Lawsuits, Breakup Talk, and the Possibility of Criminal Charges Hound Utility
By Hudson Sangree
The future of Pacific Gas and Electric is in doubt as the new year begins.
Two months after the Camp Fire — the deadliest wildfire in California history — flared Nov. 8, the utility is facing intense scrutiny from state lawmakers, regulators and a federal judge who is overseeing its probation for the 2010 San Bruno gas line explosion.
Lawsuits have proliferated, blaming PG&E for the Camp Fire, and the company is facing billions of dollars in damages for that blaze and the devastating wine country fires of October 2017.
PG&E’s stock price has plummeted by half since the Camp Fire and by two-thirds since the wine country fires, fueling speculation about its solvency. (See Destructive Fire Drives Down PG&E Stock.)
And in recent weeks, state authorities, including the California Public Utilities Commission, have publicly questioned whether the company should be broken up or have its leadership replaced. (See Camp Fire Prompts Talk of PG&E Bailout of Breakup.)
State Sen. Bill Dodd, a Napa Valley Democrat and one of the authors of a 2018 law, SB 901, that allowed PG&E and other utilities to issue long-term bonds to pay for wildfire liability, said the company needs a major shake-up, starting at the top. Dodd said he was reacting to a Dec. 14 CPUC report that alleged PG&E had falsified safety records for underground gas lines.
“PG&E has demonstrated a pattern of poor management and illegal conduct that has shattered lives across California,” Dodd said in a December statement. “This latest revelation underscores the need for systematic change, which must include change on the board of directors and in the executive suite.”
The senator told RTO Insider Friday that he wouldn’t rule out breaking up PG&E into separate gas and electric divisions. “Everything should be on the table,” he said.
On Friday, NPR reported that even PG&E is considering selling off its gas business to cope with staggering wildfire costs. The report relied on unnamed sources. The utility told NPR it was “reviewing structural options” but did not specifically address the sale of any assets.
PG&E said in a news release Friday that it is engaged in a “board refreshment process” and seeking to recruit new board members with expertise in safety. The utility also said it has “formed a special Board committee that is engaging independent experts to advise on best practices in wildfire safety.” The moves respond to criticism from lawmakers and regulators who have said PG&E needs new leaders to help it cure a flawed safety culture that precipitated two years of catastrophic wildfires.
November’s Camp Fire killed 86 residents in Butte County, destroyed nearly 14,000 homes and leveled the town of Paradise, Calif., population 27,000, in a matter of hours. It followed the wine country fires of 2017, for which PG&E has been partially blamed by state fire investigators, as well as the massive gas explosion in San Bruno, Calif., that killed eight and led to PG&E’s conviction on felony charges. PG&E’s problems continued over the holidays, when Judge William Alsup, with the federal district court in San Francisco, asked the state attorney general’s office to advise him on “the extent to which, if at all, the reckless operation or maintenance of PG&E power lines would constitute a crime under California law.”
The AG responded three days after Christmas with a rundown of the charges PG&E could potentially face, ranging from misdemeanors to murder, should it be deemed to have acted recklessly.
Alsup also required PG&E to provide a thorough account of its role in the Camp Fire and the wine country fires of October 2017. PG&E answered with a detailed description of the problems it experienced with its transmission and distribution lines near the Camp Fire’s point of origin on the morning the fire started and said multiple employees had seen the fire start. (See PG&E Grapples with Line Safety After Camp Fire.)
On Thursday, the judge ordered PG&E to submit more information concerning the Atlas Fire, one of 21 major fires that started Oct. 8, 2017, and burned through large swaths of Napa, Sonoma and neighboring counties. The wine country fires killed 44 people and leveled the northern portion of the city of Santa Rosa, Calif. (The case is No. 3:14-cr—00175-WHA in the U.S. District Court for the Northern District of California.)
“PG&E’s most important responsibility is the safety of the customers and communities we serve,” the utility told RTO Insider in an email Friday. “The cause of the Camp Fire is still under investigation. We are aware of lawsuits regarding the Camp Fire. Our focus continues to be on assessing infrastructure to further enhance safety and helping our customers recover and rebuild.”
Here’s a rundown of where PG&E stands at the start of 2019.
Pacific Gas and Electric is no stranger to criminal charges in cases involving its equipment.
In June 1997, jurors in Nevada County, Calif., found the company guilty of 739 counts of criminal negligence for failing to trim trees near its power lines and sparking the Trauner Fire, which destroyed 12 homes and burned a historic schoolhouse near the Sierra foothills town of Rough and Ready in 1994.
In the San Bruno case, jurors found the company guilty in August 2016 of five felony counts of knowingly violating federal safety regulations by failing to inspect and test its pipelines and one count of obstructing a National Transportation Safety Board proceeding.
