Utility That Tried To Blame California Fires On Climate Change Could Face Bankruptcy

Jason Hopkins | Energy Investigator

PG&E executives suggested climate change was to blame for a spate of deadly wildfires that rocked California in 2017, but now the state’s largest utility is facing the possibility of bankruptcy after investigators found it responsible.

Raging wildfires devastated Northern California in October 2017. Enhanced by high winds, the fires ultimately killed more than 40 people, burned at least 245,000 acres in Napa and Sonoma counties and caused over $3 billion in insured property losses. It was not immediately clear at the time what ignited the fires, but PG&E — a major California power company — and other utilities pointed the finger at climate change.

Years of extreme heat, drought and millions of dead trees had established a “new normal” in the state that is making wildfires more intense, PG&E said in a statement. The company called for “comprehensive new solutions” to combat the climate-fueled situation.

This strategy appeared to have some measure of success. Other utility executives and state leaders also held climate change responsible for the growing fires. Perhaps the biggest name to make a connection to rising temperatures was Democratic Gov. Jerry Brown.

“That’s the way it is with a warming climate, dry weather and reducing moisture,” Brown said in October 2017. “These kind of catastrophes have happened and they’ll continue to happen, and we have to be prepared to do everything we can to mitigate.”

Utility companies in California have an incentive to place blame elsewhere when a destructive fire is ignited. Under state law, utility companies are held responsible for fires started by their equipment, even if they follow all safety regulations. Energy executives have lobbied the state legislature to lessen their liability.

After months of investigation, however, the California Department of Forestry and Fire Protection determined at least 12 of the fires were actually caused by PG&E equipment. In many of these fires, investigators found mountable evidence that PG&E might have broken state law, with these cases being referred to relevant county district attorneys. (RELATED: Power Lines, Not Global Warming, Caused California’s Massive Wildfires, Officials Say)

PG&E is preparing to face punishment and pay big bucks for its responsibility. The utility placed its potential liability at $2.5 billion in a Thursday statement to the U.S. Securities and Exchange Commission. It’s very likely the company gets charged much more than this estimated cost, with the Thursday filing stipulating the $2.5-billion figure to be at “the lower end of the range of PG&E Corporation and the Utility’s reasonably estimated losses.”

Such a costly fine would be devastating for the utility, which only earned $1.6 billion in 2017. PG&E now faces a strong possibility of bankruptcy. The filing addressed the financial headwinds ahead, writing they “may be unable to fully recover costs in excess of insurance through regulatory mechanisms, if at all, and, even if such recovery is possible, it could take a number of years to resolve and a number of years to collect.”

A California lawmaker claimed he couldn’t walk down the hallway of the state capitol without running into PG&E lobbyists. Democratic Sen. Jerry Hill said executives with the utility were “talking about the sky is falling, that they’re going to go bankrupt and what are we going to do, and they’re creating a lot of fear in the Capitol.”

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