PG&E wants to use bankruptcy to pass on its debt to our bills, and avoid helping victims of its fires. We shouldn't let them get away with that.
Assets and Liabilities
On January 29, 2019, PG&E filed for Chapter 11 bankruptcy in order to avoid liability for the 2017–2018 wildfires. PG&E estimated its liability at $40 billion (with $10.5 billion estimated for the Camp Fire alone). At the time of filing, and prior to the determination of fault for the Camp Fire, PG&E had $51 billion in debt and $71.4 billion in assets.
Under the Chapter 11 bankruptcy, PG&E is allowed to continue operations while it reorganizes its debts. Filing bankruptcy has triggered a stay on the wildfire lawsuits against PG&E, meaning wildfire victims have to make claims in bankruptcy court. PG&E is allowed to not fully compensate the victims most affected by PG&E’s negligence — those who lost their homes or family members — and victims may only get a fraction of what they are owed.
PG&E may also be able to drastically raise rates as part of its bankruptcy settlement. In PG&E’s 2001 bankruptcy, the utility had $12 billion in debt to deal with. PG&E was permitted to pass up to $8.2 billion of this debt on to ratepayers in above-market prices through 2012. The average customer paid between $1,300 and $1,700 during this time period.
PG&E Must Pay Its Own Debts
PG&E should not be permitted to pass any of its debt on to customers. District Judge William Alsup, who presides over PG&E’s criminal indictment for the 2010 San Bruno gas explosion, recently stated: “There is one clear pattern here: PG&E is starting these fires.” Because PG&E’s debt is the direct result of its own recklessness, PG&E should pay its debt itself.
We cannot trust PG&E when it tells us that it cannot afford to pay its debts. This utility gives exorbitant payouts to its executives and shareholders. Despite its supposedly insurmountable debts, PG&E paid $9.3 million to its former CEO in 2018. PG&E justified it to the SEC by arguing that her compensation was tied to the company’s financial performance. To PG&E, its top executive’s performance was not dampened by the several dozen deadly wildfires of 2017 and 2018. Upon her resignation in January 2019, she was paid a $2.5 million bonus. In the last five years, $4.5 billion in dividends were paid to shareholders, which are Wall Street investment banks and stock funds.
PG&E’s executives and shareholders should pay for the disasters through reduced compensation and fines. In the past, PG&E has been charged with misdemeanors and felonies for its supposed criminal negligence. However, it was PG&E’s executives who repeatedly neglected safety measures in order to cut costs. The executives and shareholders are responsible for the actions of their company, and they should be the ones to pay the cost of PG&E’s disasters.
No Rate Increases to Pay Debts
PG&E has a long history of misusing ratepayer money. Instead of using ratepayer money for legally mandated safety upgrades, PG&E has repeatedly used that money for other purposes, including diverting it to shareholders.
- Between 1987 and 1994, PG&E diverted $77 million in ratepayer revenues from its tree-trimming program to shareholders. That money was earmarked for compliance with state safety regulations. PG&E was charged with several thousand tree-trimming violations, and Cal Fire investigators found that PG&E was responsible for several large wildfires and thousands of smaller wildfires. At PG&E’s trial for criminal negligence, the prosecutor explained that PG&E had a "chronic and widespread pattern of corporate negligence." PG&E was convicted of 739 counts of criminal negligence for failing to trim trees near its power lines.
- From 1999 to 2010, PG&E collected $430 million more than it was authorized to collect from ratepayers. Instead of using that additional revenue on safety measures, $56 million was diverted to executive compensation in the three years leading up to the 2010 San Bruno explosion. PG&E collected this additional revenue by cutting corners on safety: reducing pipeline replacement projects and maintenance, using less-effective inspection techniques, and laying off workers. An independent audit found that PG&E had a deficient safety culture due to its “focus on financial performance.” PG&E’s safety practices were so bad that an independent auditor found that pipeline safety in the three years leading up to the explosion were "well outside industry practice — even during times of corporate austerity programs". This callous attitude toward safety occurred during a time when PG&E was flush with cash from ratepayers.
- In 2007, PG&E requested a rate increase of $5 million for safety repairs which included the gas pipeline near the epicenter of the 2010 San Bruno explosion. (The pipeline was installed in 1948, and PG&E itself described the pipeline as “vintage.”) PG&E used that same repair project for another $5 million rate increase request in 2009, but the repair was never performed, despite PG&E's 2007 statement that “[t]he risk of a failure at this location [is] unacceptably high.” Instead of fixing the pipeline in 2009, PG&E spent $5 million on bonuses for its six top executives.
Role of the CPUC
The California Public Utilities Commission (CPUC) has continued to permit rate increases which pass the cost of fire prevention onto ratepayers. On April 25, 2019, the CPUC permitted PG&E to raise rates on Californians by a total of $373 million. This will raise ratepayers’ monthly bill by an average of $3.50 a month for the next 12 months, to cover part of the costs of fire prevention and repair tasks taken in 2016 and 2017.
In light of PG&E’s long record of misuse of funds, the CPUC should not permit any further rate increases which pass the cost of the wildfires onto ratepayers. Time after time, PG&E has demonstrated that it cannot be trusted to responsibly spend ratepayer money. According to a recent expert's report, if wildfires continue, rates may “have to double in the first year and continue to grow at an unsustainable rate year after year.” To guarantee safe, affordable energy, we need public ownership of PG&E.