Pacific Gas & Electric (PG&E) filed for Chapter 11 bankruptcy last year as a result of the California wildfires. The bankruptcy filing is the company’s attempt to restructure $30 billion in damages payments from the wildfires. State officials have blamed the massive wildfires on faulty PG&E power lines. This Chapter 11 bankruptcy is the biggest bankruptcy of a utility company in U.S. history. 

PG&E Filed for Chapter 11 Bankruptcy to Restructure Debt

PG&E has already settled with local authorities and insurers and has filed for Chapter 11 bankruptcy. Chapter 11 bankruptcy is a type of bankruptcy in which a business reorganizes its debts and assets. Corporations typically file for Chapter 11 bankruptcy when they need time to restructure their debts. After a Chapter 11 Bankruptcy has been finalized, the debtor enjoys a fresh start. However, the company must still meet his or her obligations under the reorganization plan. 

During a Chapter 11 bankruptcy proceeding, a court assists a business to restructure its debts while the business remains open and operating. PG&E’s restructuring agreement states that PG&E will put itself up for sale if the bankruptcy court does not approve of its restructuring plan by June 30, or if PG&E fails to finalize its Chapter 11 bankruptcy by the end of 2020.

As part of the bankruptcy agreement, PG&E has agreed to freeze all dividends for a period of three years. Doing so will contribute to approximately $4 billion in equity. The company can use this equity to pay down debt. Additionally, PG&E will use shareholder funds to offset customer bill charges. Doing so will raise $7.5 billion and speed up the damage payments to the victims of the California wildfires. 

PG&E’s Debts Stem From California’s Devastating Wildfires

Filing for Chapter 11 bankruptcy became necessary after PG&G became linked to several deadly California wildfires that occurred between 2015 to 2018. PG&E’s faulty power lines were at least partially responsible for the 2018 Camp Fire which was the most destructive and deadly fire in California’s history. 

After lengthy negotiations, PG&E and California’s Governor Gavin Newsom along with other local authorities came to an agreement regarding the damages amounts. PG&E agreed to over $30 billion in damages payments for the following devastating fires:

  • The Camp Fire of 2018 in which 85 people died in and around Paradise, California. Fire investigators blamed faulty PG&E transmission lines.
  • The Northern California wildfires of 2017 that resulted in over 30 deaths.
  • The Ghost Ship Fire of 2016 that resulted in 36 deaths.
  • The Butte Fire that occurred in 2015 and burned down hundreds of structures and caused two deaths.

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