Wildfire victims have little chance of getting punitive damages or taking their claims to a jury in a bankruptcy proceeding. Instead, they will have to compete with PG&E's creditors, including bondholders, for a payout from the company.
The Chapter 11 process enables a company to freeze its debts and continue functioning while developing a financial reorganization plan.
Even as an official report published Thursday revealed the company's power lines were not the source of the deadly Tubbs Fire in the Sonoma and Napa Valleys in October 2017, PG&E said it "still faces extensive litigation, significant potential liabilities and a deteriorating financial situation". But a PG&E transmission line equipment failure has been linked to the start of the fire, as has the utility's decision not to pre-emptively shut off power to the region's grid as a fire prevention measure, despite high-risk weather conditions in the days before the fire started.
Earlier this month, a state fire agency said PG&E equipment was not to blame for a 2017 wildfire in California's wine country, but the company faces dozens of lawsuits from owners of homes and businesses that burned during that and other 2017 fires. However, PG&E shot back in a court filing that the judge's proposals would endanger lives and could cost as much as $150 billion.
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. "We are not 'going out of business, ' and there will be no disruption in the services you expect from us", interim Chief Executive John Simon said in a letter to customers.
The plans could give PG&E time to seek relief from current and future wildfire claims, perhaps through the state legislature, according to the person.
PG&E is seeking court approval for $5.5 billion in debtor-in-possession financing from J.P. Morgan, Bank of America, Barclays, Citi, and other banks, it said. "We don't know yet what that will be".
PG&E must also contend with anxious suppliers. "The more money that is spent on bankruptcy filings, on courts, on damages, on issues related to this frightful tragedy, the less money there is to invest in renewables, and the less money there is to invest in the infrastructure for those renewables", said Detlef Hallermann, a visiting professor of finance and energy markets at San Diego State University. Investigators say the blaze started when an oak tree fell onto a PG&E power line. He sued PG&E hoping to "close the gap". "And this will take years to sort out".
The governor added that his administration also wants to ensure "that victims and employees are treated fairly, and that California continues to make forward progress on our climate change goals". They will now have to fight for their money in bankruptcy court, she said.
"To my mind, there's a very clear-cut pattern here: that PG&E is starting these fires", Alsup said.
He said he would set a sentencing date later.
Legal experts say the bankruptcy will likely take years to resolve and will result in higher rates for PG&E customers.
The utility also filed for bankruptcy in April 2001 near the height of an electricity debacle marked by rolling blackouts and the manipulation of the energy market.
California already has a number of large, publicly owned utilities including the Sacramento Municipal Utility District and the Los Angeles Department of Water and Power.