State investigators concluded that Pacific Gas & Electric’s electric wires ignited last year’s massive Dixie Fire, which went on to burn almost one million acres. Over its 104 days, the fire killed one person and destroyed more than 1,300 homes and other structures. CalFire’s finding that the blaze “was caused by a tree contacting [PG&E’s] electrical distribution,” released the evening of Jan. 4, surprised few observers.
Shortly after the fire started in mid-July 2021, the utility revealed that one of its workers discovered a tree leaning on an overhead 12kV distribution circuit and a fire burning at the base of the tree. Even before the announcement by investigators, back in October, five counties harmed by the wildfire sued PG&E for damages.
In response to the official finding of cause, PG&E said the leaning tree is just one of 8 million trees growing near its electric grid, but that it will “continue to be tenacious in our efforts to stop fire ignitions from our equipment.” Dating back a century, the utility ran its lines, often bare copper wire, through the state’s dense forests. The statement reiterated the company’s plan to bury 10,000 miles of lines, first announced last summer. It also is taking additional action as detailed in a document called a Wildfire Mitigation Plan.
Another round of massive wildfire liability could potentially drive PG&E into yet a third bankruptcy. Its shares fell 4.8% on Wednesday from $12.43 to $11.86. In its most recent quarterly earnings report, PG&E revealed it lost $1 billion in Q3. That Nov. 1 report compares with positive earnings of $167 million for the third quarter of 2020. Annual and fourth-quarter earnings reports are expected in late February.
PG&E exited its second bankruptcy reorganization at the end of June 2020 at a cost of $58 billion. To address the ongoing financial threat of fire to the PG&E and other utilities, the legislature passed AB 1054 creating a $21 billion liability fund paid into by PG&E and other investor-owned utility ratepayers and shareholders. It was an urgency measure that passed and went into effect in mid-2019 to help keep the rating agencies from further lowering IOU’s credit ratings, raising their borrowing costs.
One expert said a third bankruptcy could be tied to the adequacy of the AB 1054 fund to cover PG&E’s liability. “I think the threshold question is whether the Wildfire Insurance Fund is available to pay any claims,” said former Wall Street banker and attorney, John Geesman.
The California Public Utilities Commission approved PG&E issuing $7.5 billion in 30-year lower-cost, ratepayer-financed bonds last year to replace short-term borrowing to cover part of the utility’s bankruptcy debt pursuant to AB 1054. Companies are not permitted to tap into the fund unless they promise that rates will not increase.
Regardless of additional liability for PG&E, the AAA-rated bonds will be paid back by ratepayers because of an irrevocable charge put on their bills by the CPUC and the state’s guarantee to not interfere with the bondholders right to the charge, said Joseph Fichera, CEO of financial advisers Saber Partners He added that a special purpose company was created to issue the bonds and “specifically designed” to be protected from a parent company bankruptcy.
As smoke from the Dixie Fire billowed in the background last July in Chico, PG&E Chief Patty Poppe announced the utility would underground 10,000 miles of electrical lines in high fire threat areas. She estimated that burying cable would cost about $20 billion. The details of the plan are supposed to be revealed in the utility’s upcoming wildfire mitigation plan.
Attorneys for Butte, Lassen, Plumas, Shasta, and Tehama counties filed suit in San Francisco Superior Court for harm to public and natural resources, lost revenue and assets, and damaged infrastructure, including roads and water systems.
“We are holding PG&E accountable for this devastating fire, and we hope they will do what is right so these communities can start the process of rebuilding,” Baron & Budd attorney John Fiske stated in an Oct. 20 press release.