State Senator Jerry Hill, an outspoken PG&E critic, said the utility previously raised bankruptcy as leverage when seeking state assistance in paying its liabilities from wildfires in 2017.
State Farm accuses PG&E in its own lawsuit of "failing to keep the power lines, wires, and any and all associated equipment in a safe condition at all times to prevent fires".
Over the last two years, the massive number of severe wildfires in California have placed insurance companies in the state under serious financial pressure.
"You can't trust what they say", said Hill, who represents San Bruno, where a PG&E gas pipeline exploded in 2010, killing eight.
A bankruptcy filing is not certain, the sources said.
PG&E announced the assessment Friday in a news release, citing "the growing wildfire threat". Safety is and will continue to be our top priority as we work to determine the best path forward for all of our stakeholders.
In weighing a bankruptcy, power giant PG&E Corp. may be firing a warning shot to California lawmakers: Help us or watch the largest utility in your state go insolvent. One option under consideration: Selling its natural gas business after a bankruptcy filing, the people familiar with the matter said.
The company said on Friday that it was reviewing its "structural options" and assessing its operations, finances, management, structure and governance.
Dodd said findings of the regulator showed that the utility and its parent company, PG&E, need "systematic change", including on its board of directors "and in the executive suite", the newspaper had reported.
The utility has borrowed more than $3 billion under credit lines available to it, a move companies in financial distress will often make to shore up cash.
PG&E could wait to see how things play out in California, or it could opt for a bankruptcy proceeding that would prove more predictable and free the company from the mercy of state policy makers, Bloomberg Intelligence analyst Kit Konolige said.
PG&E also filed for bankruptcy in 2001 during California's energy crisis.