Pacific Gas & Electric, the California utility that faces billions of dollars in wildfire damages, hopes to use its bankruptcy to reduce its liabilities and emerge a more stable company.

But the company’s management and board of directors might not have all that much control over the outcome.

Before a bankruptcy judge has even had a chance to delve into PG&E’s financial problems, investors, lawmakers, regulators and customers are trying to exert authority over the utility and shape its future.

The latest

BlueMountain Capital, a New York investment firm that owns PG&E stock, said on Wednesday that it had recruited 13 people to replace the company’s directors, though it did not name them. The move came days after PG&E’s board said it was also seeking to replace at least half of its current group of 10 members.

Creditors and wildfire victims are forming committees in bankruptcy court to make sure the utility pays them what they are owed. Companies that sell power to PG&E are requesting that federal regulators intervene in the bankruptcy to make sure the utility is not able to renegotiate its contracts with suppliers.

In a separate case, a sharp-tongued federal judge is insisting that PG&E eliminate the risk of its equipment igniting wildfires, a tall order for a company that has been blamed for starting more than a dozen major fires in the last two years.

And the California Public Utilities Commission is studying options that include breaking up PG&E, which serves 16 million people, or turning all or parts of it into a government-owned utility.

California’s elected leaders will also play a role. They have to decide how much to help PG&E and the state’s other two investor-owned utilities without being accused of bailing them out. In his first State of the State address on Tuesday, Gov. Gavin Newsom criticized PG&E while signaling that his administration was considering broader changes to the state’s energy system.

Legal experts say it could take years to resolve PG&E’s bankruptcy because it involves so many players with disparate interests seeking different outcomes.

“This is the most complicated and difficult decision environment I’ve ever seen for a bankruptcy case,” said Jared A. Ellias, a professor at the University of California’s Hastings College of the Law. “I can’t think of a bankruptcy that had this many powerful parties with unclear bargaining power.”

Will California lighten utilities’ wildfire liabilities?

Investors seem to believe the company, even with all of its problems and liabilities, is still worth a lot of money — nearly $8 billion at Wednesday’s market close. They appear to be betting that California lawmakers will eventually set up a better approach for bearing the costs of more frequent wildfires.

PG&E’s stock surged on Tuesday after Mr. Newsom said he was open to changing the state’s current approach to paying for wildfire damage. “Regulations and insurance practices created decades ago didn’t anticipate these changes,” he said. “We must map out longer-term strategies, not just for the utilities’ future, but for California’s energy future.”

Under a provision of California’s Constitution referred to as inverse condemnation, utilities are liable for wildfires caused by their equipment even when the companies were not negligent in maintaining it. Partly as a result, PG&E has estimated that its wildfire liabilities could total more than $30 billion, much more than it says it can afford.

The California Legislature passed a bill last year that allows PG&E and other utilities to raise rates to pay for some of their wildfire liabilities. But the process can be subject to delays, and the law does not allow utilities to recoup the cost of 2018 wildfires, which could account for a large chunk of PG&E’s liabilities.

As a result, the judge overseeing the company’s bankruptcy, Judge Dennis Montali, may want to be assured that California’s politicians have come up with a better cost-sharing system before releasing the company from bankruptcy. The judge might conclude that without a change to state laws, the company could have to file for bankruptcy protection again in a few years.

“The judge can say, ‘I don’t have a confirmable plan of reorganization because you have provided nothing to account for the risk of future liability,’” said G. Marcus Cole, a bankruptcy expert and professor at Stanford Law School. “It’s totally within the judge’s discretion to make the determination.”

Is PG&E doing enough to reduce the risk of devastating wildfires?

Judge William Alsup of Federal District Court in San Francisco is overseeing PG&E’s probation in a separate, criminal case that stems from a gas pipeline explosion in 2010 in San Bruno. He is pressuring the company to eliminate the risk that the utility’s equipment could start wildfires. PG&E has said complying with the judge’s proposal could cost up to $150 billion.

Last month Judge Alsup ripped into the company. “I feel a responsibility after two years of this to step in and do something about this if somebody else doesn’t,” he said.

PG&E filed a wildfire safety plan with the utilities commission last week. The company said it would spend up to $2.3 billion this year to reduce wildfires. Its plan calls for more tree trimming, equipment inspections and precautionary blackouts on dry and windy days.

The company’s board said it was looking for new directors with expertise in safety. BlueMountain said the same on Wednesday.

But shareholders may balk at a significant increase in spending on safety. After the San Bruno explosion, PG&E invested in improving safety practices and did not increase its dividend for six years. As a result, PG&E’s stock price stagnated, frustrating investors.

Will PG&E continue in its current form?

PG&E could emerge from bankruptcy smaller than it is today. Other companies might want to buy parts of the utility, like its gas operation. State officials might welcome such a move because a smaller utility could be easier to manage and regulate.

Elected officials, consumer groups and others have also suggested breaking up the company’s electricity business into smaller utilities, some of which could be owned by local governments.

Officials in San Francisco, for example, are considering buying PG&E’s operations in their city and creating a municipally owned utility. Los Angeles, Sacramento and other California cities already operate their own electricity utilities.

PG&E’s board said last month that it was “reviewing structural options to best position PG&E to implement necessary changes while meeting customer and operational needs.”

But selling off the most attractive parts of PG&E may leave behind the operations that have problems or operate in areas that are prone to wildfires.

“The big concern is what happens if people get to cherry-pick the lowest-cost, highest-revenue portions of the electrical grid and leave behind the high-risk, high-cost areas,” said Mark Toney, executive director of the Utility Reform Network, a San Francisco-based consumer group.

Lauren Hepler contributed reporting.

Ivan Penn is a Los Angeles-based reporter covering alternative energy. Before coming to The Times in 2018 he covered utility and energy issues at The Tampa Bay Times and The Los Angeles Times. @ivanlpenn

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