After PG&E filed for bankruptcy as a result of the Californian wildfires, the company’s future was called into question, a former COO at Edison Energy LLC suggested that a “key part of that strategy” could be to use “asset sales… [to] break up PG&E.” The specialist stated that while the issue is complicated by the fact that both the gas and electric parts of PG&E are run under one holding company, Sempra Energy, Portland General Electric, or Berkshire Hathaway could all be candidates as “viable bidder[s] for the gas assets.” However, the former COO continued by saying that “just shifting the exposure of inverse condemnation and the risks of state ownership of PG&E’s even T&D [transmission and distribution] system” is not a viable option, and this raises further questions on why companies would purchase PG&E assets if they were “subject to this notion of strict liability.” Third Bridge Forum’s moderators asked two specialists about the viability of PG&E becoming a state-owned utility, but neither thought this was possible, with one of them explaining that “they don’t have the expertise to operate it,” and would be best to continue “supplying power through someone else’s system.”
PG&E’s bankruptcy filing could not only impact consumers in California, but it could also have lasting effects on the pricing strategy for renewable energy sources. While the conglomerate is “well ahead of their RPS [renewable portfolio standard] obligations,” the bankruptcy filing of the company could cause the price of renewable resources to plummet even further than it has in the past 10 to 15 years because, “since they got financing based on a certain price, PG&E can reject that contract and renegotiate a much lower price.” An Attorney at Andrews, Lagasse, Branch and Bell LLP discussed the impact the Californian wildfires have had on renewable projects, saying that “banks or lending institutions that developers of renewable projects go to for funding are not willing to fund any project that’s going to sell to a California utility, whether it’s PG&E, Edison [International] or San Diego Gas and Electric.” This could cause issues with utility companies meeting renewable energy targets, which would be a dilemma for California considering a Former VP at Pacific Gas and Electric (PG&E) described the state as being “hell-bent on having 50% renewable energy by 2030.” The Attorney continued by saying that utilities will “have business issues and issues that affect all of these important goals that California sees with regard to climate change and becoming carbon neutral” and this is due to the delay resulting from “potential wildfire liability” that has transpired as a result of “negligence and inverse condemnation issues.”
For more coverage on the political climate surrounding utilities in California from Q4 2018, download California Wildfires – Impact on PG&E (21st November 2018).
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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