Utility bankruptcy could cost fire victims

SAN FRANCISCO -- Faced with potentially ruinous lawsuits over California's recent wildfires, Pacific Gas & Electric Corp. filed for bankruptcy protection Tuesday in a move maybe leading to higher bills for customers of the nation's biggest utility and reduce the size of any payouts to fire victims.

The Chapter 11 filing allows PG&E to continue operating while it puts its books in order. But it was seen as a glimpse of the financial toll ahead for the industry because of climate change, which scientists say is leading to fiercer, more destructive blazes and longer fire seasons.

The bankruptcy could also jeopardize California's ambitious program to switch entirely to renewable energy sources within a few decades.

PG&E, which supplies natural gas and electricity to 16 million people in Northern and central California, cited hundreds of lawsuits over fires in 2017 and 2018 and tens of billions of dollars in potential liability when it announced earlier this month it planned to file for bankruptcy.

The blazes include the nation's deadliest wildfire in a century -- the one in November killing at least 86 people and destroying 15,000 homes in and around the Northern California town of Paradise. The cause is still under investigation, but suspicion fell on PG&E after it reported power line problems nearby around the time the fire broke out.

Last week, however, state investigators determined the company's equipment was not to blame for a 2017 fire killing 22 people and destroying more than 5,600 buildings in Northern California wine country. That finding spared PG&E from billions in liability.

PG&E said the bankruptcy will not affect electric or gas service and will allow for an "orderly, fair and expeditious resolution" of wildfire claims.

"Throughout this process, we are fully committed to enhancing our wildfire safety efforts, as well as helping restoration and rebuilding efforts across the communities impacted by the devastating Northern California wildfires," interim CEO John R. Simon said in a statement.

The wildfire lawsuits accuse PG&E of inadequate maintenance, including not adequately trimming trees and clearing brush around electrical lines and failing to shut off power when the fire risk is high.

The bankruptcy filing immediately puts the lawsuits on hold and consolidates them in bankruptcy court, where legal experts say victims will probably receive less money.

"They're going to have to take some sort of haircut on their claims," said Jared Ellias, a bankruptcy attorney who teaches at the University of California, Hastings College of the Law. "We don't know yet what that will be."

In a bankruptcy proceeding, the victims will have little chance of getting punitive damages, and their claims will almost certainly be heard by a judge, not a jury. They will also have to stand in line behind PG&E's secured creditors, such as banks, when the judge decides who gets paid and how much.

Gov. Gavin Newsom said in a statement his administration will work to ensure "Californians have access to safe, reliable and affordable service, that victims and employees are treated fairly, and that California continues to make forward progress on our climate change goals."

Amanda Riddle, an attorney representing victims of a deadly 2015 wildfire, said that even before the bankruptcy filing, PG&E had stopped making settlement payments to her clients. They will now have to fight for their money in bankruptcy court, she said.

"It shows PG&E does not actually have the best interests of the wildfire victims in mind," she said.