Pacific Gas and Electric finds itself in a Kafkaesque legal situation. It faces an upcoming Chapter 11 bankruptcy filing while, at the same time, a federal judge overseeing its probation in a criminal case has suggested he might order the San Francisco-based utility to take steps that could render the bankruptcy protection moot. It could be a truly existential situation for the state’s largest investor-owned utility.
“This is like a scary law school exam,” veteran Virginia attorney David Masselli told The Quad Report. PG&E announced Jan. 14 that it would file for federal bankruptcy protection Jan. 29 as it faces $10-$30 billion in claims from last fall’s Camp Fire. On Jan. 17, U.S. District Court Judge William Alsup, supervising PG&E’s criminal probation in the 2010 San Bruno gas pipeline explosion, said he might proposed new probation conditions on the company, related to the 2017 Sonoma and 2018 northern California fires.
Alsup said he may require PG&E to reinspect its entire electric grid and trim and remove trees that could cause uninsulated lines to spark, and to deliver power only through those parts of the grid it has determined to be safe, before next year’s fire season. He ordered a Jan. 30 hearing on “this tentative finding.”
PG&E responded that the Alsup proposal gives “PG&E only two options: either remove an extraordinary number of trees across every segment of its electric grid within six months, or instead de-energize transmission and distribution lines, shutting off power across Northern California and potentially beyond.” The company estimated that it would have to “remove 100 million trees and that “doing so before June 21, 2019, would require the labor of more than 650,000 full-time employees.” All told, the probation conditions could cost the company “between $75 billion to $100 billion.”
How would the Chapter 11 filing impact Alsup’s probation oversight? “Normally”, said Masselli, “bankruptcy gives a debtor relief, at least temporarily,” either through an automatic stay, or through ‘discharge’ under a reorganization plan, which is what occurred when PG&E entered Chapter 11 protection in 2001. “Neither works in a criminal case,” Masselli said.
“There is no automatic stay of the pending criminal action,” said Masselli. “This is largely because the probation is conditioned on no future violations of law. Once you have been convicted of a crime with all of your Fifth Amendment rights, many of them disappear when claims are made that you have violated a condition of probation.” As for discharge, “A series of cases, beginning with Kelly v. Robinson 479 US 36 (1986) say that you can’t discharge a probation debt. What makes things interesting here is that what Judge Alsup is proposing to do does not seem to be a fine, penalty, or forfeiture or restitution.”
Masselli added that “there doesn’t seem to be much that PG&E can do to stop Alsup. If he really does impose such costs on PG&E, and any such order survives appeal, this would probably result in either liquidation (I assume this is a pretty scary proposition) or in all other PG&E creditors, including victims of the recent fires, having a much smaller pie to cut up. Perhaps there would be a public benefit to those who don’t get burned in the future, but that may be scant satisfaction for those who have already suffered.”
In a related matter, Bloomberg reports that Florida-based NextEra Energy has asked the Federal Energy Regulatory Commission to protect its contracts to sell power to PG&E before PG&E files for Chapter 11. NextEra is the nation’s largest wind and solar power generator. The company asked FERC to rule by tomorrow on its filing, arguing that PG&E cannot “abrogate, amend or reject” the terms of its power agreements with the California utility. PG&E responded that FERC approval of the NextEra proposal would “violate both the Federal Power Act and the Bankruptcy Code and also would contravene the terms of the agreements.”
— Kennedy Maize