Officials Levy $1.9 Billion Penalty For PG&E

California officials on May 7 approved a $1.9-billion
penalty against Pacific Gas & Electric (PG&E) for the company’s role in
a series of wildfires that left more than 100 people dead and caused billions
of dollars in damage in 2017 and 2018. The damage claims led PG&E
to file for bankruptcy in January 2019

PG&E, which faces a June 30 state deadline to receive regulatory and bankruptcy court approval of its Chapter 11 reorganization plan, already has agreed to pay about $25.5 billion to resolve claims from victims of the fires, in addition to settlements with insurers and some local government agencies. The Public Utilities Commission (PUC) blamed PG&E’s aging electrical grid for causing 15 wildfires.

The company in a statement Thursday said it is “deeply sorry” for causing the wildfires. “We share the same objectives as the commission and other state leaders—namely in reducing the risk of wildfire in our communities, even in a rapidly changing environment,” the company said.

The PUC on Thursday heard more than an hour of public comments, with most speakers objecting to perceived shortcomings in PG&E’s bankruptcy plan. They charge the utility is not doing enough to protect customers in its territory from what some called “life-threatening hazards,” and they also are upset with the company’s handling of blackouts in its service areas. Those deliberate power outages are designed to reduce wildfire risks during hot and windy conditions, and at times have lasted several days.

The utility has been in upheaval the past few years after the wildfires. The company on April 22 announced Bill Johnson, the president and CEO who took over those roles in the midst of the company’s bankruptcy proceedings, will step down June 30 after just more than one year on the job. Bill Smith, a current PG&E board member, will serve as interim CEO. Johnson, the former head of the Tennessee Valley Authority who came out of retirement to take over at PG&E, had replaced interim chief executive John Simon, who was put into that role when CEO Geisha Williams resigned in January 2019, two weeks before PG&E filed for bankruptcy.  

The PUC is scheduled to vote on PG&E’s bankruptcy plan
May 21.

2018 Fire Was State’s Deadliest

PG&E in March agreed to plead guilty to 84 counts of involuntary manslaughter and one count of unlawfully causing a fire in connection with the 2018 Camp Fire, the deadliest wildfire in state history. The fire overran the town of Paradise, and about 18,000 buildings were destroyed in the blaze. The California Department of Forestry and Fire Protection said the fire was sparked by PG&E equipment. The utility has said it will also pay $4 million in fines for its role in that blaze.

A series of wildfires in California in 2017 and 2018 caused billions of dollars in damage. PG&E equipment was implicated as the cause of at least 15 fires, and the damage claims led the utility to file for bankruptcy. Courtesy: POWER archives

The penalty assessed Thursday is the largest ever approved by the PUC. The agency’s investigators, along with state officials, spent months looking into the causes of the deadly fires, which destroyed thousands of homes and led to an estimated $30 billion in damage claims against PG&E.

The PUC on Thursday backed off plans for the penalty to include an additional $200-million fine. PG&E said that assessment could imperil agreements the company already has reached with investors who have promised to buy $9 billion in shares of the reorganized company. The commission’s public advocate office said allowing PG&E to escape that fine sets a bad precedent that could lead to future problems.

“Rather than motivating PG&E to improve its abysmal
safety record, a permanently suspended fine would encourage PG&E to devise
future stratagems to avoid penalties,” the public advocate said.

Thursday’s penalty is more than the $1.7 billion PG&E
agreed to pay last year in a settlement with parties that included the PUC’s safety
division, but the amount is less than the $2.1 billion penalty recommended in
February by an administrative law judge. The terms of the penalty issued
Thursday include about $1.8 billion in safety work to mitigate the threat of
future fires, and $114 million for other corrective measures. The PUC said
PG&E cannot realize any tax benefits from operational expenses related to
the penalty.

PG&E earlier this month said it would replace most of
its board as part of an overhaul of its governance structure. The company had
promised to change its leadership and bring in new safety experts as part of
several reforms announced so that California Gov. Gavin Newsom would approve
the utility’s reorganization plan.

The utility last week said just three of the 14 current board
members would remain with the company after it exits Chapter 11. The board’s
chair, Nora Mead Brownell, has confirmed she is leaving.

 —Darrell Proctor is associate editor for POWER (@DarrellProctor1, @POWERmagazine).

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