PG&E expects to pay $2.5B, warns things could worsen
The utility blames a California legal and regulatory doctrine for its financial situation
PG&E will take a $2.5 billion charge to cover its potential liability in several — but not all — of a series of lethal infernos that scorched the North Bay Wine Country and nearby regions, the embattled utility disclosed Thursday.
The mammoth scope of the charge suggests financial pressures have begun to mount for PG&E, which, in a separatematter, has been branded a convicted felon for crimes it committed before and after a fatal natural gas explosion that the utility caused, which resulted in eight deaths in San Bruno.
PG& E intends to take the charge in the current fiscal quarter, which ends June 30.
San Francisco-based PG& E made it clear Thursday the company blames a California legal and regulatory doctrine, known as inverse condemnation, as a big reason why it’s landed in a hazardous financial situation in the wake of the deadly North Bay wildfires.
Multiple theories of litigation are in play, according to PG&E, including negligence and California’s policy of allowing inverse condemnation to determine liability. Under inverse condemnation rules, PG&E and othermajor power companies in California could be strictly liable for property damages and attorneys’ fees if their equipment was a substantial cause of a fire, even if the utility followed established inspection and safety rules.
Geisha Williams, PG& E’s chief executive officer, described the California policy as “flawed” during a conference call Thursday with analysts to discuss the huge financial charge.
PG&E executives have vowed to wage a multi-front battle to upend rules arising from the state policy. This week, PG& E appealed a lower court ruling connected to a Butte County fire by taking the matter to the state Supreme Court, PG&E executives said during the conference call.
Some PG& E critics have warned that PG& E wants to make it easier to pass on liability costs from the wildfires to customers through higher monthly power bills, thereby
easing its own financial burden. PG&E also believes it’s been victimized by climate change and what it claims is a tendency towards more ferocious fire seasons.
“PG& E is trying every trick in the book to blame everyone and everything but themselves,” said state Sen. Jerry Hill, whose legislative district includes parts of Santa Clara County and San Mateo County, along with San Bruno. “They are still violating state law. To blame climate change is absurd.”
Williams said during the conference call that the news media was harming the company’s efforts to make enough headway with state lawmakers. This is an election year formost state lawmakers.
” Things will bemore difficult on the legislative side due to media coverage and negative headlines,” Williams said. “We continue to engage with legislators.”
It’s also possible that even more massive financial accounting charges may be employed to help PG& E cover its liabilities from the wildfires.
State fire investigators have issued rulings on just 14 of the blazes, which occurred inOctober 2017, and they have not issued a determination regarding the cause of the destructive Tubbs Fire.
On June 8, PG& E was deemed to bear a measure of responsibility for blazes in Sonoma, Napa, Mendocino, Humboldt, Butte and Lake counties because its equipment and facilities were involved in 12 of the fires, according to the state Department of Forestry and Fire Protection, known as Cal Fire. In some instances, Cal Fire determined, PG&E violated state regulations.
In late May, Cal Fire determined PG& E was responsible for four blazes in Nevada and Butte counties that occurred in October.
“The charge is based on the low end of liability estimates,” Jason Wells, PG& E’s chief financial officer, said during the conference call. “We are unable to reasonably estimate the high end of the range.”
James Patterson, a PG& E shareholder, said he believes PG& E’s current CEO, Williams, and her predecessor, Anthony Earley, have been poor top managers of the company.
Since the last trading day before the fires erupted, PG& E’s shares have nose- dived by 41 percent through Thursday.
“Tony Earley was a disaster for PG&E, and Geisha Williams is an even worse disaster,” Patterson said.