Distributed Energy

PG&E Presses the “Pause” Button

What does the company’s bankruptcy mean for the future of utilities?

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In a dramatic series of events, San Francisco-based PG&E announced Monday that it will file for Chapter 11 of the US bankruptcy code on January 29. The company’s CEO, Geisha Williams, also stepped down amid the disturbance as its stocks plummeted.

For months investigators have been working to determine whether the power supplier’s equipment sparked the Camp Fire, along with other 2017 fires that charred Northern California. PG&E recently acknowledged that it “experienced an outage” on a transmission line in Butte County at 6:15 a.m. on November 8—just 15 minutes before the Camp Fire broke out. In the wake of these devastating fires in which 86 lives were lost, the utility will face potential liabilities of $30 billion dollars. Its 2018 wildfire insurance covered $1.4 billion.

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According to experts, bankruptcy shields the utility from incurring costs until it has determined a strategy for handling the claims against it. “PG&E expects its losses in connection with the 2017 and 2018 Northern California wildfires will greatly exceed its available insurance. PG&E also expects to face increasing difficulty securing liability insurance in future years due to availability and to face significantly increased insurance costs,” the company said in a filing.

Industry insiders predict that the bankruptcy will have little effect on customers at least in the short term. “The power plants are not going to stop operating, the employees are not going to stop going to work,” UC Berkeley energy economist Severin Borenstein told the San Francisco Chronicle. “The whole point of Chapter 11 bankruptcy is to keep a company running while it figures out how to deal with, generally, the idea that they don’t have enough cash flow to cover their obligations.”

However, PG&E’s financial issues will impact the companies that supply its natural gas and electricity. At least two small gas suppliers have restricted sales to PG&E because of concern that the company won’t be able to pay, according to Bloomburg.

Along with the bankruptcy the company has plans to reorganize. How exactly PG&E will be restructured is interesting to imagine. According to the San Francisco Chronicle, state regulators plan to look at whether PG&E should split its gas and electric operations into separate companies as well, including the possibility of breaking PG&E up into smaller regional entities and whether the system should be publicly owned.

What are your thoughts? How do you think this scenario will influence utilities in the future? DE_bug_web

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