first climate change-caused emergency
PG&E’s controversial history of safety violations and the rapidly rising costs from the past two years of wildfires seem to make bankruptcy difficult to avoid, stakeholders told Utility Dive. But it is unlikely to greatly benefit any of the involved parties.
Bankruptcy makes victims’ claims subordinate to other utility obligations and is a gamble for PG&E because a bankruptcy court could judge the company harshly, McCallum Group President Patrick McCallum told Utility Dive. McCallum, who barely survived the 2017 Wine Country wildfire, leads a coalition of victims’ groups, and is participating in the current settlement talks.
A settlement also would not address the bigger challenge of climate change, Center for Energy Efficiency and Renewable Technologies Executive Director V. John White told Utility Dive. “The wildfire threat has to be treated as California’s first climate change-caused emergency, or losses on this scale will keep happening, quite apart from what happens to PG&E.”
The 2018 Camp Fire was the deadliest and most destructive in California history. It destroyed 18,661 structures and killed 86 people. When it started on Nov. 8, PG&E’s stock price was $47.80. A day after the utility filed for bankruptcy, it was $6.19.
All PG&E “costs, expenses and other losses” through December 2018 for the 2017 and 2018 wildfires “could exceed $30 billion,” its SEC filing reported.
“[P]otential punitive damages, fines and penalties or damages related to future claims” not included in the $30 billion estimate could make the utility’s liability “substantially greater,” the filing added. Including some of those unattributed liabilities, it could be among the 10 biggest bankruptcies in the U.S. PG&E’s insurance coverage is approximately $2.24 billion, and it expects “increasing difficulty securing liability insurance.”
Reasons for mistrust of PG&E are substantial. In December, U.S. District Court Judge William Alsup cited PG&E’s “history of falsification of inspection reports” in an order requiring rigorous re-inspection and hardening of its system.
Days later, the CPUC launched and investigation and found “PG&E has had serious safety problems with both its natural gas and electric operations in recent years.” Based on an independent analysis of the utility’s safety practices, the commission said it would consider restructuring the corporation to ensure “safe energy service.”
“Inspections can be completed ahead of the 2019 wildfire threat, but completing upgrades depends on funding.”
The interests of ratepayers, wildfire victims and the markets are now aligned on the message that the 2017 and 2018 California wildfires are totally unacceptable and “that is a huge opportunity” to take on wildfire prevention, Wara said.
To take advantage of it, mandate de-energization of power lines during high wind events “so dry debris isn’t flying around hot wires,” he said. And provide funding for all customers in high wildfire risk areas “to obtain solar-plus-storage systems to power themselves when the electricity is turned off.”
Addressing PG&E’s liabilities through securitization, in or out of bankruptcy. then becomes more viable, Wara added. “It will raise rates, but it will be a problem in the rearview mirror instead of an ongoing cost of doing business, which is where we are now.”