Pacific Gas & Electric has told regulators and investors it will file for Chapter 11 bankruptcy by the end of this month.
The financial and insurance obligations of dealing with back-to-back years of devastating and deadly wildfires-which some believe were caused by PG&E equipment—has overwhelmed the San Francisco-based utility which has 15 million customers depending on it for their home energy needs. The specter of its impending bankruptcy seems unparalleled, but the truth one doesn’t have to travel far to find a such a parallel in the annals of power utility bankruptcies.
PG&E did it in 2001 in the wake of the California electricity crisis.
The combination of drought and deregulated markets plunged California utilities into a horror of soaring wholesale energy costs. Wholesale prices rose ten-fold to as much as $330 per MWh.
Hydropower was no longer so bountiful due to the lack of rainfall, while PG&E was forced to buy spot market power out of state, subjecting it to huge price hikes. The cost of unreimbursed energy costs totaled close to $300 million per month on the utility’s ledger, according to reports.
By April 2001, PG&E filed for Chapter 11 bankruptcy protection and reorganization, citing $9 billion in debt and growing. For those wondering how the impending new case will proceed, the lessons of nearly 18 years earlier offer some insights.
PG&E finally emerged from bankruptcy in April 2004, after three years and $10.2 billion paid to creditors. Some estimates say bankruptcy proceedings cost PG&E and the state of Californa at least $40 billion.
The other large California-based utility, Southern California Edison, did not seek bankruptcy protection despite the spot market electricity crisis. In fact, SCE seemed to criticize the PG&E move indirectly.
“We at Southern California Edison continue to believe that working out a comprehensive solution to our current crisis is a preferable course to take,” said then SCE CEO John Bryson in a statement.
No one can predict accurately how this new PG&E bankruptcy will unfold. The California weather—with its damaging meteorological cocktail of high coastal winds, occasional drought and dense, dry vegetation—could make each year a potential perfect storm for grid-wide devastation.
(Rod Walton is content manager for Power Engineering and POWERGEN International. He can be reached at 918-831-9177 and [email protected]).