Pacific Gas and Electric Company published financial documents this week saying that the utility faces a potential liability of billions of dollars from wildfires currently raging in California. Although PG&E told financial analysts they are not preparing for bankruptcy, shares and bonds plunged and industry experts speculated about a bailout.
Intense wildfires are ripping through parts of California for the second year in a row. The Camp Fire in Northern California started on November 8 and is currently 40% contained, according to Cal Fire. Dozens of people are still unaccounted for, and at least 56 have been killed, making it the deadliest wildfire in state history. The blaze destroyed 260 commercial structures, more than 8,700 residences, and decimated the town of Paradise.
Cal Fire says the cause is still under investigation. Looking into the cause of a fire can take months of painstaking work, Kirk Johnson reported in the New York Times. Cal Fire determined that PG&E’s power lines, poles, and other equipment caused several fires in Northern California last year, Johnson added. This year, PG&E planned to pre-emptively cut off power when the risk of wildfires was extreme.
On Tuesday, PG&E filed an 8-K document with the Securities and Exchange Commission disclosing that the utility had withdrawn all of the cash available from its revolving credit lines, Utility Dive’s Gavin Bade reported. “In a note to clients, Julien Dumoulin-Smith, a Bank of America-Merrill Lynch analyst, said the utility assured his firm that it is not preparing a bankruptcy filing,” he wrote.
In the midst of mounting financial liabilities, PG&E’s shares dropped more than 20% on Wednesday, Ivan Penn and Peter Eavis reported in the New York Times. They cited a Citigroup estimate that PG&E’s exposure to liability for last year’s fires is $15 billion. The utility, one of California’s largest, could face at least another $15 billion in claims if they are found responsible for the Camp Fire.
These potential losses could leave PG&E customers on the hook to pay the bill, exposing businesses to higher costs, Penn and Eavis reported. The utility has approximately 16 million customers in Northern and Central California.
“If PG&E does file for bankruptcy, it would be the second time the company has been through the process in less than two decades,” Bade wrote in Utility Dive. “The company last emerged from bankruptcy almost 15 years ago following its filing during the California energy crisis.”
Over the summer, PG&E opposed a California Assembly bill that set the goal of supplying 100% of retail electricity in the state from carbon-free resources by 2045.
A spokesperson for the utility told the Wall Street Journal at the time that lawmakers “put the cart before the horse by approving a long-term procurement mandate that will affect utilities and their customers for more than 25 years without any assurance that the state’s utilities will remain financially stable and able to shoulder these new mandates in the face of growing wildfire risk.”