• About
    • Which Energy Mix is this?
  • Climate News Network Archive
  • Contact
Celebrating our 1,000th edition. The climate news you need
No Result
View All Result
The Energy Mix
  • Canada
  • UK & Europe
  • Fossil Fuels
  • Ending Emissions
  • Community Climate Finance
  • Clean Electricity Grid
  • Cities & Communities
SUBSCRIBE
DONATE
  • Canada
  • UK & Europe
  • Fossil Fuels
  • Ending Emissions
  • Community Climate Finance
  • Clean Electricity Grid
  • Cities & Communities
SUBSCRIBE
DONATE
No Result
View All Result
The Energy Mix
No Result
View All Result
  FEATURED
BREAKING: No Public Finance for East Coast LNG Projects, Wilkinson Says July 4, 2022
‘Climate Math Gets Harder’ as Radicalized Supreme Court Upends U.S. Carbon Regulation July 4, 2022
Dire Living Conditions, Climate-Driven Heat Wave Produce Deadliest Human Smuggling Event in U.S. History July 4, 2022
Ex-Fossil Workers Convert Old Oilfields to Solar Farms After ‘Rapid Upskilling’ in Alberta June 29, 2022
London Becomes Biggest City to Sign Fossil Fuel Non-Proliferation Treaty June 29, 2022
Next
Prev
Home Demand & Distribution Clean Electricity Grid

Wildfire Liability Could Drive California’s Biggest Utility into Bankruptcy

January 11, 2019
Reading time: 5 minutes
Primary Author: Mitchell Beer @mitchellbeer

Daria Devyatkina/Flickr

Daria Devyatkina/Flickr

1
SHARES
 

California’s biggest power utility, Pacific Gas & Electric (PG&E), may be on its way to bankruptcy court as it faces billions of dollars in costs and multiple lawsuits for the role its equipment may have played in several massive wildfires in the northern part of the state.

A bankruptcy filing is one of the options PG&E is considering to avert financial ruin after its equipment “likely started several blazes,” Climate Liability News reports. The ongoing discussion raises the question “of who will ultimately pay for losses—particularly those from the recent Camp Fire,” the inferno that destroyed the town of Paradise and has now been identified by reinsurer Munich Re as the world’s costliest natural disaster of 2018, with losses above US$16.5 billion.

While the Camp Fire was raging, the New York Times reports, PG&E executives were at a resort on Maui, exhorting state legislators to allow them to pass their wildfire-related costs on to customers. “Realizing that their potential fire liability is large enough to bankrupt them, the utility companies are spending tens of millions of dollars on lobbying and campaign contributions,” the Times reports. “The utility companies acknowledge that they may bear some responsibility but say not all of it, because climate change and development in remote areas have made wildfires more destructive.” But “public interest groups say the utilities are effectively seeking a bailout for mistakes made by well-compensated executives.”

“There is not enough money in the State of California—whether it is public funds or investor-owned utility funds—to pay for the damages from wildfires of this magnitude if they continue to occur,” said UC Berkeley lecturer Steve Weissman a former administrative law judge with the state Public Utilities Commission.

In the end, “California’s utility customers may be on the hook for much of those costs” if legislators or the PUC PG&E to recover its losses with rate increases, CLN notes. “Last year, the state legislature passed a bill that permitted investor-owned utilities to pass on wildfire-related costs to consumers. The bill pertained to the 2017 wildfires and subsequent fires beginning in 2019, but it did not address fires occurring in 2018.”

PG&E could face liabilities up to $30 billion for the 2017 and 2018 wildfire seasons, not including fines, penalties, or punitive damages, with nearly two dozen lawsuits already filed against the company by Camp Fire survivors. “Insurance companies are also suing the utility, and the state’s attorney general indicated in a recent court filing that the company may be charged criminally, including for murder,” CLN states. “PG&E’s potential legal liability is heightened by the doctrine of inverse condemnation, which says a party can he held liable for property damage even if it was not negligent. Under California law, the doctrine applies to public utilities.”

Meanwhile, multiple reports have PG&E’s share value tanking, most recently after the Standard & Poors rating agency slashed its credit rating to junk status, Greentech Media reports.

Bloomberg notes the process of apportioning wildfire costs will be an earlier priority for incoming California governor Gavin Newsom as he takes office this month. “The prospect of a bankruptcy filing, even just as contingency planning, escalates the pressure on California’s politicians to make a decision on how much support to offer PG&E. There are several remedies the company could seek, ranging from a specific cap on wildfire liabilities to, at the less likely end of the scale, a change in the state’s peculiar ‘inverse condemnation’ principle.”

The dilemma for legislators is that “signaling support for PG&E carries the risk of being accused of bailing out a company whose equipment may have played a key role in fatal wildfires (investigations are ongoing),” adds opinion writer Liam Denning. “Yet letting the company slide into Chapter 11 carries its own costs and risks. One of the latter includes the possibility that PG&E’s power purchase agreements with renewable energy projects get rejected in a bankruptcy court. The falling cost of renewable power, and the desire to cut any costs as a way of mitigating the increases in power bills necessary to pay for the wildfire liabilities, could make this tempting for multiple parties in a bankruptcy situation. And that could hamper another important political goal in California: the push for zero-carbon electricity by 2045.”

