PG&E Investors Seeking Relief From California Won't Get It Soon

(Bloomberg) -- As prices of stocks and bonds issued by PG&E Corp. touch record lows, investors probably won’t get any certainty soon from the incoming California governor on how he would deal with the utility’s liabilities from the fatal fires ravaging the state.

In a brief news conference with Governor Jerry Brown, Lieutenant Governor Gavin Newsom, who will succeed him in January, noted that people are concerned about the potential bankruptcy of the state’s largest utility, which reported that its equipment was damaged near where the deadliest fire began. But Newsom didn’t say what he would do to address the concerns sparked by PG&E and other utilities facing billion-dollar liabilities.

“We’re going to assess all those facts -- the governor is in the process of doing the same -- and we’ll see where we are when the baton is handed,” Newsom said outside the governor’s office in Sacramento.

In California, utilities can be held liable for any economic damages tied to their equipment, even if they follow all of the state’s safety rules. Officials are currently grappling with the state’s deadliest blaze, known as the Camp Fire, that has left at least 42 people dead about 150 miles (240 kilometers) northeast of San Francisco, as well as with conflagrations in Southern California that have killed two.

The devastation comes a year after wildfires swept Northern California, exposing PG&E to about $15 billion of liabilities, and the latest blazes may be just as costly to the utility, said Bloomberg Intelligence analyst Kit Konolige. The legislation enacted in September to address the prior fire has no provision for those this year: The package allowed PG&E to use state-authorized bonds to pay off lawsuits from the 2017 fires and gave utilities a mechanism for recovering some wildfire costs starting next year, so long as the fires weren’t caused by company negligence.

“It was a good first step,” Newsom said of the legislation. “Obviously it’s a work in progress. It’s got to be iterative.”

PG&E Bonds Fall to Record Low as California Fights Deadly Fires

The earliest any action would likely occur may be in January, after a new legislative session begins. Assembly Democrats aren’t currently working on any new provisions, said spokesman Kevin Liao in an email. "The focus now is on putting out the fires and on recovery for victims," he said.

Senate President Pro Tempore Toni G. Atkins said she will work with Newsom and Brown on the matter. “Clearly, we are faced with a new reality of year-round fires in California and the issue is and will continue to be top-of-mind for the upcoming legislative session," she said in an emailed statement.

In the news conference, asked why the state didn’t prevent the latest disasters, Brown said: “Some things only God can do. We’re doing everything we can, and there’ll be new challenges, and we don’t even know what they are and we will respond and do as much as we can as creatively as we can.”

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