Judge's Safety Plan for PG&E Now Limited to Tree-Trimming Push

(Bloomberg) -- A federal judge overseeing PG&E Corp.’s safety compliance backed off the aggressive fire prevention plan he sought to impose in January, conceding to the bankrupt utility’s complaint that it was unrealistic.

U.S. District Judge William Alsup said he’s prepared to order PG&E to keep its dividend payments suspended until the utility trims trees around its power lines to comply with state rules. Earlier, the judge said he planned to mandate that the entire power grid be inspected and repaired before the fire season begins, an effort PG&E said would cost $150 billion.

Judge's Safety Plan for PG&E Now Limited to Tree-Trimming Push

Alsup, who oversees PG&E’s criminal probation, said he wants to reform the "dismal” management that led to wildfires in the state. PG&E has until March 22 to argue why the order shouldn’t be implemented. Lawyers representing wildfire victims, meanwhile, were quick to criticize the newest plan.

“Existing law was too lax, and PG&E was not complying with it,” said Mike Danko, a lawyer representing fire victims suing the company for damages. “The judge is now saying you have to comply with existing law. I’m not sure if it’s an answer to anything.”

The shares rose 1.4 percent to $18.56 at 12:44 p.m. in New York. PG&E, which suspended its dividend in December 2017, said in a statement it is "committed to completing the work" in its wildfire safety plan, and will work "to develop comprehensive, long-term safety solutions." The company said it would respond to Alsup’s latest ruling within the time frame requested.

State Laws

State laws require that the utility trim or remove trees and branches growing within specified distances of its power lines. The company must also meet its own targets in a wildfire safety plan that it submitted to state regulators, Alsup said.

“PG&E’s performance with respect to vegetation management has been dismal,” Alsup wrote in his ruling issued late Tuesday. If complying with state or federal laws is too strict, he added “PG&E’s remedy would be to seek the relaxation of such laws through its well-oiled lobbying efforts.”

Alsup has wielded his role like a club, threatening to subject the company to criminal sanctions if it failed comply with his plan to “reduce to zero” the number of wildfires caused by the utility’s equipment in 2019. The judge also ordered unannounced inspections of PG&E’s compliance with vegetation management, and required the company to keep monthly records.

Dividend Payouts

In 2016 and 2017, PG&E paid $1.9 billion in dividends to common shareholders, Alsup said, while failing to trim or remove thousands of trees that posed a fire hazard. “Some of these dividends could and should have been kept and used to bring PG&E into compliance with state and federal law," Alsup wrote.

Alsup also postponed "for a few weeks" a decision about his hotly contested suggestion that PG&E should be required to shut off its power in fire prone areas during high winds.

Kit Konolige, an analyst for Bloomberg Intelligence, said the latest ruling “seems to have taken a more realistic view of what is reasonable to expect the company to do under the circumstances. All the parties would agree safety needs to be first, and needs to improve.”

The case is U.S. v. Pacific Gas and Electric Co., 14-cr-00175, U.S. District Court, Northern District of California (San Francisco).

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