$30-Billion PG&E Bankruptcy Plan Includes New Name, New Negotiations with Solar and Wind Suppliers
A US$30-billion bankruptcy plan, a new name, a compensation fund for wildfire victims, and the right to renegotiate contracts with older renewable energy suppliers are the elements of a plan taking shape to pull California utility giant Pacific Gas & Electric (PG&E) out of insolvency, after its power lines were blamed for the inferno that literally burned Paradise to the ground last summer.
“The filing in U.S. Bankruptcy Court put dollar figures on a plan whose broad outline had been sketched out via unnamed sources in the previous week,” Greentech Media reports. “In an interesting aside, the creditors proposed a new name—Golden State Power Light & Gas Co.—to replace a name now associated with safety lapses and disasters such as the 2010 San Bruno gas pipeline explosion and the deadly wildfires that drove it into bankruptcy.”
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The announcement incorporates the utility’s earlier rumblings about renegotiating some of its older, more expensive power purchase agreements with solar and wind power producers. Greentech says that possibility has already “led to credit downgrades for several key renewable energy developers with a stake in the outcome,” with industry analysts warning the negotiations “could increase the costs of future clean energy projects in the state.”
Earlier this year, Greentech said the reorganization could take years to complete.
The current plan hinges on a proposal under discussion within Governor Gavin Newsom’s administration for a $21-billion wildfire insurance fund, whose cost would be borne equally by ratepayers and shareholders. The fund would help protect PG&E and the state’s other major investor-owned utilities, Southern California Edison and San Diego Gas & Electric, from future liability for fires caused by their equipment and infrastructure.
The fund “would help utilities weather the burden of multi-billion-dollar wildfire liabilities for the months to years it will take for state fire investigators and utility regulators to determine if the utility acted as a ‘prudent manager’ up to and during the fire,” Greentech explains. “If the answer is yes, utilities will be allowed to keep what they’ve drawn from the fund, and if the answer is no, the utility and its shareholders would be forced to pay back what they’ve taken.”
That system would be a workaround for an “inverse condemnation” doctrine in California law, under which a company like PG&E is held liable for a disaster like the Camp Fire, even if it’s found to have acted prudently. Utilities, credit rating agencies, investors, and state commissions have all recommended shifting to a more conventional, fault-based system, Greentech says. “But wildfire victims, attorneys, insurance companies, and a significant share of public opinion are against changing what they see as a key check on PG&E’s lax safety record in particular, and utility negligence in general.”