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California Utility Files Bankruptcy After Wildfires

By George Khoury, Esq. on January 16, 2019 | Last updated on March 21, 2019

The recent wildfires that devastated California will have a lasting impact beyond the lives and homes destroyed. The company that is allegedly responsible for starting the Northern California Camp Fire, Pacific Gas and Electric, has stated its intention to declare bankruptcy due to the liabilities created by the wildfire's damage.

Declaring bankruptcy could leave investors and victims of wildfire taking severe financial losses, but as the company expressed, it may be the only way for the company to continue to operate. If the bankruptcy goes through, it would seem that creditors will likely be forced to take severe cuts, while customers bear the burden over the next few years due to rate hikes.

Investors Already Hit

On the news of the bankruptcy, investments into PG&E were pretty much, categorically declared "junk" or generally considered not good, as the company faces debt well beyond what it can afford. In addition to the planned bankruptcy, the company announced that it would not pay the interest on a set of bonds, which would send the company into default.

The state's government officials, as reported by Reuters, "are in a quandary over whether to offer a bailout or risk allowing the state's largest private utility to fail." After all, if the utility fails, Californians suffer the consequences. Notably, the state has among the highest energy costs already.

In the company's statement regarding the bankruptcy, it explained that services for gas and electric consumers should not be impacted, and that it should be done with the process in approximately two years.

Is Climate Change to Blame?

One of the factors that PG&E cited as a reason for their increasing costs was climate change. It reasoned that with climate change, the risk of wildfires increases. And while this link may seem tenuous as an excuse to avoid liability for causing a massive wildfire, there may be something to it.

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