Pacific Gas and Electric promises that its customers’ lights will stay on if it follows through on plans to file for bankruptcy this month. But companies that supply the California utility’s electricity may have more to worry about.
PG&E said Monday that it would use bankruptcy to resolve huge liabilities arising from two years of deadly wildfires. Such a move would allow the company to try to revoke or renegotiate contracts it signed with suppliers when power prices were higher than they are now. That, analysts said, could hurt companies that borrowed based on the higher prices — especially those whose power comes from renewable resources.
“It didn’t take a crystal ball to figure out what PG&E is doing here is what we call a defensive bankruptcy filing,” said G. Marcus Cole, a professor at Stanford Law School. “This is completely voluntarily. What PG&E is doing is circling the wagons.”
Some experts warned that it could be harder than it seemed for PG&E to renegotiate contracts with suppliers. A bankruptcy court could require the utility to pay damages for breach of contract because it still has enough money to operate, Professor Cole of Stanford said.Read More