PG&E Power Line Failed Minutes Before a California Wildfire

(Bloomberg) -- Bankrupt California utility giant PG&E Corp. had an equipment failure on a high-voltage transmission line just minutes before a wildfire was reported to have broken out late Wednesday.

A 230-kilovolt PG&E power line went down at about 9:20 p.m. local time, according to a report filed with the California Public Utilities Commission. The Kincade blaze was reported to have erupted five minutes later. As of early Friday, it had scorched at least 16,000 acres and destroyed 49 structures. California’s fire agency is investigating the line, according to the company.

PG&E’s equipment has already been blamed for sparking a series of wildfires that devastated California in 2017 and 2018, saddling the San Francisco-based company with an estimated $30 billion in liabilities and forcing it to file for Chapter 11 in January. The latest blaze threatens to derail its restructuring efforts and encumber it with even more damages. It struck even as the company took extreme measures to fire-proof wires: On Wednesday, it deliberately cut the lights to half a million people amid high winds.

Shares slid as much as 27% to $5.28 on Friday.

“This is a setback,” Evercore ISI utilities analyst Greg Gordon said in a research note. “A big fire could increase overall liabilities for shareholders and threaten the viability of” PG&E’s reorganization plan.

The utility had actually switched off local, distribution lines in the area of the Kincade fire, about 85 miles (137 kilometers) north of San Francisco. But PG&E Chief Executive Officer Bill Johnson said transmission lines weren’t taken down because wind speeds didn’t warrant such a move.

What Bloomberg Intelligence Says:

“Any news about fires is going to be bad news for the company and investors. It’s going to increasingly hurt their ability to try to achieve whatever they might try to achieve in the bankruptcy.”

--Kit Konolige, senior utilities analyst

Johnson stressed that the transmission failure doesn’t mean PG&E’s equipment caused the blaze and said, “We are just going to have to wait for the results of our investigation and that of” California’s fire agency.

A state fire department employee was the one who flagged what appeared to be a broken cable on one of PG&E’s transmission towers in the area. The tower in question is 43 years old, Johnson said at a press conference Thursday. It had been inspected twice this year -- both in person and by drone.

“It appears to be in excellent condition,” he said.

In the canyons north of Los Angeles, another blaze known as the Tick fire ignited Thursday afternoon and quickly grew to 3,950 acres, burning structures and forcing evacuations. By late Thursday, it was racing westward toward the city of Santa Clarita and threatening a local college.

Edison International, which supplies power to the area, said it had de-energized local power lines long before the blaze began.

Two smaller fires broke out in San Bernardino county, east of Los Angeles, and along the Marin County coast northwest of San Francisco. A stretch of the state’s famed Highway 1 was closed as smoke blanketed the area. The cause of those fires had yet to be determined.

To contact the reporters on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net;David R. Baker in San Francisco at dbaker116@bloomberg.net

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Joe Carroll

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