What's going on?
US energy company Pacific Gas and Electric (PG&E) said on Monday that it would file for bankruptcy later this month. It’s facing at least $30 billion in liabilities for its involvement in starting Californian wildfires in 2017 and 2018…
What does this mean?
PG&E serves 16 million Californians and has 20,000 employees. Now, its CEO has quit and it’s filing for Chapter 11 bankruptcy protection to avoid further wildfire claims and carry on providing gas and electric services, having already been found responsible for at least 17 wildfires in 2017. Investigators are still determining whether PG&E’s faulty equipment sparked the 2018 Camp Fire: the deadliest and most destructive in Californian history. If so, it would face even more significant liability, fines, and damages.
Why should I care?
For markets: Climate change costs.
PG&E’s stock suffered 55% third-degree burns on Monday. But climate change is also to blame for the increase in wildfires. Higher temperatures and faster-melting snow are extending the fire season in the American West, and the total cost of the Camp Fire alone was over $16 billion. Wildfires aren’t the only expensive consequence of extreme weather: last year, the Beast from the East muffled UK consumer spending in a blanket of snow. The abnormally warm spell that followed, meanwhile, hit clothing companies from Superdry to ASOS.
The bigger picture: Rising from the ashes?
Filing for bankruptcy could help PG&E deal with some recurrent worries – like feeling the heat from future wildfires. California previously enacted a law to help PG&E deal with the fallout from the 2017 fires. The Golden State is notoriously hot and dry, and with many of PG&E’s customers living in increasingly parched forests and previously rural areas, conditions are favorable for future blazes. It’s in California’s interests to figure out a way to keep both citizens safe and the lights on.