California utility PG&E is exploring filing some or all of its business for bankruptcy protection as it faces billions of dollars in liabilities related to fatal wildfires in 2018 and 2017, according to several sources.
The contingency plan is due to significant financial liabilities associated with 2018 wildfire damages.
A bankruptcy filing is not certain and depends on whether financial support can be provided through legislation, allowing a percentage of the costs to be carried by utility customers.
PG&E is avoiding negotiating so-called debtor-in-possession financing that companies typically line up before a bankruptcy filing to help keep operating while under court protection, according to Reuters sources.
Recently PG&E shares dropped 30% in light of the news.
“PG&E’s board and management are working diligently to assess the company’s potential liabilities as a result of the wildfires and the options for addressing those liabilities. We recognise the need to balance the interests of many stakeholders while maintaining safe, reliable and affordable services for our customers, which is always our top priority,” the company said in a statement.
The utility is also considering selling a gas unit, using proceeds from the sale to address death and injury claims arising from the recent wildfires.
Several insurance companies have filed lawsuits blaming PG&E for deadly California wildfires and even though investigators have not pinpointed a cause for the fire, irregularity in transmission-lines have been blamed.
Under California law, PG&E is held entirely liable if lawyers can prove the fire is linked to the utility’s power lines or other equipment, although PG&E executives and lobbyists are attempting to change the legal standard and reduce utility’s liability.
“We are aware of lawsuits regarding the Camp Fire,” Lynsey Paulo, a PG&E spokeswoman, said in a statement. “Our focus continues to be on assessing infrastructure to further enhance safety and helping our customers recover and rebuild.”