HOW TO THINK ABOUT IT

They asked for it. California has resisted bailing out PG&E, as public anger mounts over what’s widely seen as a broken safety culture within the company. Now legislators must determine the best way to ensure safety, reliability and affordability, whether utilities are government- or investor-owned. Although companies have been bailed out in the past — like the financial institutions and automobile industry, which received federal-level relief in the wake of the 2008 financial crisis — politicians are reluctant to speak up for a discredited PG&E, already facing penalties for falsifying safety documents for natural gas pipelines.

Big enough to fail. California lawmakers have signaled they would wait until the utility giant is in bankruptcy court — a lawsuit to which the state would be a party — before discussing any taxpayer-funded relief for some $30 billion in liability. Previous legislation allowed PG&E to pass the costs of wildfires in 2017 to its customers with higher rates after the company was found liable for 17 of 21 major Northern California fires that year. But legislation permitting something similar for 2018’s wildfire season has yet to be introduced. Meanwhile, PG&E’s former CEO Geisha Williams is expected to walk away with a multimillion-dollar severance, aside from millions in pension benefits.

An unstable grid. More natural disasters necessarily mean more power trouble for citizens as aging utility infrastructure faces flooding, winds and fires at the same time as increased demand. Severe weather has been found to be the leading cause of power outages in the U.S. And utility companies can’t always weather the storm. Way back in 2005, Hurricane Katrina forced Entergy New Orleans into bankruptcy. More recently, the Puerto Rico Electric Power Authority left residents of the island without power for half a year after Hurricane Maria struck in 2017. That bankrupt utility is now on its way to restructuring and likely privatizing. Rate hikes and unreliable service could see more people turning to solutions like private solar, decentralized microgrids or renewable energy solutions like wind farms, which are less vulnerable to extreme weather.

Pay up. A number of retailers have recently filed Chapter 11 bankruptcies, including Toys R Us and Sears, putting thousands of their employees’ jobs at risk. Sears’ prior store closures meant workers were already being laid off, but they stopped receiving severance pay when bankruptcy hit. A separate claim must be filed by those who are owed money, throwing former employees in with other creditors as claims get prioritized. Meanwhile, former workers at Toys R Us, which declared bankruptcy last year, wrangled a $20 million fund out of private equity firms that bought the company — a fraction of what they said they were owed — after months of protests.

WHAT TO READ

Who Could Get Hurt by PG&E’s Fire-Driven Bankruptcy, by David R. Baker on Bloomberg
“Filing for bankruptcy puts those lawsuits — total estimated liability: $30 billion — on hold and wraps them into the bankruptcy proceedings. That’s part of bankruptcy’s appeal to PG&E.”

Why the Government Shutdown Is Increasing Fire Risks in California, by Natasha Bach in Fortune
“Thousands of U.S. Forest Service, National Park Service and Bureau of Land Management employees remain furloughed, preventing these agencies from doing critical work to prepare for the next fire season or reduce existing risks.”

WHAT TO WATCH