PG&E Slumps After Scrutiny Over California Wildfires Escalates
(Bloomberg) -- Utility giant PG&E Corp. is once again coming under the spotlight for its role in California’s wildfires, sending its shares falling the most in a week.
Regulators threatened to heighten enforcement action against the company for its track record of safety lapses, while a federal judge is probing its role in starting the second biggest-wildfire in the state’s history, which has been raging for more than a month.
PG&E shares dropped as much as 4.1% Thursday, the most since Aug. 12. They were down 3.1% to $8.84 at 11:36 a.m in New York.
The heightened scrutiny comes as California’s largest utility has been working to restore its reputation and financial health after emerging from bankruptcy last year. PG&E was forced to restructure after it started catastrophic wildfires in 2017 and 2018 that killed more than 100 people and destroyed more than 22,000 structures.
California Public Utilities Commission President Marybel Batjer said Wednesday she’s asking the agency’s staff to investigate whether PG&E should be placed into a higher level of oversight for a pattern of self-reported missed inspections and other safety incidents, according to a letter sent to PG&E Chief Executive Officer Patricia Poppe.
Shortly after, the judge overseeing PG&E’s criminal probation pressed the company for more details about how it initially responded to the Dixie Fire, which has burned about 650,000 acres and destroyed more 1,200 structures in the Sierra Nevada mountains north of Sacramento. PG&E has said that its power line may have started the fire.
What Bloomberg Intelligence Says:
PG&E may be able to offset as much as $900 million of costs from California’s huge Dixie wildfire through its insurance, but damages above $1 billion create a much riskier proposition. It can seek recovery of claims from the state’s Wildfire Fund, but disbursements are only possible if regulators find PG&E acted prudently. The utility’s total out-of-pocket wildfire spending is capped at $2.9 billion over three years.
--Kit Konolige, BI senior industry analyst
California regulators set up a six-step enforcement process for PG&E as a condition of approving its bankruptcy exit plan. The state placed the utility into the first level of the process in April based on its failure to prioritize vegetation clearing in high-fire risk areas last year. Higher levels of enforcement could lead to the state revoking the utility’s operating license if the company fails to reform itself.
Since April, PG&E has reported missed inspections of hydroelectric stations, poles and power lines, Batjer said in her letter. The utility has also reported missing internal targets for tree clearing work and failing to identify dry rot in certain poles, the letter said. Separately, the commission recently opened a probe into the responsibility of the utility’s equipment in causing the Dixie Fire, Batjer said.
All of the issues identified in the self-reports have been corrected or are planned for corrective action, PG&E spokeswoman Lynsey Paulo said in a statement.
“We share the Commission’s goal of reducing wildfire risk and prioritizing safety,” Paulo said in the statement. “We take feedback from the Commission and others seriously.”
Meanwhile, U.S. District Judge William Alsup has raised dozens of new questions about the company’s account of events surrounding the Dixie Fire. The judge has been a harsh critic of the company’s track record on fire safety.
Alsup said in a court filing Wednesday that it “does not add up” that 10 hours after the company recorded a disruption to a power line, a worker known as a troubleman saw a fire that was “only” 600 or 800 square feet (55.7 or 74.3 square meters) in size.
The judge directed the utility to provide written responses -- along with sketches and relevant internal records including reports and emails -- by Aug. 31. He also ordered the troubleman to appear in court for a Sept. 13 hearing for questioning.
“We’re aware of the order and will respond by the deadline,” PG&E said in a statement.
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