PG&E Stock Hit by Mounting Potential Fire Liability

Pacific Gas & Electric shares took a beating June 11 after CalFire revealed last Friday that the utility’s power lines were involved in starting 12 more wildfires north of San Francisco last fall. Increasing liability for PG&E is that CalFire alleged the utility violated state fire protection standards in eight of those blazes.

Earlier this spring, CalFire implicated utility lines in four other fires last October.

Of PG&E’s alleged involvement in sparking 16 of the massive wildfires the state fire agency has investigated, it alleged that in most of those cases the utility failed to comply with safety regulations.

“That means flawed vegetation management is suspected in two-thirds of the October wildfires caused by trees,” said Sen. Jerry Hill (D-San Mateo). Hill's San Bruno constituents were harmed by the the utility's gas line explosion in 2010.

In early trading June 11, PG&E’s stock price fell almost five percent in response to the development to a low of $38.89 per share. The lowest point for its stock this year was $37.30, with its highest share price over the last 52 weeks at $71.57.

The latest investigations prompted PG&E Corp. June 11 to state that its estimated liability for the fires and legal violations will be included in its quarterly earnings report next month.

“We look forward to the opportunity to carefully review the CalFire reports to understand the agency’s perspectives,” PG&E stated. It added that the company continues “to believe our overall programs met our state’s high standards.”

“The investigation results should be viewed in context with PG&E’s long history of falling short on system safety and maintenance, rather than statements extolling the utility’s practices,” Hill said.

The utility’s response was similar to that following CalFire’s announcement just before the start of the Memorial Day weekend that its equipment had been involved in igniting four other fires last October. CalFire said then that PG&E was in violation of wildfire protection regulations in three of those blazes. Investigations of that trio of blazes were forwarded to the appropriate county District Attorneys.

In its latest investigatory report, CalFire announced June 8 it had referred the eight additional wildfire cases involving the utility to county District Attorneys for review “due to evidence of alleged violation of state law.”

Just ahead of CalFire’s announcement last week, PG&E asked the California Public Utilities Commission to extend the deadline by four months to file its upcoming general rate case . That was due to potentially facing billions of dollars of claims, plus unknown impacts on the utility’s access to financing for its capital investment plans.

The additional eight blazes CalFire alleged were started by utility lines on Oct. 8 killed three people, burned 56,556 acres, and destroyed about 1,355 structures.

The eight fires included the Norrbom, Patrick, Pythian, Adobe, Pocket and Atlas fires that torched large part of Sonoma and Napa Counties. The other two were the Sulphur blaze in Lake County and Blue fire in Humboldt County.

The CPUC also is investigating the cause of the devastating wildfires, including evaluating whether PG&E’s maintenance of facilities, vegetation management, and emergency preparedness and response met state standards.

“The utility could be subject to material fines or penalties if the CPUC or any law enforcement agency were to bring an enforcement action and determine that the utility failed to comply with applicable laws and regulations,” the utility parent company stated in its Securities & Exchange 8K filing released on Monday.

The other four fires evaluated in CalFire’s June 8 announcement were the Redwood Fire in Mendocino County that lead to nine deaths, the Cherokee Fire in Butte County, the 37 Fire in Sonoma County and the Nunns Fire.

There were as many as 21 major wildfires in Northern California last fall, burning a total of more than 245,000 acres, destroying about 8,900 structures and killing 44 people. The most destructive, the Tubbs Fire, which burned major parts of Santa Rosa, remains under investigation. — Elizabeth McCarthy

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PG&E Stock Hit by Mounting Potential Fire Liability

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