The PUC has been calling for “structural reforms” to keep PG&E in operation, Denning reports, including the prospect of breaking it up into several smaller, regional entities. “Another possibility, selling off PG&E’s natural gas network, looks like a more useful outcome. This would simultaneously shrink the company’s scope and raise money to pay off its liabilities,” he writes. Greentech says the utility floated that possibility in an internal plan, titled Project Falcon, that was reported by National Public Radio last week.

“While PG&E’s gas business is also exposed to inverse condemnation, underground pipes don’t face the same wildfire-associated risks as wires do. Assuming annual earnings of about $500 million and a multiple of 20 times—at the low end of recent deals—the business could fetch at least $10 billion,” more than the company’s current market capitalization.

Ultimately, even with climate change driving up the intensity and frequency of wildfires, Weissman said California will have to get better at managing the risk. “Utility ratepayers cannot continue to cover these liabilities. Neither can utility shareholders. The only answer is to undertake an exhaustive effort to reduce the intensity of future wildfires by managing vegetation more effectively,” he told Climate Liability News. “We may need an agency to protect forested lands just like California has an agency to protect coastal resources. The state needs to make this a top priority.”



in Clean Electricity Grid, Drought, Famine & Wildfires, Forests & Deforestation, Health & Safety, Legal & Regulatory, Sub-National Governments, United States

The latest climate news and analysis, direct to your inbox

Subscribe

Related Posts

Wikimedia Commons
Oil & Gas

BREAKING: No Public Finance for East Coast LNG Projects, Wilkinson Says

July 4, 2022
43
angela n./flickr
United States

‘Climate Math Gets Harder’ as Radicalized Supreme Court Upends U.S. Carbon Regulation

July 4, 2022
40
EdmondMeinfelder/flickr
Environmental Justice

Dire Living Conditions, Climate-Driven Heat Wave Produce Deadliest Human Smuggling Event in U.S. History

July 4, 2022
17

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Terms & Conditions and Privacy Policy.

Trending Stories

opinion polling gender green recovery climate action

Conservative Women Far More Likely Than Men to Support Green Transition, EcoAnalytics Research Finds

July 4, 2022
46
U.S. Navy/picryl

Montreal to Host New NATO Climate Centre as Military Analyst Confronts Global ‘Hyperthreat’

July 4, 2022
45
Wikimedia Commons

BREAKING: No Public Finance for East Coast LNG Projects, Wilkinson Says

July 4, 2022
43
angela n./flickr

‘Climate Math Gets Harder’ as Radicalized Supreme Court Upends U.S. Carbon Regulation

July 4, 2022
40
Maurits90/Wikimedia Commons

San Francisco Commuter Train Derailed by Scorching Track Temperatures, Extreme Heat

July 4, 2022
30
Keith Hirsche

Ex-Fossil Workers Convert Old Oilfields to Solar Farms After ‘Rapid Upskilling’ in Alberta

July 3, 2022
457

Recent Posts

EdmondMeinfelder/flickr

Dire Living Conditions, Climate-Driven Heat Wave Produce Deadliest Human Smuggling Event in U.S. History

July 4, 2022
17
Adrian Grycuk/Wikimedia Commons

Youth Climate Case Moves to Top Tribunal in European Court

July 4, 2022
20
Seci/wikimedia commons

Saudi Aramco Talks Net-Zero, Plans to Boost Production Through 2035

July 4, 2022
11
Keith Weller/Wikimedia Commons

U.S. Methane Plan Gives Big Ag a Free Pass

July 4, 2022
13
Fadi Hage/wikimedia commons

Indoor Farming Revolution Comes with Significant Carbon Cost

July 4, 2022
16
Mont SUTTON snow terrain

Southern Quebec Towns Scramble for Solutions as Water Sources Dwindle

July 4, 2022
21
Next Post
Unist'ot'en Camp/Facebook

'Peaceful Resolution’ to Unist’ot’en Blockade Allows Access, Not Construction, Chiefs Say

The Energy Mix

Copyright 2022 © Smarter Shift Inc. and Energy Mix Productions Inc. All rights reserved.

Navigate Site

  • About
  • Contact
  • Privacy Policy and Copyright
  • Cookie Policy

Follow Us

No Result
View All Result
  • Canada
  • UK & Europe
  • Fossil Fuels
  • Ending Emissions
  • Community Climate Finance
  • Clean Electricity Grid
  • Cities & Communities

Copyright 2022 © Smarter Shift Inc. and Energy Mix Productions Inc. All rights reserved.

Manage Cookie Consent
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behaviour or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes. The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
Manage options Manage services Manage vendors Read more about these purposes
View preferences
{title} {title} {title}