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Timeline: PG&E’s Road Towards Bankruptcy
Updated May 15, 2019, 3:30 p.m.
Pacific Gas and Electric, California’s largest utility company, has been plagued with legal, financial and safety troubles after a series of deadly wildfires blamed on the utility’s power lines.
On Jan. 13, PG&E’s CEO resigned and the company announced its intent to file for bankruptcy protection in the face of millions of dollars in wildfire damage liability. On midnight Jan. 29 the utility officially filed for Chapter 11 bankruptcy protection.
It’s not the first time PG&E has ended up in financial trouble. The utility filed for bankruptcy previously in 2001 due to debts caused by California’s energy crisis. And its natural gas service has faced withering criticism following the San Bruno pipeline explosion in 2010.
This time around, PG&E Board of Directors Chairman Richard Kelly said that Chapter 11 reorganization was "the only viable option to address the company's responsibilities to its stakeholders." But how did the company get to this point? CapRadio journalists have put together a timeline to lay out the events that have led to PG&E’s current liability crisis.
Sept. 9, 2010: A PG&E natural gas pipeline in San Bruno, Calif. explodes, killing eight
On the evening of Sept. 9, 2010, one of PG&E’s natural gas pipelines exploded in a residential area of the Bay Area suburb of San Bruno. The explosion sparked a fire, destroying 58 homes and killing eight people.
The utility was convicted on six criminal charges in 2016, including five related to pipeline safety violations and one related to obstructing investigators. The company received five years probation in the case.
The utility was also ordered to pay a $3 million fine, run commercials on television about the convictions and let an independent monitor oversee its gas pipeline system’s safety. They also paid a total of $565 million to victims of the blast after hundreds of suits were filed by those affected, according to the Los Angeles Times.
Probes into the utility company related to the explosion also revealed emails showing PG&E officials and California Public Utilities Commission regulators privately discussing public business. PG&E settled with the state over charges of insider dealings with regulators for $87 million.
In late 2018, the California Public Utilities Commission found that PG&E may have falsified pipeline safety records from 2012 to 2017 in response to the San Bruno blast. The commission alleged that PG&E disregarded safety measures in the wake of the explosion rather than tightening them.
October 2017: Blame for deadly North Bay wildfires laid on PG&E
State fire investigators determined that fallen PG&E power lines caused some of the devastating and deadly wildfires that tore through California’s North Bay in 2017, leaving PG&E liable for billions of dollars in damages.
The utility said in June 2018 that it expected to pay at least $2.5 billion in connection with the fires, with the potential for that number to go up as the causes of other fires were determined. A prosecutor with the U.S. attorney’s office in San Francisco also said that PG&E’s role in the fires may have violated the terms in their sentence in the San Bruno explosion.
San Diego Gas & Electric faced a similar problem in connection with the 2007 San Diego wildfires, where the utility was held responsible for $379 million in costs related to the fire, according to the San Diego Union Tribune. The Public Utilities Commission voted against allowing the utility to pass these costs along to ratepayers, something PG&E was able to successfully do in the 2017 fires.
In the face of these massive liabilities, PG&E and other utilities turned to the state government for help in shouldering these costs.
2018: Legislators debate PG&E’s financial liability in the North Bay fires
California lawmakers voted in September 2018 to shift the costs related to the 2017 North Bay wildfires from PG&E shareholders to its ratepayers after a long debate over how to handle the utility’s liability during the legislative session.
The bill also included measures to help prevent wildfires and to improve response and recovery efforts. Opponents criticized the measure as a bailout for the utility, but supporters said it was a necessary action for the good of all.
Under current state law, utilities are liable for all damages related to wildfires caused by their equipment, even if the utility did nothing wrong to cause the fire. That provision is known as “inverse condemnation.” PG&E originally lobbied for legislation to rewrite this liability law altogether, but had to settle for the deal negotiated by lawmakers and Gov. Jerry Brown that did the following:
- For fires that started in 2017, the California Public Utilities Commission would conduct a “stress test” to determine the maximum amount of damages a utility could sustain without harming ratepayers or going bankrupt. That amount would serve as a “cap” on their fiscal liability.
