As Wildfire Costs Mount, PG&E Contemplates Next Move

In late May, a California Department of Forestry and Fire Protection (CalFire) investigation found utility Pacific Gas & Electric (PG&E) had committed violations that led to several of the 2017 Northern California wildfires that devastated the state. Since then, the outlook for PG&E has only gotten bleaker.

CalFire now claims PG&E equipment caused 12 wildfires in 2017, resulting in 18 deaths. On June 21, the utility filed an 8-K with the U.S. Securities and Exchange Commission that states PG&E will record a $2.5 billion pre-tax charge related to these fires. In addition, the utility has apparently claimed that if it is found legally liable, it may need to reorganize or seek bankruptcy protection.

PG&E continues to deny liability for these wildfires, instead blaming climate change and extreme weather events.

“These fires were tragic and we remain focused on helping communities recover and rebuild," said Geisha Williams, PG&E Corp. CEO and president. "Looking forward, the state, first responders and California’s utilities are all in agreement that we must work together to prevent and respond to wildfires and enhance infrastructure resiliency. Years of drought, extreme heat and 129 million dead trees have created a ‘new normal’ for our state that requires comprehensive new solutions."

The $2.5 billion charge does not account for any future fines or governmental penalties that may be handed to the utility. In addition, the June 21 release admits that the potential exists for future charges to be levied against PG&E for other wildfires in 2017 if new facts emerge that find them to be at fault. In that case, the financial burden could be significant.

PG&E has not declared bankruptcy since 2001 (following a California energy crisis), and now the company is telling lawmakers in Sacramento, Calif., that it is becoming a real possibility.

Regardless, many legal battles lie ahead for PG&E, and one of the biggest factors will be how sympathetic lawmakers are to its plight. Gov. Jerry Brown has already voiced support for changes to the state’s fire-liability rules.

“Liability regardless of negligence undermines the financial health of the state’s utilities, discourages investment in California and has the potential to materially impact the ability of utilities to access the capital markets to fund utility operations and California’s bold clean-energy vision,” Williams said.

About the Author

Matt Kraus

Senior Associate Editor
Matt Kraus is Electrical Contractor magazine's senior associate editor. Contact him at matthew.kraus@necanet.org .

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