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PG&E says it might have to quintuple its utility rates

CNBC logo CNBC 1/24/2019 Thomas Franck

California utility company PG&E Corp. said in a court filing Wednesday that it can't afford a federal judge's order to inspect its energy grid and clear trees that could fall into its power lines, work it estimates would cost between $75 billion and $150 billion.

The company told the U.S. District Court in San Francisco that the judge's so-called "vegetation management" plan would force it to dramatically increase the rates it charges customers to employ more than 650,000 full-time employees.

"PG&E would inevitably need to turn to California ratepayers for funding, resulting in a substantial increase — an estimated one-year increase of more than five times current rates in typical utility bills," it said in the filing.

The work was proposed in a Jan. 9 order by U.S. District Judge William Alsup.

"The work that would be required is so labor-intensive and costly that compliance is technically and operationally infeasible," PG&E said in the court filing. "PG&E would be required within less than five months to remove or trim trees and branches that could bend, break or fall into powerlines, poles or electric equipment in high-wind conditions."

a close up of a map© Provided by CNBC LLC The utility calculated that it would have to remove 100 million trees or more to protect the power lines. The company said such a huge project would face "myriad legal obstacles to reconfiguring the California landscape," and would require haggling with with state and federal agencies as well as private property owners.

The company said on Jan. 14 that it plans to file for Chapter 11 bankruptcy protection amid the financial anguish stemming from its part in a wave of historic wildfires in California.

PG&E faces at least $30 billion in potential liability costs stemming from wildfires in 2017 and 2018, many allegedly started by the company's equipment, that have led state officials to doubt the safety of the company's electric distribution system.

Related video: PG&E shares plummet as firm plans to file for bankruptcy

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Investigators have already determined PG&E's equipment liable in at least 17 major wildfires in 2017 . State investigators are still working to determine if the company's equipment was partly responsible for November's Camp Fire, which killed at least 86 people and destroyed about 14,000 homes, making it the state's deadliest fire.

The company's stock fell 1 percent before the opening bell on Thursday. PG&E shares have lost more than 80 percent of their value in the last six months.

Critics, including famed environmental activist Erin Brockovich and activist hedge fund BlueMountain Capital Management (which owns about 11 million shares), have rebuked the company, alleging that the board is using Chapter 11 to "abdicate" its responsibility to shareholders when it isn't clear the company is insolvent.

"It may appear easier for Board members to file for Chapter 11 – shifting the burden of dealing with the myriad issues that will face the Board and placing it squarely on the shoulders of the Bankruptcy Court and the companies' advisors," BlueMountain wrote to PG&E's board on Jan. 17.

"The Company has ample liquidity to operate its business; the amount of liabilities remains uncertain and contestable."PG&E is California's largest investor-owned utility with 16 million customers across a 70,000-square-mile service area in Northern and Central California.

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