- Also for fires started in 2017, costs passed along to ratepayers could be financed — spread out over several years under a process called “securitization” — to reduce the sticker shock on ratepayers’ monthly utility bills.
- For fires caused by electrical infrastructure from next year forward, the CPUC will decide whether a utility acted reasonably, considering factors that include extreme weather conditions. If so, the CPUC could order that the costs be passed along to ratepayers and securitized.
Oct. 15, 2018: PG&E shuts off power to about 60,000 customers in pre-emptive public safety outage
In October 2018, about a year after the North Bay wildfires PG&E was held responsible for, the utility decided to pre-emptively shut off power for around 60,000 customers in an attempt to prevent more fires.
The pre-emptive outage came as strong winds were forecast across Northern California, causing worry about the fire risks of blown-over power lines. In light of the utility’s previous liabilities in wildfires, the company decided to shut off power due to the increased fire danger.
Power was shut off to customers in more than a dozen Northern California Counties, with heavy shut-offs in Amador, El Dorado, Calaveras Lake, Napa and Sonoma counties. Some customers in the Sierra Foothills and North Bay areas also had their power shut off.
The outages forced schools and businesses to close, with many residents taking to social media to complain about the planned outage. The company received reimbursement demands from customers after the shut-off, claiming that it caused financial issues for them.
Weeks later, PG&E announced it was considering another round public safety shut-offs — including in a small Butte County town named Paradise. The utility ended up deciding to keep the lights on.
Flames were already tearing through Paradise and surrounding towns when PG&E made that decision.
November 2018: PG&E potentially to blame for deadly Camp Fire in Butte County
Concerns about PG&E’s liability began to pop up in the wake of the devastating Camp Fire in November 2018, though the official cause of the fire has not yet been identified.
Despite this, suits have already been filed against the utility by insurers after the fire triggered billions of dollars in insurance claims. PG&E expressed concerns to regulators that it may not have enough insurance to cover the liability costs if they are found to be at fault in the Camp Fire. The utility’s stock lost 20 percent of its value after this announcement.
PG&E later acknowledged receiving two reports on the morning the fire sparked about issues with its equipment near the spot where the Camp Fire started
Dec. 30, 2018: California Attorney General Xavier Becerra mentions possibility of murder charges for PG&E in Camp Fire deaths
California Attorney General Xavier Becerra announced in late 2018 that PG&E could be guilty of murder if any of the deadly wildfires in the past two years were found to have been caused by reckless operation of PG&E power equipment.
Becerra released this information in an advisory brief, and any actual criminal charges would have to be brought by a county’s district attorney. Becerra’s opinion was submitted to a federal judge who is overseeing the criminal case against PG&E in the San Bruno explosion.
Jan. 8, 2019: PG&E’s bond rating falls after S&P cuts its credit rating
The value of PG&E’s shares and bonds dropped significantly in early January 2019 after S&P Global Ratings dropped the utility’s credit rating, according to the Los Angeles Times.
The credit rating was due to the utility’s limited options for handling its wildfire liabilities, according to S&P Global Ratings. They slashed the company’s ratings from BBB-, the lowest investment-grade rating, to B, a junk rating, and may continue to cut the company’s standing as the situation develops.
Jan. 13, 2019: PG&E CEO Geisha Williams resigns
PG&E CEO Geisha Williams resigned on Jan. 13, 2019, as the company faced the potential of colossal liability costs. She is being replaced by the company’s general counsel, John Simon, until a permanent chief executive is appointed.
Jan. 14, 2019: PG&E announces its intent to file for bankruptcy protection over wildfire liabilities
PG&E announced its plans to file for Chapter 11 bankruptcy protection Jan. 14, 2019, the day after Williams resigned.
