PG&E to record $2.5B charge for California wildfires — and warns it could get worse
- PG&E Corp. and its subsidiary, Pacific Gas and Electric, announced today in an 8-K filed with the U.S. Securities and Exchange Commission that it will record a $2.5 billion pre-tax charge related to deadly wildfires in Northern California last year.
- The charge relates to the liability for the damage from 10 wildfires, but does not include potential government penalties or fines, or the impacts of seven other fires where PG&E does not believe it will take a loss.
- Earlier this month, Cal Fire, the state's fire management agency, said electric equipment owned by PG&E caused 12 wildfires that killed 18 people and burned hundreds of square miles. Some industry observers believe this could lead to bankruptcy for the utility.
PG&E Corp. will take a charge on more than a dozen fires (10 by the utility's math, as several were combined), but it is not clear if more financial implications could be coming. The utility has been highly critical of California laws that allow for reverse condemnation — essentially finding the utility liable even if it met standards and regulations.
"Liability regardless of negligence undermines the financial health of the state’s utilities, discourages investment in California and has the potential to materially impact the ability of utilities to access the capital markets to fund utility operations and California’s bold clean energy vision," PG&E CEO and President Geisha Williams said in a statement.
PG&E explained that the charge is expected to be recorded in connection to these Northern California wildfires: La Porte; McCourtney; Lobo; Honey; Redwood; Sulphur; Cherokee; Blue; Pocket and the Sonoma/Napa merged fires (which include the Nuns, Norrbom, Adobe, Partrick and Pythian fires).
"The charge does not include any amounts for potential penalties or fines that may be imposed by governmental entities," the utility said. It also does not include amounts in connection to the Atlas, 37, Tubbs, Cascade, Maacama, Pressley and Point fires.
But "in the future it is possible that facts could emerge that lead PG&E Corporation and the utility to believe that a loss is probable, resulting in the accrual of a liability at that time, the amount of which could be significant," PG&E warned.
PG&E previously declared bankruptcy in 2001, amidst the 2000-2001 California electricity crisis, and state lawmakers have said the company is floating that possibility again.
State Sen. Jerry Hill, D, said "they keep 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."
PG&E says extreme weather is increasing the danger from large wildfires. Last year, Cal Fire dealt with more than 7,000 wildfires — compared to less than 5,000, on average, in the five years before.
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