PG&E could sell off gas business to cover lawsuit claims, but would anyone want it?

PG&E’s future continues to be up in the air. The company was already facing responsibility for 17 wildfires which occurred in 2017 before the Camp Fire wiped out the city of Paradise and became the deadliest fire in state history. Now PG&E is facing lawsuits that could eventually total $15 billion, far more than the company is worth. The question is what’s next.

Last Friday, NPR reported that the company’s executives were considering a plan called “Project Falcon.” The idea is to sell off the gas business to help pay the liabilities and allow the remaining company to avoid bankruptcy and focus on the safety of its electric business.

All net proceeds from the sale of PG&E’s gas division would be used to set up a fund to pay billions of dollars in potential claims from wildfires, the sources said. They requested anonymity because they were not authorized to speak publicly.

The company also is exploring selling key real estate assets, including its San Francisco headquarters, and moving its operations elsewhere in the Bay Area, the sources say.

The idea of moving the company’s headquarters out of San Francisco could serve a dual purpose. First it would allow the company to a cheaper site and second, it would allow the company to avoid the recently passed homeless tax. Prop C was passed last year but opponents have taken it to court arguing it would need a higher threshold to be enacted. For now the money is being collected but not spent. From the San Francisco Business Times:

Moving its headquarters out of San Francisco could resolve another issue. It would allow the utility giant, with revenue of more than $17 billion in 2017, to avoid the city’s new tax on big businesses to pay for homeless services.

Getting back to Project Falcon, NPR reports that there’s some question whether anyone would want to buy PG&E’s gas business which has also been plagued with safety problems:

PG&E was convicted of felony safety violations in a gas line explosion in 2010 in a San Francisco suburb that killed eight people and destroyed a neighborhood. The federal judge overseeing the utility’s five-year criminal probation in that case had asked Becerra’s opinion on whether PG&E’s possible role in the recent wildfires constitutes a probation violation…

The inside sources say the company is hoping to get between $10.7 billion and $15.5 billion for its gas assets. Given the company’s safety, liability and political challenges — including new allegations last month that the company violated safety regulations — analysts say it’s not at all clear they would get that on the open market.

In mid-December, state regulators found that PG&E had systematically falsified safety documents and broke safety rules related to its natural gas operations over a five-year period.

Today, California’s new governor Gavin Newsom said he was focused on the problem. Newsom seems to be hoping to keep the company out of bankruptcy but doing so could mean allowing the company to pay off its liabilities from the Camp Fire by raising prices on customers. The state has already passed a law allowing the company to do that for liability from 2017 fires but, so far, that hasn’t been extended to the far more deadly Camp Fire.

Here’s a 2010 report on the deadly San Bruno fire. Below that is an NTSB video report on their nearly year-long investigation. I’ve cued this up to the portion where they explain what caused the San Bruno gas line explosion. There were multiple failures by PG&E.