- Creditors of bankrupt Pacific Gas & Electric have endorsed the recommendations of California's Commission on Catastrophic Wildfire Cost and Recovery, including reforming the state's inverse condemnation liability rules and developing a wildfire fund.
- The wildfire fund concept in particular got a boost Thursday, when Bloomberg reported California Gov. Gavin Newsom will soon ask lawmakers to create a "liquidity fund" to help address some of the costs of the state's wildfires.
- Pacific Gas & Electric has pointed to the state's liability rules as one reason for its bankruptcy filing this year, and has also called for a fund to be considered. Shares of the company jumped almost 15% Thursday, following Bloomberg's report.
California is rushing to overhaul how it handles wildfires — a high profile example of a state adjusting policy to deal with climate change.
The wildfire fund would be designed to give utilities better access to capital to address costs, and according to Bloomberg's report, would be funded by $10 billion in bonds issued by the state's Department of Water Resources. There is also the possibility that utilities would be asked to contribute $7.5 billion in equity.
Shares of PG&E immediately jumped on the news, and closed Thursday at $23.57.
The stock price has recovered significantly since January, when the utility declared bankruptcy and shares traded in the single digits. As recently as October, however, PG&E traded above $45/share.
A wildfire fund "will enhance the ability of responsible utilities to access capital at reasonable rates, compensate wildfire victims, and better prepare the state for future wildfires," PG&E's Official Creditors Committee said in a statement. The group also called inverse condemnation an "unreasonable standard."
California's interpretation of inverse condemnation holds utilities accountable for wildfires caused by their equipment, even if a company is not found negligent.
The rule "makes it extremely difficult for utilities to secure sufficient capital and insurance coverage to conduct vital maintenance and ensure safe operations," said the creditors committee, which was appointed by the U.S. Trustee in PG&E's bankruptcy case to represent a broad group of individual and business interests.
Ratings agency Moody's Investor Services has said changes to inverse condemnation rules could be politically difficult in California, because the changes are seen as a bailout of unpopular utilities.
PG&E is slowly working through financial issues related to California's recent wildfires. The utility this week announced a $1 billion settlement with 18 cities, counties, districts and public agencies, that were impacted by the 2015 Butte Fire, 2017 Northern California wildfires and 2018 Camp Fire.
The settlement is contingent on approval from the bankruptcy court, however, and does not include individuals or business owner claims, which are expected to number in the thousands.