PG&E halts dividends over possible liability

PG&E Corp., the parent company of Pacific Gas and Electric Co., warned investors Wednesday that it will stop issuing dividends due to the possibility that the utility could be held liable for October’s deadly Wine Country wildfires, which caused more than $9 billion in damage.

PG&E Corp. will suspend dividends on its common stock beginning with the fourth quarter of 2017. The company, whose most recent quarterly dividend was 53 cents per share, did not indicate when dividend payments might resume.

Although the California Department of Forestry and Fire Protection, known as Cal Fire, has not determined a cause for any of the North Bay

fires, numerous homeowners have sued Pacific Gas and Electric Co., accusing the company of improper maintenance and operations of its equipment. A fierce windstorm the night the fires began knocked down PG&E utility poles and sent trees and limbs crashing into power lines. The fires killed 44 people.

California utilities can be held liable for wildfire damage caused by their equipment even if they followed all relevant safety regulations. PG&E Corp. cited that possibility Wednesday as a reason to suspend the dividends.

“After extensive consideration and in light of the uncertainty associated with the causes and potential liabilities associated with these wildfires as well as state policy uncertainties, the PG&E boards determined that suspending the common and preferred stock dividends is prudent with respect to cash conservation and is in the best longterm interests of the companies, our customers and our shareholders,” PG&E Corp. Chairman of the Board Richard Kelly said in a press release.

Pacific Gas and Electric Co., the utility subsidiary of PG&E Corp., has its own preferred stock and operates on a slightly different fiscal year. It will suspend its dividends starting with the three-month period that ends on Jan. 31. Those stocks, however, are not publicly traded on any exchange.

PG&E Corp. made the announcement after markets closed Wednesday. Its shares fell 9 percent in after-hours trading, to $46.50. Since the fires erupted on Oct. 8, the stock has lost roughly onethird of its value.

PG&E last stopped paying its quarterly dividend in January 2001, after soaring wholesale electricity costs and rolling blackouts plunged California into crisis. Within three months, the utility Pacific Gas and Electric Co. had filed for bankruptcy protection. Dividend payments did not resume until the utility emerged from bankruptcy in 2004.

Even the deadly 2010 explosion of a natural gas pipeline beneath San Bruno did not force PG&E to suspend its dividends, although the company did not raise them for several years.

Many of California’s most destructive wildfires have been caused by power lines falling, sparking or tangling with trees during windstorms. Cal Fire investigators are exploring whether Pacific Gas and Electric’s electrical lines played a role in starting the Wine Country fires. The cause of the fires may not be known until next year. The utility, however, has suggested that the largest of the blazes — the Tubbs Fire, which burned from Calistoga to Santa Rosa — may have been caused by lines installed and owned by someone else.

Cal Fire is also examining whether electrical equipment could have sparked some of this month’s devastating wildfires still burning in Southern California. That equipment, however, belongs to another utility company, Southern California Edison. Some Ventura County residents have already sued Edison over the Thomas Fire, now the second-largest blaze in California history.

PG&E Corp. CEO Geisha Williams has argued that utilities should not face strict liability for wildfire damage if they follow state rules for maintaining and running their equipment. But if some or all of the Wine Country fires are traced back to Pacific Gas and Electric Co.’s gear, and the company is held liable, PG&E will try to pass on to utility customers any costs not covered by liability insurance.

“We fully recognize the importance of dividends and intend to revisit the issue as we get more clarity,” Kelly said in Wednesday’s press release. “In the meantime, PG&E is committed to working with state policymakers to address the negative investment environment that strict liability under inverse condemnation is creating for California’s utilities. This ultimately hurts our customers and the state.”