San Francisco-based PG&E Co. announced via a news release early Monday morning that it is filing for Chapter 11 bankruptcy just one day after its CEO resigned, according to company officials.
The Monday announcement is a 15-day advance notice that the company intends to file for bankruptcy reorganization around Jan. 29, utility officials said. The company does not expect any impact to electric or natural gas customers, and reiterated its commitment to rebuilding communities affected by massive wildfires in 2017 and 2018.
"Chapter 11 will best enable PG&E to resolve its potential liabilities in an orderly, fair and expeditious fashion," PG&E interim CEO John Simon said.
On Sunday, the company's CEO Geisha Williams, the chief executive officer of PG&E since March 2017, resigned, and Simon, who was the corporation's executive vice president and general counsel, was named as her interim replacement.
Cal Fire determined in June 2018 that some of the devastating wildfires that struck Northern California in 2017 were caused by PG&E equipment. Cal Fire announced that the utility's "electric power and distribution lines, conductors and the failure of power poles," caused at least a dozen wildfires in six Northern California counties.
The Chapter 11 procedure enables a company to freeze its debts and continue operating while it develops a financial reorganization plan. The plan must be approved by a federal bankruptcy judge.
"Our goal will be to work collaboratively to fairly balance the interests of our many constituents -- including wildfire victims, customers, employees, creditors, shareholders, the financial community and business partners -- while creating a sustainable foundation for the delivery of safe service to our customers in the years ahead," said Richard Kelly, chair of the PG&E Board of Directors.
The bankruptcy announcement and Williams' departure comes as PG&E is facing a financial crisis. Its market value has plunged since November's Camp Fire, which devastated the town of Paradise and surrounding areas in Butte County.
Damage from that blaze, the state's deadliest ever, and from 2017's Tubbs Fire that caused major damage in Santa Rosa and other parts of Sonoma, Napa and Lake counties, could lead to the company being liable for up to $30 billion.
Gov. Gavin Newsom and other elected officials vowed on Monday to work to protect the public interest during PG&E's imminent Chapter 11 bankruptcy proceedings.
"Everyone's immediate focus is, rightfully, on ensuring Californians have continuous, reliable and safe electric and gas service," Newsom said in a statement.
Newsom said that in the coming months, he will work with the Legislature and all affected groups "on a solution that ensures consumers have access to safe, affordable and reliable service, fire victims are treated fairly, and California can continue to make progress toward our climate goals."
In a separate statement filed with the U.S. Securities and Exchange Commission, the utility said its liability from the fires could be more than $30 billion, not including possible punitive damages or fines.
The statement said PG&E Co. and its parent holding company, PG&E Corp., have $1.4 billion in cash on hand, $1.4 billion in wildfire liability insurance for the current year and $840 million in insurance for the previous year. Simon said the utility expects to obtain an additional $5.5 billion in bank loans by the time it files its bankruptcy petition.
State regulators have called for management changes within PG&E, and the utility may end up getting a bailout package of some kind.
PG&E has started the search for a permanent CEO, but Richard C. Kelly, board chairman of PG&E, on Sunday said Simon is the man for the moment.
"We believe John is the right interim leader for the company while we work to identify a new CEO," Kelly said in a statement. "Our search is focused on extensive operational and safety expertise, and the Board is committed to further change at PG&E."
Simon has served as PG&E's executive vice president and general counsel since 2017, and has been with the company since 2007, serving in several management roles.
Williams had also been with PG&E since 2007, and in March 2017 became the first Latina CEO of a Fortune 500 company. In 2017, she made $991,667 in base pay and $7,600,410 in total compensation. She has resigned from the boards of both PG&E and its holding company.
PG&E, which is owned by shareholders, provides electricity and natural gas to 16 million customers in Northern and Central California.
The utility previously filed for Chapter 11 bankruptcy protection in 2001 in the midst of billions of dollars of debt for spiraling wholesale electricity costs during the state's 2000-01 energy crisis. It emerged from the bankruptcy case in 2004.
PG&E told the SEC that it is aware of 50 lawsuits filed thus far on behalf of 2,000 plaintiffs in connection with the Camp Fire and 700 lawsuits by 3,600 people related to the 2017 wildfires.
A federal judge who is overseeing PG&E's probation in a criminal pipeline safety case has tentatively ordered the utility to inspect its entire electrical service area and remove or trim any trees and repair any transmission equipment that could cause wildfires.
U.S. District Judge William Alsup will hold a Jan. 30 hearing to decide whether to go ahead with the order, which if finalized would become a new condition of probation.
The federal pipeline safety investigation grew out of a fatal explosion in San Bruno in 2010 of a defectively welded PG&E natural gas transmission pipe. Eight people died.
PG&E was convicted of five counts of violating safety laws in connection with several pipelines and one count of obstructing the San Bruno investigation. It was fined $3 million and sentenced to five years of probation with conditions including a requirement not to commit any federal, state or local crimes.