PG&E;'s Bankruptcy Could Hurt California’s Aggressive Climate Goals

PG&E’s bankruptcy could have major spillover effects on the solar, wind, and electric car industries.

Zahra Hirji

BuzzFeed News Reporter

Justin Sullivan / Getty Images

California’s devastating two years of massive wildfire seasons was a wakeup call to some residents that climate change was already impacting their lives. Yet the financial fallout from the fires could make it more difficult for the state to curb greenhouse gas emissions.

Pacific Gas & Electric, the state’s largest utility, which provides service to 16 million customers, says it plans to file for bankruptcy due to its financial exposure from the fires. Under California law, utilities are responsible for wildfires caused by their equipment, even if they are not found to be negligent. The company on Monday said Chapter 11 bankruptcy was its “only viable option” in response to an estimated $30 billion or more in liabilities stemming from damaging wildfires, which have been made more likely by climate change.

“This is climate change,” David Weiskopf, the climate policy director at the nonprofit NextGen America, told BuzzFeed News. “It’s what we’ve all been warning each other about for a long time. There will be impacts and they will be big.”

PG&E’s bankruptcy could mean bigger bills for its millions of customers and delays to fire victim lawsuits. It could also mean trouble for the utility’s many renewable energy contracts and other programs meant to better prepare residents for a warming world, climate and energy experts say, from electric vehicles to solar to energy efficiency. And if those programs are cut or scaled back, or become more expensive, it could hurt California’s ability to meet its bold climate targets as it's trying to be a leader on aggressive climate action for the rest of the country, and the world.

“In the short term, it’s not good news,” said Ethan Elkind, director of the climate program at University of California Berkeley’s Center for Law, Energy & the Environment.

One of Elkind’s main concerns is what will happen to the utility’s multiyear, $130 million pilot program, announced last year, to install 7,500 chargers for electric cars.

A big barrier to people buying an electric vehicle is a lack of charging stations, Elkind said, so “not having that investment from a utility removes a major amount of funding the state was counting on to encourage people to buy electric vehicles.” The state’s largest source of greenhouse gas emissions is oil or gas–based transportation.

In bankruptcy court, according to Joshua Rhodes, a postdoctoral research fellow at the University of Texas at Austin, “all programs, contracts, everything is going to be put on the table to figure out how to restructure to make [PG&E] solvent again.”

Back in 2001, the last time PG&E declared bankruptcy, creditors “tried to seize revenues dedicated to energy efficiency, renewable energy, and low-income energy services,” Ralph Cavanagh, a director at the Natural Resources Defense Council, told BuzzFeed News. This effort failed, however, after the bankruptcy judge sided with the utility, and groups including NRDC argued to keep these programs funded.

Elkind and Rhodes are both closely watching what will happen to PG&E’s dozens of contracts (called power purchase agreements, or PPAs) with wind and solar companies. The main concern is these contracts could be renegotiated, rather than canceled, possibly decreasing the revenue they would generate. “That would be bad news for those companies’ bottom line, as well as their credit,” Elkind said, and this could make it harder for solar and wind providers to expand or do new projects.

And those impacts could be felt beyond California. "Restructuring existing renewable PPAs would not only damage those project owners and investors; it would set a bad precedent for the whole US power sector and potentially make it more difficult to finance renewable energy projects around the country,” Tyler Norris, market lead at Cypress Creek Renewables, told BuzzFeed News.

At least two companies that contract with PG&E have already seen their credit downgraded in the aftermath of last year’s wildfires, according to S&P Global.

Following the company’s bankruptcy announcement, California Gov. Gavin Newsom said in a statement, “the company should continue to honor promises made to energy suppliers and to our community.”

Newson also said his team has been in close contact with the utility so far, and he committed to working with state lawmakers and other stakeholders so that “California can continue to make progress toward our climate goals.”

California is currently the largest producer of solar in the nation, and among the top wind producers. Last year, state lawmakers set a new, aggressive goal to get 50% of California’s electricity from renewable sources like wind and solar by 2025, and to rely 100% on carbon-free sources for electricity by 2045.

When asked about what a bankruptcy declaration would mean for PG&E’s electric vehicle and other climate-related programs, or the state’s climate goals, company spokesperson Matt Nauman said in an email: “this is a long process that we’re just announcing” and “I can’t speculate on what changes, if any, could result.”

Adrienne Alvord, Western states director for the Union of Concerned Scientists, agreed it’s too early to know if and how a looming bankruptcy would impact California’s climate progress. The state’s climate laws “will not change because one utility is having a financial problem,” said Alvord.

California's high fire risk remains as long as the planet keeps warming and people continue to live in fire-prone areas. Some experts are hopeful a bankruptcy process could ultimately make the state more prepared for climate change in the long run, if it leads to PG&E and others to invest in safer, more resilient infrastructure or spurs changes to rules regarding wildfire liability or fireproofing homes.

CORRECTION

David Weiskopf is the climate policy director for NextGen America. An earlier version of this article, using information provided by the NextGen America site, misstated Weiskopf’s title.