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Posts Tagged ‘Bankruptcy’

 

Electric utilities have to worry about a lot of stuff that sounds mundane, including that part of system maintenance that goes under the heading of “vegetation management.” In plain English, that means trimming trees so that they don’t interfere with transmission and distribution lines. The problem is very large and very complex because many miles of utility lines run through remote areas in which trees and brush, left to grow over decades (plural), can cause problems for both inspection and access for maintenance. In the eastern U.S., vegetation management is primarily a matter of system reliability: A branch or fallen tree can press one wire against another, causing a short or other disruption in service.

But in the western U.S., vegetation management is also very much a safety concern. A tree branch doesn’t need to touch a line to cause a fire. If it gets too close, electricity can arc from the line to the branch. If the branch is dry, which is often the case in rural California, it can burst into flame. Sparks, embers or burning fragments of the branch may drop to the ground. The ground is usually full of dry leaves and underbrush. Combine that with strong winds and within a few minutes a vast area of dry forest will be turned into a blazing inferno. The proximity of suburbs and exurbs to these forested areas only increases the risk to lives and property.

California generally, and PG&E in particular, has had a very tough history in this regard. going back decades. The Camp Fire, which raged through much of last November in PG&E’s service territory, shows that vegetation management is literally a matter of life and death: 86 persons died in the Camp Fire, which also destroyed 14,000 homes, more than 500 businesses, and 4,300 other structures. Estimates of damages are in the range of $7 billion.

CNN reports that California utility PG&E will file Chapter 11 at the end of this month. It’s believed that a PG&E power line came in contact with nearby trees and sparked the fire. The Camp Fire comes on the heels of a series of wildfires, also blamed on PG&E, in 2017. Those fires caused $10 billion in damages and 44 deaths. In 11 of those fires, state investigators found the company violated codes regarding brush clearance near its power lines or had made related violations.

 

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Soft-diamond Specials waiting to move out

Soft-diamond Specials waiting to move out.

Argument is scheduled for today in bankruptcy court in St. Louis over Peabody Energy’s request for approval of $16,200,000 in executive bonuses for six top executives (In re Peabody Energy Corp., Bankrtcy., E. Dist. Mo.). Peabody, one of a series of coal company insolvencies over the past few years, filed bankruptcy this past April, attributing its difficulties to declining demand overseas, particularly from China, low market prices for coal, and the loss of electricity generation demand to cheaper shale gas. These factors allegedly rendered the company unable to service its $10.1 billion debt load.

The United Mine Workers pension and benefit funds oppose the plan, saying it’s both inappropriate and unfair to pay bonuses to senior executives when employees are losing their jobs.

Peabody Energy counters that the bonuses are essential to turn the world’s largest private-sector coal company around and offer stakeholders the best possible recovery. The company claims that the bonuses are tied to its achievement of certain performance benchmarks through the end of 2017. Reuters reports that the debtor’s unsecured creditors’ committee supports the bonus plan and that the U.S. trustee has not objected.

Though unseen, the ghosts of AIG retention-bonuses-past usually attend these hearings. A debtor proposing such a plan must show that it is based on pay-for-performance and not just an executive retention program.

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