The Struggle to Control PG&E

Pacific Gas & Electric, the California utility that faces billions of dollars in wildfire damages, hopes to use its bankruptcy to reduce its liabilities and emerge a more stable company.

But the company’s management and board of directors might not have all that much control over the outcome.

Before a bankruptcy judge has even had a chance to delve into PG&E’s financial problems, investors, lawmakers, regulators and customers are trying to exert authority over the utility and shape its future.

BlueMountain Capital, a New York investment firm that owns PG&E stock, said on Wednesday that it had recruited 13 people to replace the company’s directors, though it did not name them. The move came days after PG&E’s board said it was also seeking to replace at least half of its current group of 10 members.

Creditors and wildfire victims are forming committees in bankruptcy court to make sure the utility pays them what they are owed. Companies that sell power to PG&E are requesting that federal regulators intervene in the bankruptcy to make sure the utility is not able to renegotiate its contracts with suppliers.

In a separate case, a sharp-tongued federal judge is insisting that PG&E eliminate the risk of its equipment igniting wildfires, a tall order for a company that has been blamed for starting more than a dozen major fires in the last two years.

And the California Public Utilities Commission is studying options that include breaking up PG&E, which serves 16 million people, or turning all or parts of it into a government-owned utility.

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California’s elected leaders will also play a role. They have to decide how much to help PG&E and the state’s other two investor-owned utilities without being accused of bailing them out. In his first State of the State address on Tuesday, Gov. Gavin Newsom criticized PG&E while signaling that his administration was considering broader changes to the state’s energy system.

Legal experts say it could take years to resolve PG&E’s bankruptcy because it involves so many players with disparate interests seeking different outcomes.

“This is the most complicated and difficult decision environment I’ve ever seen for a bankruptcy case,” said Jared A. Ellias, a professor at the University of California’s Hastings College of the Law. “I can’t think of a bankruptcy that had this many powerful parties with unclear bargaining power.”

Investors seem to believe the company, even with all of its problems and liabilities, is still worth a lot of money — nearly $8 billion at Wednesday’s market close. They appear to be betting that California lawmakers will eventually set up a better approach for bearing the costs of more frequent wildfires.

PG&E’s stock surged on Tuesday after Mr. Newsom said he was open to changing the state’s current approach to paying for wildfire damage. “Regulations and insurance practices created decades ago didn’t anticipate these changes,” he said. “We must map out longer-term strategies, not just for the utilities’ future, but for California’s energy future.”

Under a provision of California’s Constitution referred to as inverse condemnation, utilities are liable for wildfires caused by their equipment even when the companies were not negligent in maintaining it. Partly as a result, PG&E has estimated that its wildfire liabilities could total more than $30 billion, much more than it says it can afford.