Capitol Alert

PG&E faces more financial woes over wine country wildfires that killed 44 people

The sun rises through a cloud of smoke in the Rincon Ridge area in Santa Rosa after the October 2017 fires. PG&E is facing state fines.
The sun rises through a cloud of smoke in the Rincon Ridge area in Santa Rosa after the October 2017 fires. PG&E is facing state fines. pkitagaki@sacbee.com

Trying to dig its way out of bankruptcy, PG&E Corp. is likely to take another financial hit as the California Public Utilities Commission opens a formal “penalty case” over the utility’s role in the 2017 wine country wildfires.

The fines could be considerable. The commission fined PG&E about $1.6 billion following the 2010 San Bruno natural gas pipeline explosion that killed eight people. The October 2017 fires killed 44 people, destroyed nearly 9,000 buildings and burned a total of 245,000 acres.

In an order released late Thursday, the PUC said its safety division has already concluded that PG&E failed to operate its electrical equipment properly and had “various deficiencies” in its tree-trimming program, contributing to the 2017 fires.

“PG&E’s violations during the 2017 fire siege are extensive and disturbing, and go to basic requirements, such as the failure to maintain adequate records,” PUC Commissioner Clifford Rechtschaffen said in a prepared statement.

Cal Fire blamed PG&E’s power lines and other equipment for a dozen of the fires, although it exonerated the utility in connection with the deadliest fire, the Tubbs Fire. That fire killed 22 people and burned much of the Coffey Park neighborhood in Santa Rosa.

PG&E filed for bankruptcy in January, estimating it was facing $30 billion in liabilities from the 2017 fires and last November’s Camp Fire, which killed 85 people and destroyed much of the town of Paradise.

The PUC’s penalty case doesn’t cover the Camp Fire because the commission’s safety division hasn’t finished its Paradise investigation yet, said PUC spokeswoman Terrie Prosper. Cal Fire has said a faulty high-voltage transmission tower owned by PG&E was responsible for the deadliest fire in California history.

In its order, the utilities commission directed PG&E to create a smartphone app that enables the public to report problems with utility poles.

“The app is our way of crowdsourcing public safety and helping reduce the risk of wildfires,” said PUC President Michael Picker in a prepared statement.

In a statement, PG&E said it will “fully cooperate” with the PUC’s investigation and pointed to the work it’s done since 2017 to reduce wildfire risk. The company’s stock price fell $1.03, to $22.92, on the New York Stock Exchange.

The PUC order came as legislative language began circulating on Gov. Gavin Newsom’s proposal for a $21 billion insurance fund to help pay claims to victims of wildfires caused by utilities’ equipment.

The fund is to be financed by utility shareholders and ratepayers; it would only be used to pay claims for future wildfires and wouldn’t cover any of PG&E’s costs from previous fires. However, the bill, AB 1054, would give utilities greater assurance that they could charge ratepayers for wildfire liabilities, and Newsom’s advisers believe this would enable PG&E to borrow the billions it needs to pay its existing claims.

PG&E hasn’t yet submitted a plan to the bankruptcy court for dealing with the 2017 and 2018 claims. But PG&E’s major bondholders have offered to inject up to $30 billion in new money to lift the ailing utility out of bankruptcy.

Up to $18 billion would go for paying victims of the previous fires. The bondholders would wind up owning a sizable portion of the company, although it’s unclear just how much.

Dale Kasler covers climate change, the environment, economics and the convoluted world of California water. He also covers major enterprise stories for McClatchy’s Western newspapers. He joined The Bee in 1996 from the Des Moines Register and graduated from Northwestern University.
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