In January 2017, U.S. District Court Judge Thelton Henderson slapped the company with the maximum $3 million fine and ordered it to serve five years of probation, saying PG&E’s crimes posed “a great risk to the public safety.” (That was on top of $1.6 billion in fines levied by the state.) The company was placed under a federal monitor.
The probation from the San Bruno sentence is the basis for Alsup’s current inquiries, which began just after Thanksgiving. Under its terms, PG&E must not commit any federal, state or local crimes. Doing so could subject the company to further penalties, and its probation could be revoked, federal prosecutors told Alsup.
There is already some evidence that criminal charges are possible.
Investigators with the California Department of Forestry and Fire Protection (Cal Fire) have said PG&E equipment was to blame for at least 17 of the wine country fires. Cal Fire forwarded 12 of those cases to county prosecutors, who retain discretion about whether to charge PG&E. So far, no charges have been filed.
The AG’s office said in its brief that it wasn’t making any factual findings on whether PG&E committed crimes.
“Determining PG&E’s potential criminal liability, if any, for recent wildfires would require an investigation into the cause or causes of those fires,” the attorney general’s brief said. “If PG&E caused any of the fires, the investigation would have to expand into PG&E’s operations, maintenance and safety practices to determine whether criminal states were violated with the requisite mental intent.”
That mental intent would be measured on a sliding scale from mere negligence to reckless behavior that could constitute manslaughter or implied-malice murder, it said.
Multiple lawsuits — about a half-dozen, according to various news reports — have already been filed against PG&E by survivors and insurance companies for what could add up to $15 billion in damages for the Camp Fire, according to one Citigroup estimate. That comes on top of another $15 billion in damages for many of the wine country fires, Citigroup said.
Allstate, State Farm and USAA filed suits last month in state court in Sacramento over billions of dollars in claims they expect to pay from the Camp Fire, The Sacramento Bee reported Thursday.
In another suit, filed by a prominent San Francisco plaintiffs’ firm, Lieff Cabraser Heimann & Bernstein, two children of Ernie Foss, a disabled man killed while trying to escape the Camp Fire, claim the blaze was started by “unsafe electrical infrastructure owned, operated and (improperly) maintained by PG&E Corporation and Pacific Gas & Electric Company.”
“The catastrophic damage and loss of life was preventable,” the lawsuit alleges. “PG&E’s failing infrastructure and its inadequate efforts to maintain its equipment and mitigate risk have caused tragedy before, and PG&E has been sanctioned a number of times for virtually identical misconduct.”
The complaint cites other instances in which PG&E was fined or held criminally liable for deadly fires and explosions, including the Trauner Fire, the San Bruno explosion and a fatal gas explosion near Sacramento in 2008.
“PG&E’s corporate policy of putting profits over public safety has resulted in catastrophic loss of life and injury to persons and property, including the tragic and unnecessary death of Ernie Foss,” the suit contends.
The Lieff Cabraser suit is likely just the start; other law firms have been busy signing up clients in Butte County.
The wine country suits, also called the North Bay California Fire Cases, have been consolidated under a single judge in San Francisco Superior Court and are slowly working their way toward a trial or settlement. The same will likely happen with the Camp Fire claims.
Regulators and Lawmakers
In early December, CPUC President Michael Picker said state regulators would expand their investigation of PG&E’s safety practices after the Camp Fire. (See CPUC Expands Probe Into PG&E Practices After Deadly Fire.) The investigation began in the wake of the San Bruno explosion.
On Dec. 21 the commission released a scoping memo and ruling regarding the investigation that asked whether the company’s management should be replaced, whether members of its board of directors should resign, and whether the company should be broken up into separate gas and electric divisions.
“PG&E has had serious safety problems with both its gas and electric operations for many years,” it said, citing a long list of disasters and problems for which PG&E had been penalized.
“The future of PG&E may also be impacted by other actors beyond the Commission,” the CPUC noted. “The Legislature, the court appointed Federal Monitor, the various courts considering claims against PG&E, the Federal Energy Regulatory Commission, and the communities served by PG&E all have a role in determining PG&E’s future.”
With the state Legislature returning Monday (Jan. 7), lawmakers will have to determine if legislation is needed to help keep PG&E solvent — for instance, by extending the bond provisions of SB 901 to 2018 fires — or whether the company should be reconfigured after a series of catastrophes that has grown unacceptable, even to many centrist lawmakers. (See California Wildfire Bill Goes to Governor.)
Dodd, for one, said it will be hard for PG&E to make amends, regardless of its legal compliance and restitution to fire victims.
“It’s too little, too late,” the senator said. With so much frustration and anger built up against PG&E, it may be time for the utility to face more serious consequences.
“I’m not sure there’s anything they can do,” he said.