PG&E rebuts paper’s probe
Utility denies conclusion it neglected equipment
Pacific Gas and Electric Co. defended itself to a federal judge Wednesday amid scrutiny of its aging highvoltage power line system and corporate spending habits, arguing it was not dangerously neglectful of its infrastructure and had allocated its money wisely.
The utility told U.S. District Judge William Alsup that it disagreed with many conclusions in a recent newspaper investigation that said the company failed to make key improvements to its electric transmission system, despite knowing that parts of it had grown too old and posed a wildfire risk.
PG&E was responding to an order from Alsup, who took the unusual step of forcing the
company to respond paragraph by paragraph to a July 10 article in the Wall Street Journal that described alarming shortfalls in the bankrupt utility’s approach to its transmission lines.
Alsup also ordered PG&E to account for its political spending habits after a Sacramento television station detailed how the company donated money to candidates, even last year as its wildfirerelated issues mounted and it prepared to file for bankruptcy protection in January. PG&E told the judge its contributions were not more important than equipment investments and said engaging in politics was necessary because of how the political process affects its business.
Alsup is overseeing PG&E’s probation arising from the 2010 San Bruno pipeline explosion. He has taken a keen interest in the company’s wildfire problems in the wake of November’s deadly Camp Fire, which was started by a nearly centuryold PG&E transmission tower.
The company told Alsup that the Journal accurately quoted from certain documents or described facts truthfully in many instances. Yet PG&E disputed some of the investigation’s most damning conclusions.
“The Journal’s article on PG&E was deeply sourced and thoroughly reported,” a spokesman for Dow Jones, publisher of the Wall Street Journal, said in a statement. “Company officials were given ample opportunity to respond in advance of publication. Their lawyers have strained to no avail to challenge our article, which we stand behind fully.”
PG&E “strongly disagrees” with the newspaper’s suggestion that company officials “knew of the specific maintenance conditions that caused the Camp Fire and nonetheless deferred work that would have addressed those conditions,” attorneys for the company told Alsup.
“PG&E denies the generalized assertion that it repeatedly failed to perform the necessary upgrades to prevent failures on its transmission lines,” attorneys wrote at another point. “The suggestion that PG&E has ignored investment in its transmission lines is inaccurate.”
PG&E did not deny that, before the Camp Fire started in Butte County last year, it needed to replace a series of the towers on the CaribouPalermo transmission line, where the inferno started. But the company stressed that the tower that broke and ignited the Camp Fire was not one of those slated for replacement.
While conceding that the towers were old, PG&E said that was not why it had planned to replace them. Rather, “the older design of the towers made them unsuitable” to fulfill designrelated requirements, the company said.
It’s not clear what Alsup’s next step will be.
Alsup had asked PG&E for a “fresh, forthright statement owning up to the true extent” of the Journal article. Mike Danko, an attorney who has sued PG&E on behalf of wildfire victims, did not think the company delivered.
“It’s just a lot of lawyers who are dodging the questions, basically,” Danko said.
Alsup had also asked PG&E to explain why it paid about $5 billion in shareholder dividends before it sought bankruptcy protection, suggesting the company could have spent that money on fixing the problems outlined by the Journal.
In its response to that question, PG&E said the money it gets from ratepayers is not enough to fully finance its operations and infrastructure investments, so it often turns to equity markets to raise capital. Dividends help attract investors looking for steady returns, PG&E said.
PG&E told Alsup that, while it paid $5.1 billion in dividends between 2012 and 2017, shareholders paid $6.5 billion in “new capital and reinvested earnings” for infrastructure upgrades over the same time. The company stopped paying dividends in 2017, after its power lines were suspected of starting numerous North Bay wildfires that October.
Alsup previously ruled that PG&E can’t resume issuing dividends until it is in compliance with certain vegetation management requirements.
“In sum, the payment of dividends and the performance of work on all aspects of PG&E’s system are not an ‘either/or’ calculus,” PG&E said. “On the contrary, they are mutually reinforcing, as dividend payments are essential to PG&E’s ability to continue to attract the capital needed to make required investments in safety and other aspects of PG&E’s operations.”
Danko wasn’t moved by PG&E’s dividend argument, either.
“You can’t say it costs more to run the system than we get from the ratepayers and then say, ‘But we are going to pay profits to investors,’ ” he said. “It doesn’t make any sense. It becomes a shell game.”
To Danko, the argument only further underscored the shortcomings of allowing an electric utility like PG&E to be owned by investors at all — that model is “totally contrary to the interests of safety,” he said.