Ed­i­to­rial: PG&E may need to be re­struc­tured rather than res­cued

San Francisco Chronicle (Sunday) - - INSIGHT -

In­sur­ers coined the term “moral haz­ard” to de­scribe the ten­dency of those in­su­lated from con­se­quences to take more risks. Moral haz­ard is the rea­son in­sur­ance plans come with de­ductibles and too-big-to-fail fi­nan­cial in­sti­tu­tions are in­her­ently dan­ger­ous.

In Septem­ber, Gov. Jerry Brown signed a bill al­low­ing Pa­cific Gas and Elec­tric Co. to make its cus­tomers cover li­a­bil­i­ties aris­ing from last year’s Wine Coun­try fires, in­clud­ing Cal­i­for­nia’s most de­struc­tive wild­fire to date. Less than two months later, the state had a new most de­struc­tive wild­fire dwarf­ing pre­vi­ous records, and PG&E was ac­knowl­edg­ing sus­pi­cious out­ages near its time and place of ori­gin.

In case this il­lus­tra­tion of moral haz­ard wasn’t clear enough, pol­i­cy­mak­ers be­gan dis­cussing the di­men­sions of the next PG&E bailout while the lat­est dev­as­tat­ing wild­fire still burned.

The Cal­i­for­nia Depart­ment of Forestry and Fire Pro­tec­tion has blamed 17 of last year’s North­ern Cal­i­for­nia fires, which caused 44 deaths, on PG&E power lines and other equip­ment. In­ves­ti­ga­tors found that vi­o­la­tions of state law by the util­ity may have played a role in 11 of them. Yet to be con­cluded is Cal Fire’s cru­cial in­ves­ti­ga­tion of the Tubbs Fire, which be­came the dead­li­est of the year’s blazes and the state’s most de­struc­tive so far when it swept into Santa Rosa.

Amid PG&E’s en­su­ing $2 mil­lion-a-month lob­by­ing blitzkrieg, leg­is­la­tors formed a spe­cial com­mit­tee that con­sid­ered broadly ex­cus­ing the util­ity from fu­ture fire li­a­bil­i­ties. They ul­ti­mately stopped short of that but did pro­duce a res­cue pack­age al­low­ing PG&E to cover cat­a­strophic costs stem­ming from the Wine Coun­try fires through bonds to be paid off by its cus­tomers. The life­line also al­lows the util­ity to charge ratepay­ers for fu­ture fires pro­vided reg­u­la­tors find the com­pany acted “rea­son­ably.”

It’s a gen­er­ous safety net, but PG&E may have found a hole. The bailout pro­vi­sions ap­ply to the 2017 fires and to fu­ture fires start­ing in 2019, but they leave out 2018 — the year that has now seen the state’s most cat­a­strophic wild­fire by far.

The Camp Fire, which at least dou­bled the over­all death toll of the Wine Coun­try firestorm and tre­bled the record de­struc­tion of the Tubbs Fire as it lev­eled

much of the town of Par­adise, started in the Sierra Ne­vada foothills on the morn­ing of Nov. 8 — co­in­cid­ing, PG&E has ac­knowl­edged, with two out­ages in the area. The high-volt­age line draw­ing scru­tiny col­lapsed in a storm six years ago, the Bay Area News Group re­ported, and other blazes linked to PG&E lines threat­ened Par­adise in 2017 and 2001.

Ap­par­ently sus­pect­ing a re­peat of­fender, San Fran­cisco-based U.S. Dis­trict Judge Wil­liam Al­sup on Tues­day or­dered PG&E to ex­plain its role in the Camp Fire and the Wine Coun­try con­fla­gra­tion. Al­sup is su­per­vis­ing the com­pany’s pro­ba­tion as a re­sult of yet an­other deadly dis­as­ter, the 2010 gas pipe­line ex­plo­sion in San Bruno, and rightly won­der­ing about the im­pli­ca­tions of “any wild­fire started by reck­less op­er­a­tion or main­te­nance of PG&E power lines.” The Cal­i­for­nia Pub­lic Util­i­ties Com­mis­sion’s in­ves­ti­ga­tion of the com­pany’s safety prac­tices in the wake of the ex­plo­sion is ex­pected to be ex­panded to en­com­pass the fires.

The lat­est fire has em­bold­ened PG&E’s de­trac­tors in Sacra­mento, where the sweep­ing li­a­bil­ity con­ces­sions the util­ity failed to win last year ap­pear even more un­likely for the time be­ing. State Sen. Jerry Hill, D-San Ma­teo, an avid PG&E critic since the util­ity blew up a neigh­bor­hood he rep­re­sents, is con­sid­er­ing pro­pos­als to break up or oth­er­wise over­haul the util­ity.

But pol­i­cy­mak­ers have also taken steps to soothe PG&E’s in­vestors. As­sem­bly Util­i­ties and En­ergy Com­mit­tee Chair­man Chris Holden, D-Pasadena, told Bloomberg he plans to in­tro­duce a bill ex­tend­ing the 2017 bailout to 2018.

Though the next bailout, like the last, will be ra­tio­nal­ized as head­ing off the risks of an un­sta­ble PG&E, the dan­gers posed by the util­ity in all its sup­posed sta­bil­ity are more im­me­di­ate and dire. Re­struc­tur­ing this way­ward com­pany makes more sense than end­less res­cues from its havoc-wreak­ing re­cidi­vism.

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