDELSON/AFP/Getty Images)

California’s biggest utility, PG&E, is considering filing for bankruptcy following two years of record-breaking wildfires. But some experts are voicing frustration, saying the utility is trying to skirt its financial responsibility and that the focus should be on building resilience as climate change continues to make wildfires more intense and destructive.

It’s widely believed that PG&E power lines sparked the state’s most devastating wildfire ever, the Camp Fire, which destroyed 18,500 structures and killed 86 people last November. Last June, state fire officials officially blamed PG&E for power lines starting several 2017 wildfires in the state.

That liability translates into a significant impact on PG&E’s bottom line. It has pushed the utility to explore “filing some or all of its business for bankruptcy protection as it faces billions of dollars in liabilities related to fatal wildfires in 2018 and 2017,” Reuters reported.

The utility is also reportedly exploring whether it should sell off its natural gas division. And PG&E could also receive financial assistance should the state legislature pass a bill allowing the utility to pass the wildfire costs onto its customers — something it has been lobbying to make happen.


PG&E’s uncertain financial future accompanies a slew of other challenges, such as three top executives announcing that they will be retiring this month, as well as a strong proposal put forward by U.S. District Judge William Alsup on Wednesday, urging PG&E to reinspect its entire grid and remove or trim all trees that could fall on its power lines. The company has two weeks to respond.

PG&E is “skulking around in the shadows, potentially filing bankruptcy,” Mike Danko, an attorney with Danko Meredith law firm in California, told ThinkProgress. Danko has been involved in numerous successful settlements and verdicts against PG&E. The utility’s actions so far, he said, show it appears to be more concerned with retaining shareholder value than compensating wildfire victims.

Since the Camp Fire began on November 8, PG&E’s stock value has plummeted 50 percent. Three insurance companies — Allstate, State Farm, and USAA — have filed lawsuits against the utility over the Camp Fire, and PG&E is facing at least 100 lawsuits from survivors.

Some of the wildfire cases Danko is involved in include survivors of the Butte Fire, which occurred in 2015. Yet, according to Danko, PG&E has told the court that it will stop compensating victims of that fire “because of a change in its financial conditions.”

This illustrates an immediate impact the utility’s financial struggles are having on individuals, he said; “They’re citing their own greed and incompetence” to explain why they can’t compensate victims.


A spokesperson for PG&E declined to answer questions on the possible bankruptcy, telling ThinkProgress in a statement, “We don’t comment on market rumor or speculation.”

The utility also added that its board “is actively assessing PG&E’s operations, finances, management, structure and governance — and remains focused on improving safety and operational effectiveness.”

If the wildfire costs are passed on to PG&E’s customers, it won’t just impact the issue of affordable energy in California — which already has some of the highest electricity rates in the country — but it will also impact the state’s ability to prepare for the future, said Michael Wara, a lawyer and climate research scholar at Stanford University.

“Wildfire costs will raise rates,” Wara told ThinkProgress. “If they go up a lot more, because of both climate change and an irresponsible utility, you get a situation where it’s really hard to invest in a way that we need to in order to achieve our climate goals.”

For example, investing in the necessary infrastructure to support the flow of energy for electric vehicles will require assistance from utilities.


Whether PG&E declares bankruptcy or raises rates, Wara expects the company’s financial woes to continue. “We need a climate resilience solution for the electricity system that doesn’t involve utility finance because… it’s going to take years for the credit situation for PG&E to normalize, I don’t think it’s going to get better soon,” he said.

As far as the markets are concerned, it’s not about the past two years, Wara said, it’s about what’s to come, “it’s the expected fires.”

What’s driving financial fears and conversations about bankruptcy “is the fact that now the markets really believe fires like those [in 2017 and 2018] are the norm and will occur on an ongoing basis.”

And it’s not just the markets. According to Wara, there is an “utter lack of trust in PG&E” among California residents, something he compared to sentiments expressed during Occupy Wall Street days. “There’s a very strong suspicion on the part of normal people that the regulators and the utility are in cahoots again and structuring another bailout.”

PG&E has come under scrutiny for its decision to not preemptively shut off power in the days and hours before the Camp Fire began, despite worsening wind conditions and drops in humidity.

The utility told ThinkProgress in its statement it is “bolstering wildfire prevention and emergency response efforts” including real-time wildfire risk monitoring, enhancing weather modeling and forecasting, managing vegetation, and proactively turning off electric power “when extreme fire danger conditions are forecasted.”

“In California, in the fall if it’s warm and the wind is blowing you get super nervous, my blood pressure goes up,” said Wara.

This specific fear about wind is also addressed in Judge Alsup’s proposal, which would require PG&E to start shutting off power on windy days.

And it is this proposed order, said Danko, that should be the primary focus for PG&E, because the next wildfire season is six months away and all preparations under the order must be completed by then.

And as climate change continues to make wildfires more intense, the urgency is increasing.

“This has to be PG&E’s most immediate need,” Danko said, “because the judge is going to order it… they don’t have time to mess around. They can’t skulk around in the shadows and have endless meetings and endless analysis about what is best for shareholders.”