California Utility Company Is To Pay Out $2.5B for Wildfire Damage

A Northern California utility, Pacific Gas & Electric, will be liable for an estimated $2.5 billion due to its power lines which caused the fires that swept Northern California last October.

PG&E said in an 8-K form filed Thursday with the U.S. Securities and Exchange Commission that this charge is a low estimate of liability, which could potentially exceed $10 billion. This charge will be recorded as part of the quarter ending on June 30. Comparably, the utility earned $1.7 billion in 2017 and has $840 million in insurance for the fires.

The utility also notes that, “In accordance with U.S. generally accepted accounting principles, PG&E Corporation and the Utility evaluate which potential liabilities are probable and the related range of reasonably estimated losses, and record a charge that is the amount within the range that is a better estimate than any other amount or the lower end of the range, if there is no better estimate.” Thus, showing how they came to a low estimated dollar figure of liability.

The utility was found to be responsible in a report that was filed June 11 by the California Department of Forestry and Fire Protection (Cal Fire). The report stated that 12 fires, which killed nine people and burned 150,000 acres, were caused by PG&E power lines. Due to evidence of brush being present around lines and improper maintenance of power equipment, of those 12 Cal Fire investigations, eight of them are being analyzed by their corresponding county’s District Attorney’s offices. The investigations under review include the Adobe, Blue, Atlas, Pocket, Sulphur, Pythian, Norrbom, and Patrick fires.

Charges have not yet been filed by any of these counties and PG&E wrote in their 8-K that the evidence Cal Fire discovered has not yet been reviewed by them due to a lack of access.

The utility’s liability may not stop there, as Cal Fire has yet to determine the cause of 21 other fires in Northern California last year. These devastating fires caused 44 fatalities and the destruction of thousands of homes and businesses resulting in more than $3 billion in insured property losses, as reported in a Greentech Media article.

The lawsuits are mounting against PG&E, currently totaling more than 200.

California state law on inverse condemnation holds the utility responsible for all damages which includes property and attorney fees when its equipment contributes to a fire. According to Greentech Media’s article, PG&E is working on legislation to reduce their financial responsibility under this law by collaborating with Gov. Jerry Brown and state lawmakers. The attempt is being made to avoid similar damage that was done when PG&E filed for bankruptcy due to the California energy crisis in 2001. When emerging from bankruptcy in 2004, the utility had paid $10.2 billion to its creditors in large part due to customers paying increased rates.

This isn’t the first time PG&E has faced fines and lawsuits for safety violations. The utility was convicted of six felony charges for a 2010 gas pipeline explosion in San Bruno, which destroyed a neighborhood and killed eight people. A fine of $3 million was handed down by the judge as well as a $1.6 billion fine from the California Public Utilities Commission due to the lack of proper pipeline maintenance.