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California's largest utility company - that would be Pacific Gas and Electric Corporation - announced plans today to file for Chapter 11 bankruptcy protection. The company faces billions in liabilities and costs related to last year's massive wildfires. A bankruptcy filing could have big implications for PG&E shareholders, employees and more than 9 million customers, as NPR's Eric Westervelt reports.
ERIC WESTERVELT, BYLINE: PG&E's problems have mushroomed since November's fire destroyed the Northern California town of Paradise and killed 86 people in the state's most destructive wildfire. The company faces a flood of lawsuits from fire victims alleging that faulty maintenance of its aging electric system is to blame. Its insurance companies are suing the utility. PG&E's stock has been battered, and ratings agencies have slashed it to junk status. By the company's own estimates, potential liabilities from combined 2017 and 2018 wildfires could reach $30 billion. That's far more than its current assets. And that doesn't account for potential future wildfire liabilities in a state that has seen historic fire damage in back-to-back years.
PG&E board chairman Richard Kelly said in a statement that Chapter 11 represents the only viable option to address the company's responsibilities to its stakeholders. The state legislature could take action in coming weeks to protect the company from 2018 fire liabilities, but given the raw anger at the utility, that may be politically impossible.
JERRY HILL: I certainly don't want to see another bailout for the fires of 2018.
WESTERVELT: State Senator Jerry Hill, a Democrat, heads a key utility safety committee. He says he'll work to see that any reorganization protects ratepayers and fire victims first. Hill says if today's announcement is a company tactic to pressure the legislature for a bailout, it won't work.
HILL: PG&E shareholders and bondholders - they invested, and sometimes we make bad investments. And I think that we should not be helping or assisting them nor giving golden parachutes to CEOs as well.
WESTERVELT: This would be the company's second bankruptcy in two decades. The utility's 2001 reorganization led to a negotiated rate increase. Back then, the company painted itself as a victim of deregulation. But since then, the company has been convicted of felonies in a deadly gas line explosion and now faces those potentially crippling wildfire liabilities and safety lawsuits. So Mindy Spatt with the group The Utility Reform Network says this time is very different. The company's problems are from what she calls PG&E's practice of putting profits ahead of safety.
MINDY SPATT: The debt that PG&E is talking about is debt that arises directly from its own negligence and liability. It is a longstanding principle of utility law that customers don't pay for that kind of thing.
WESTERVELT: Sunday night, PG&E announced that its CEO, Geisha Williams, was stepping down after barely two years on the job. The company says safety improvement is a top priority, but many customers and lawmakers are skeptical. Eric Westervelt, NPR News, San Francisco.
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