
Disasters like this Oct., 2017 fire near Calistoga, Calif. could limit efforts on wildfire mitigation and greenhouse gas reductions, the utility says. |
California state fire investigators have linked Pacific Gas and Electric Co.'s utility equipment to 12 more wildfires, adding to the "tremendous uncertainty" the PG&E Corp. subsidiary already faced in planning for future capital expenditures, according to the utility's vice president for regulatory affairs.
In a June 8 report, the California Department of Forestry and Fire Protection, or CAL FIRE, said that PG&E's electrical equipment contributed to the wildfires in northern California in October 2017, and that in eight of those cases there was evidence of state law violations. CAL FIRE has so far determined that PG&E's infrastructure was involved in all 16 fires for which the department has issued reports and that there is evidence the company violated state laws in 11 of those cases.
In a June 4 letter to California Public Utilities Commission Executive Director Alice Stebbins, PG&E Vice President of Regulatory Affairs Robert Kenney asked for a four-month extension to the company's Sept. 1 deadline for filing its 2020 general rate case application.
"The 2017 Northern California Wildfires have created tremendous uncertainty regarding the company's potential liabilities under the state's inverse condemnation policy," Kenney wrote referring to a legal doctrine that utilities can be held liable for wildfire damages from electrical equipment, even if they obeyed all laws and took proper precautions to prevent fires. "This uncertainty could impact the company's access to the financing needed to support the capital investment plans in the 2020 General Rate Case," he continued.
In response to CAL FIRE's June 8 announcement, PG&E said in a press release, "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."
Uncertainty surrounding the utility's wildfire liabilities have led to credit rating downgrades and weakened demand for PG&E Corp. stock, Kenney said. "These financial uncertainties could impact the amount of work PG&E can commit to financing in the 2020 General Rate Case period."
PG&E looks to lawmakers
The state legislature is likely to consider legislation limiting utilities' liability in disasters like the 2017 fires before it adjourns on Aug. 31. What happens there will have a significant impact on PG&E's access to capital, Kenney pointed out: "It is, therefore, critical to understand the outcome prior to submitting our plans in the General Rate Case."
Lawmakers are considering establishing a state wildfire relief fund that could be funded by a combination of utility rates, shareholder contributions and state funding, but CAL FIRE's allegations of utility fault could disrupt that effort, according to a Wells Fargo Securities research note. On the other hand, PG&E's argument that penalties from previous fires could limit its plans for wildfire mitigation, clean energy and greenhouse gas reduction programs could help convince legislators to help limit the utility's exposure to wildfire damages.
"We do not view it as an idle threat, considering [PG&E Corp.] has already suspended the common dividend and the company has suffered credit ratings downgrades since last October," Wells Fargo concluded, saying that the latest CAL FIRE reports "further casts [PG&E Corp.] in a bad light."
In an 8-K filing on June 8, PG&E said the PUC is also investigating the fires, including PG&E's maintenance of facilities, vegetation management, emergency preparedness and response. The utility is also the subject of about 200 complaints from at least 2,700 plaintiffs in San Francisco Superior Court and may be liable for fire suppression costs, personal injury damages and other damages if it is found to be negligent, according to the filing. The litigation could take a number of years to resolve.
Meanwhile, damages from future wildfires could mount because years of drought, extreme heat and millions of dead trees have created a "new normal."
"Extreme weather is increasing the number of large wildfires and the length of the wildfire season in California," PG&E said.
