“It freezes the company,” he said. “A judge who has no expertise essentially becomes the CEO. And there are these committees that get involved in every corporate decision.”

PG&E has faced bankruptcy previously.

Its Pacific Gas and Electric utility filed for bankruptcy in 2001 as soaring wholesale power prices and rolling blackouts threw California into crisis. The PG&E Corp. holding company itself never filed for bankruptcy. The utility emerged three years later, its business intact. Under the reorganization plan, ratepayers were responsible for $7.2 billion of the company's debt from the electricity crisis.

Electric utility bankruptcy filings are rare

Bankruptcy filings tend to be rare for electric utilities because they have large and steady revenue streams. But there have been other cases. El Paso Electric, for example, filed for Chapter 11 in 1992, due largely to expenses tied to the Palo Verde nuclear plant. The Texas company exited bankruptcy court four years later with a new rate plan that let it recoup its costs.

A PG&E bankruptcy isn't “likely” at this time as the company can tap other sources of cash, either through the sale of its natural gas unit or other real estate, or a cut in its $5.5 billion capital spending plan, analysts at Mizuho Securities USA LLC led by Paul Fremont wrote in a research note Tuesday. Fremont cut his price target on the shares to $19 from $27.

“There are other sources for cash the company can rely on to avoid bankruptcy,” Fremont said in the note.

Not every bankrupt utility has fared as well.

Last year, Energy Future Holdings Corp. was forced to sell off its electricity distribution business in Texas to Sempra Energy as part of a tortuous four-year bankruptcy proceeding. And the Puerto Rico Electric Power Authority, which filed for bankruptcy in 2017 due to mounting debts, now plans to hire a private operator to manage its electricity grid.

The Puerto Rico utility's corporate disarray left it ill-prepared when Hurricane Maria slammed into the island in 2017 — something California leaders would have to weigh in a PG&E bankruptcy as they face the prospect of another fire season with a power company in dire financial straits.

No public comment from PG&E

PG&E hasn't commented publicly on the prospect of bankruptcy and didn't have immediate comment for this story. While the company does have experience navigating the Chapter 11 process, the problems it faces now are far different from those in 2001.

Then, unscrupulous energy traders and companies — most notably, Enron Corp. — exploited flaws in California's recently restructured electricity market to send wholesale power prices soaring. Utilities, their rates regulated by the state, couldn't pass those cost increases on to their customers. At the time of the filing, PG&E's debts were reported to be rising by $300 million per month.

This time, PG&E's travails are tied to the role its power lines may have played in fires that killed dozens of people. In California, utilities can be held liable for damages even if they aren't found to be negligent.

Possible safety rule violations, falsified records

State investigators have blamed PG&E's equipment for starting 17 of the wildfires that tore across Northern California in 2017. Those investigators are now exploring whether a PG&E transmission line started November's Camp Fire, which leveled the Butte County town of Paradise and left 86 people dead.

Since then, state regulators accused the utility owner of breaking natural gas pipeline-safety rules and falsifying records. On Tuesday, PG&E's utility promoted Michael A. Lewis to senior vice president of electric operations effective today, less than a week after the holding company said it was weighing changes to both its board and how its businesses are structured.

“This will now require a significant amount of time for the company to re-earn the trust of its stakeholders,” S&P said in a statement late Monday, explaining its decision to downgrade PG&E to B from BBB-. “These conditions may significantly limit the company's options including its ability to consistently finance or safely operate its businesses.”

Political pressure

California politicians have been considering legislation that would help PG&E pay off lawsuits related to the Camp Fire, and one veteran lawmaker has publicly questioned whether the company was using the specter of bankruptcy to pressure Sacramento.

In 2001, Pacific Gas and Electric filed for bankruptcy while bailout talks with then-Governor Gray Davis were well underway. Davis, blindsided by the filing, called it a “slap in the face to California,” according to local reports at the time.

The company emerged from that bankruptcy without major structural changes and with its top management intact. A filing now may result in a harsher outcome, said Mark Toney, director of the Utility Reform Network consumer group. PG&E saw its reputation badly tarnished by the 2010 San Bruno gas pipeline explosion, which led to six criminal convictions against the company.

“Last time, PG&E was able to portray itself as an innocent victim, and there were bigger actors that were gaming the market, that were lying, stealing and cheating,” Toney said. “Now, I think the feeling is completely different. They are a convicted felon.”

Related: What insurers need to know about California's fire, insurance overhaul