Pacific Gas & Electric stock price falls ahead of lawsuits by California fire victims
19 November 2018
The admission by California’s biggest power company that it may be to blame for at least one of the deadly fires ravaging the state sent company stock prices crashing by more than 60% compared to its pre-fire level. PG&E told the US Securities and Exchange Commission on November 13 that its equipment may have sparked the Camp Fire in Northern California, the worst fire in the state’s history in terms of fatalities.
"While the cause of the Camp Fire is still under investigation, if the Utility's equipment is determined to be the cause, the Utility could be subject to significant liability in excess of insurance coverage," the company said in the document filed with the SEC, which was obtained by CNBC.
That would "have a material impact on PG&E Corporation's and the Utility's financial condition, results of operations, liquidity, and cash flows," the document said.
On November 14, PG&E was hit with the first of what is likely to be many lawsuits alleging that the fires were the result of negligence and that the utility was more interested in boosting profits and salaries than investing in infrastructure.
The suit in San Francisco County Superior Court alleges that PG&E failed to properly maintain, repair and replace its equipment and that its “inexcusable” behaviour contributed to the cause of the Camp Fire.
Before that blaze broke out, PG&E warned customers it might turn off power in some areas because of the high risk of igniting a wildfire. The suit alleges the decision not to proceed with a power shutdown despite its own recognition of impending hazardous conditions was partially responsible for starting the fire.
On the morning of November 15, authorities said the Camp Fire had been responsible for 56 deaths with 130 other people still unaccounted for. The blaze has destroyed nearly 9,000 homes, including the town of Paradise, and forced at least 52,000 people to evacuate.
In anticipation of the expected lawsuits, PG&E has already drawn down $3 billion from its credit line, CNBC reported.
Investors are watching for clues about whether California’s government will step in to save PG&E should it eventually be found responsible for the fire and should any potential liability exceed the utility’s resources.
California Public Utilities Commission President Michael Picker told Reuters that utilities must be able to borrow money cheaply in order to properly serve ratepayers. Similar comments from Picker a day earlier caused PG&E’s stock to surge in after-hours trading, but fell back again on the news that a second outage could have been responsible for a separate Camp Fire outbreak.
The company’s stock had slumped more than 60% since the wildfire broke out on fears that without help from California’s government, the utility could go bankrupt should it eventually be found responsible.
PG&E is still dealing with 200 or so lawsuits from the 2017 wildfires, which also caused a number of fatalities.
The California Department of Forestry and Fire Protection blamed PG&E equipment for starting at least 16 of the 2017 fires, which could cost the utility up to an estimate $15 billion in damages.
PG&E CEO Geisha Williams told stockholders on November 5 that she would once again try to change a state policy called “inverse condemnation,” which holds utilities responsible for any damage done by their equipment, even if they have done nothing intentionally wrong.
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