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California Assembly considers PG&E wildfire ‘bailout’

East Bay representative’s bill tries to shield utility from potential bankruptcy

Structures Destroyed By California Wine Country Wildfires Rises To 8400
Santa Rosa residents sift through the remains of their homes in October 2017.
Photo by Justin Sullivan/Getty Images

Fire investigators concluded earlier this year that faulty PG&E equipment triggered many of last year’s devastating Northern California wildfires.

Now, the California State Assembly is considering a bill that might allow the company to pay off fire-related lawsuits with state-authorized bonds, provoking cries of “bailout” from critics.

The proposed bill, AB 33, actually predates the fires themselves, first introduced by Hayward Representative Bill Quirk (D) in December 2016.

However, new amendments introduced last week radically changed the bill’s contents and could potentially relieve PG&E of certain financial costs of last year’s fire season:

The potential liability from the 2017 northern California wildfires requires immediate legislative action. [...] The magnitude of potential damage claims undermines Pacific Gas and Electric Company’s ability to invest in the infrastructure necessary to meet the state’s aggressive wildfire mitigation and clean energy plans and has the potential to create an unsustainable hardship for customers if passed on in the form of higher rates through the typical ratemaking processes.

The potential liabilities and uncertainties surrounding the timing and extent of cost recovery create an imminent threat to the utility’s financial stability and ability to cost effectively carry out its public service mission.

Under the present version of the bill, the state may help PG&E “securitize costs related to the 2017 northern California wildfires” with bonds. “Costs” in this case refers to the potential damages from fire-related lawsuits.

As the San Francisco Chronicle notes, “those bonds would be paid off by the utility’s customers, prompting critics to label the legislation a ‘bailout.’ ”

Quirk’s office characterized AB 33 as an attempt to ensure that fire victims are compensated. The bill itself suggests that PG&E faces potential bankruptcy without state help.

In May of this year, Cal Fire concluded that, after a six-month investigation, four of the 2017 NorCal fires “were caused by trees coming into contact with power lines.”

Two weeks later, another report said that an additional twelve fires “were caused by electric power and distribution lines, conductors and the failure of power poles.”

For legal liability purposes, we should note that these findings don’t mean that PG&E will be found criminally negligent; the utility company faces potentially billions of dollars in fees and damages from lawsuits and regulatory reprisal.