California’s PG&E risks outages amidst bankruptcy
Monday, October 14, 2019
Recently, the legally embattled Pacific Gas and Electric Company (PG&E) agreed to pay billions to compensate for faulty equipment-induced wildfire damages throughout the state of California.
Last week, the company is instituted power outages as a proactive way to prevent wildfires. Conveniently, any front-end money saved in the outages can go towards back-end damage expenses, which keep accruing as the company collaborates with meteorologists and the National Weather Service to suspend services in the name of wildfire prevention.
What has unfolded is a fire prevention debacle, leaving us asking if this kind of spread-out corporate activity can really be tracked. This is a question California officials need to ask after a weekend of wildfires that saw three deaths in Southern California. Fires continue burning there, and power in Northern California was reportedly restored by Sunday.
In that northern half of the state, a red flag fire warning in the Santa Cruz Mountains sparked concern that sparks could fly, which spawned the poorly executed blackouts that harken back to the suspicious rolling blackouts in the San Francisco Bay Area in June 2000.
The 2019 blackout area included 738,000 accounts that impacted 2 million people in 34 counties overall, including the North Bay. They began there last Tuesday, and in East and South Bay counties one day later.
Businesses, schools, and even police weighed in about the inconveniences of maps, faulty and downed website access, and poorly staffed natural disaster service centers that hindered communities.
When considering the scope and range of the blackout areas, which are proving difficult to track, it appears as if it’s the state and companies vs. PG&E, as one entity loses money and the other gains it. These tensions are being addressed in court, as the company faces a massive financial restructuring that includes mandated wildfire prevention activities.
While aspects of the planned outage went smoothly, some communities were hit by unannounced schedule changes.
The San Francisco Chronicle reports: “The first wave of shut-offs came swiftly and on schedule, but PG&E delayed the second phase by a day as weather conditions shifted. As a result, tensions flared as communities scrambled to prepare. Public officials announced school closures, businesses transported perishables and families stocked freezers with ice, only to find the shut-offs were pushed back several times.”
While Gov. Gavin Newsom stopped short of criticizing the company, social media commentators and politicians were quick to criticize PG&E for its handling of the planned outages, which it claims were necessary to avoid high wind’s potentially catastrophic fire effects.
What’s strange is how vast the scope of the outage territory was and how long the blackouts lasted. This suggests outages could have been done not for inspection and prevention purposes, but to help pay for some of the billions in damages owed by the bankrupt company. Future billing retroactive to the blackout period will determine how this speculation plays out.
A court-mandated mitigation plan, which is part of the company’s ongoing legal restructuring, is to blame for the blackouts.
The blackout wildfire prevention strategy was first introduced by San Diego Gas and Electric in the late 2000s, which was met with staunch resistance, leaving the company reconsidering its targeted territory size. This an issue PG&E now faces from Northern critics, like local police and emergency services authorities, who had to bear the labor and cost brunt as the company faltered to provide adequate safety measures for local communities.
If people did not have a strong opinion about PG&E’s restructuring previously, they may now. As the blackouts were planned and occurring, a San Francisco court was deciding to take away the company’s financial sovereignty over its own bankruptcy recovery.
According to The New York Times, a group of creditors’ rival reorganization plan, backed by wildfire victims, their lawyers, and hedge fund groups, will use $34 billion in new debt financing and $14 billion in new equity capital to “invest $29.2 billion, and offer up to $14.5 billion to individual fire victims.”
This also retains current shareholders’ stakes in the company as it emerges from bankruptcy, a dual track plan that federal bankruptcy court judge Dennis Montali ruled on as a way to make all parties satisfied in an ongoing dispute about PG&E’s future.
It was a busy week for the company, which received the news that it no longer controls its own bankruptcy recovery plan while facing immense criticism from power outage-impacted customers and incensed local officials, who will surely hold PG&E accountable for incurred monetary losses.
In California, frustrated residents face the unfortunate choices of inconvenient late-hour evacuations or inconvenient power outages, with any notion of convenient living proceeding in short supply.
As evacuations are lifted in still burning Southern counties, recent wildfire developments leave us cynically considering a name change from the Golden State to the Charred, Burning, or Smoky State. Or, as PG&E and state officials, who scurry to avoid financial ruin here, offer: the Bankrupt Blackout State.
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