PG&E, the nation's biggest utility, announced on Tuesday it has filed for bankruptcy reorganization in a bid to relieve itself of billions of dollars in liabilites stemming from devastating wildfires in both 2017 and 2018.
While the power giant filed a motion seeking court approval for a $5.5 billion debtor-in-possession financing, it said it still intends to pay suppliers in full under normal terms for goods and services provided on or after the date of the Chapter 11 filing.
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What's more, in statement to FOX Business earlier this month, PG&E said despite filing for bankruptcy, it remains committed to providing "safe natural gas and electric service" to its 10 million customers.
“The company does not expect any impact to electric or natural gas service for its customers as a result of the Chapter 11 process. PG&E remains committed to assisting the communities affected by wildfires in Northern California, and its restoration and rebuilding efforts will continue,” PG&E said in a statement released on Jan. 14.
Additionally, the embattled utility giant said it expects that its employees will continue to receive their pay and health care benefits as usual.
PG&E also said it will continue to make investments in the safety of its system as it works with regulators, policymakers and other key stakeholders to consider a “range of alternatives to provide for the safe delivery of natural gas and electric service for the long-term in an environment that continues to be challenged by climate change.”
Shares for the company popped on the news early Tuesday.
The company's chief executive John Simon, who was appointed on the interim basis after its CEO Geisha Williams left earlier this month, said the board believes a court-supervised process under Chapter 11 will “best enable PG&E to resolve its potential liabilities in an orderly, fair and expeditious fashion.”
“We expect this process also will enable PG&E to access the capital and resources we need to continue providing our customers with safe service and investing in our systems and infrastructure,” Simon added.
The power company also said it’s searching for a new board of directors at both its holding company and its utility unit.
On whether filing for Chapter 11 was the best move for PG&E, Sarah Foss, a legal analyst at Debtwire, told FOX Business that it was “really the only option the company had considering the massive liabilities it was facing” with not only last year’s deadly wildfires, but also 2017’s damage.
“Once the company files for bankruptcy, the litigation that the company is currently facing in connection with the wildfires will be stayed. Customers should continue to receive their natural gas and electric service uninterrupted during PG&E’s bankruptcy. However, it is likely that PG&E will be seeking a rate increase for customers as part of a Chapter 11 plan of reorganization,” Foss said.
But Tim Hynes, head of North American Research at Debtwire, previously said he thought PG&E may just be “using the threat of bankruptcy in order to get better liability protections from the California state legislature.”
As reported by FOX Business in November, a new California bill is reportedly in the works to help provide relief to PG&E.
But the fate of the embattled company isn’t just limited to bankruptcy. It could also face a shakeup, breakup, bailout or even a takeover over the next few months.
S&P Global stripped the company of its investment-grade credit rating amid the massive pending claims and lawsuits from the deadly wildfires this year and last year.
This story was originally published on Jan. 8, 2019.