PG&E stock dives amid fire rumors
Pacific Gas & Electric stock plunges on news
California utility may have sparked deadly blaze.
California utility Pacific Gas & Electric acknowledged it may be found liable for causing the state’s Camp Fire and could face “significant” costs if investigators blame it for the subsequent devastation.
PG&E investors are panicking after the utility admitted that an outage on a
115-kilovolt transmission line near the fire’s origin occurred around the time the blaze started.
The company’s stock plunged 22 percent Wednesday to close at $25.59, reflecting extraordinary volatility for a utility stock and suggesting investors believe the company could face massive losses. The blaze has killed at least 42 people, destroyed at least 6,522 homes and 260 businesses and wrecked the town of Paradise.
PG&E has wildfire liability insurance that would cover up to $1.4 billion in damages from Aug. 1, 2018, through July
31, 2019, according to a Securities and Exchange Commission filing.
But “while the cause of the Camp Fire is still under investigation, if the Utility’s equipment is determined to be the cause, the Utility could be subject to significant liability in excess of insurance coverage,” PG&E acknowledged in the filing.
Those losses could seriously undermine the company’s “financial condition, results of operations, liquidity and cash flows.”
The company, which serves 16 million people from Bakersfield to Eureka, first sent an incident notice to the California Public Utilities Commission on Nov. 8 noting the proximity of its transmission outage to the fire’s origin.
Consumer advocates are concerned that ratepayers could face higher bills to pay for the damages.
Because of a new law passed by the California Legislature to limit the damages PG&E might pay for 2017’s wildfires, some think those protections might be extended to the current blazes.
Senate Bill 901, signed by Gov. Jerry Brown in September, will allow companies like PG&E to raise utility rates if the liability payments threaten them with bankruptcy.
The utility raised concerns, and lawmakers agreed, that a bankruptcy would lead to steep rate hikes, and sharing the liability would be a better way to manage the risk to utility customers.
Company spokesman Paul Moreno declined Tuesday to discuss liability issues.
“The cause of the Camp Fire has not been determined. (The California Department of Fire and Forestry) is investi- gating the cause of the fire,” Moreno said.
SB 901 applies to 2017 fires where PG&E is determined to be liable for damages.
State fire investigators found the company was to blame for several fires in Napa and Sonoma counties, and beyond, in October last year.
Wolfe Research analyst Steven Fleishman wrote in a Sunday research report that “we do not believe the utilities would absorb all the fire damages” due to the new law.
But Bank of America research analyst Julien Dumoulin-Smith said Monday in a research report that “the fire will still result in a growing deficit to be borne by shareholders if ratepayer recovery is not granted.”
PG&E already stopped paying a quarterly dividend to stockholders in December 2017 because of the potential liabilities from that year’s fires.