Under last year’s wildfire liability legislation, the utility is required to give 15 days advance notice of its intent to file bankruptcy,. It’s expected in court late in January to continue the process.
PG&E shares dropped by 50 percent before the opening bell of the stock market after the bankruptcy plans were announced.
Jan. 24, 2019: Cal Fire finds private electrical system, not PG&E equipment, caused Tubbs Fire
Cal Fire found PG&E not liable for last year’s deadly Tubbs Fire, announcing their investigation determined that household wiring, not the utility’s equipment, sparked the blaze.
PG&E’s stock value nearly doubled after the announcement, but PG&E has not said whether the finding will affect the utility’s plans to file for bankruptcy later this month.
Jan. 29, 2019: PG&E files for bankruptcy protection
At midnight on Jan. 29 PG&E officially filed for Chapter 11 bankruptcy protection, the soonest it could after announcing its intention to do so 15 days before.
The Chapter 11 filing allows PG&E to continue operating while it puts its finances in order. But the move could ultimately drive up electricity rates for customers, jeopardize California's ambitious transition toward renewable energy and lead to smaller payouts for fire victims.
Jan. 30, 2019: Judge in San Bruno case berates PG&E about wildfire prevention
On Jan. 30, San Francisco federal Judge William Alsup found that PG&E had violated its probation in the San Bruno pipeline explosion case.
Alsup upheld a finding that the utility company did not notify probation officers that a prosecutor’s office had opened a full investigation into PG&E’s role in a 2017 wildfire.
He also scolded PG&E for not taking more measures to prevent its equipment from causing wildfires. Alsup has previously proposed that PG&E be required to remove or trim all trees that could fall on its power lines in high winds and to shut off power at times of high fire risk as a part of its probation.
Feb. 28, 2019: PG&E says its equipment likely sparked Camp Fire
PG&E released a statement Feb. 28 saying that one of the utility’s transmission lines likely sparked the deadly Camp Fire that devastated the Butte County town of Paradise in November, according to the Associated Press.
While the cause of the fire is still under investigation, firefighters reported that it started near a tower on PG&E’s Caribou-Palermo transmission line. PG&E had previously stated that that line lost power right before the fire and was found to be damaged.
March 28, 2019: Gov. Gavin Newsom Criticizes Planned PG&E Board Changes
As PG&E worked to remake its board of directors in the wake of its bankruptcy and liability in a series of deadly wildfires, Gov. Gavin Newsom urged the utility to change course, according to the Associated Press.
Newsom said that the utility planned to fill the board with hedge fund financiers and people who have little experience with utility operations and safety. He encouraged PG&E to appoint board members with backgrounds as regulators and safety and clean energy experts.
PG&E will elect its new board at its annual shareholder meeting on May 21.
April 25, 2019: Regulators Approve PG&E Rate Hike
The California Public Utilities Commission gave PG&E permission to increase its rates by $373 million to pay for costs of a series of California wildfires blamed on the utility, the Associated Press reports.
The commission unanimously approved the utility’s request, allowing it to raise the average bill by $3.50 a month over 12 months. This rate increase will not cover the billions of dollars PG&E will owe in connection with 2018’s wildfires.
May 15, 2019: Cal Fire Says PG&E To Blame For Camp Fire
Cal Fire announced their investigation into the cause of the Camp Fire found PG&E was to blame for the start of the blaze.
Lines owned and operated by the utility sparked the fire near Pulga in rural Butte County, according to the Cal Fire announcement. Cal Fire did not release their full report, but forwarded it to the Butte County District Attorney, who is considering criminal charges against the utility.
Cal Fire’s announcement leaves PG&E open to further financial liabilities like the ones the utility has faced since being found to blame in several of the 2017 Northern California fires.
CapRadio will continue to update this page as the PG&E story develops. Check back for updates.
CapRadio's Ben Adler and Ezra David Romero contributed to this report, as did the Associated Press.
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