Embattled Utility Fighting Probation Case in Court
By Hudson Sangree
California fire investigators on Thursday said Pacific Gas and Electric was not responsible for the Tubbs Fire, a catastrophic blaze that leveled parts of the city of Santa Rosa in October 2017.
The blaze was a major source of the utility’s anticipated $30 billion in wildfire liability that led it to announce it would file for bankruptcy by Tuesday.
The news came as PG&E continued to fight proposed new probation requirements stemming from the San Bruno gas line explosion in 2010 and came under fire from shareholders who said it doesn’t need to seek Chapter 11 reorganization.
“The news from Cal Fire [the California Department of Forestry and Fire Protection] that PG&E did not cause the devastating 2017 Tubbs fire is yet another example of why the company shouldn’t be rushing to file for bankruptcy, which would be totally unnecessary and bad for all stakeholders,” BlueMountain Capital Management, a major PG&E shareholder, said in a news release Thursday afternoon.
BlueMountain has argued in open letters to PG&E that the company is not insolvent and should postpone its bankruptcy plans. Shareholders would likely lose out to creditors in a bankruptcy proceeding. The firm said Thursday it was planning to run a slate of candidates to replace PG&E’s current board members in May.
PG&E’s battered stock price shot up after Cal Fire’s announcement, going from around $7/share to $14/share in trading Thursday, but the utility remained wary about its prospects.
“Regardless of today’s announcement, PG&E still faces extensive litigation, significant potential liabilities and a deteriorating financial situation, which was further impaired by the recent credit agency downgrades to below investment grade,” the utility said Thursday. “Resolving the legal liabilities and financial challenges stemming from the 2017 and 2018 wildfires will be enormously complex and will require us to address multiple stakeholder interests, including thousands of wildfire victims and others who have already made claims and likely thousands of others we expect to make claims.”
California Gov. Gavin Newsom held a press conference in the state Capitol on Thursday to address the finding.
PG&E may not be liable for the Tubbs fire, Newsom said, but “it was found liable for 17 other fires in 2017.” (Cal Fire found PG&E equipment was a cause of 17 major Northern California fires in October 2017.)
“This obviously begs the question, ‘Now what?’” the governor said. “Do we anticipate that PG&E will move forward … as they previewed this next week to file bankruptcy? That is an open-ended question, and that’s a question for PG&E.”
Cal Fire said a private landowner’s electrical equipment had sparked the Tubbs Fire, which killed 22 people, destroyed 5,636 structures and burned 36,807 acres. The fire was one of 21 major wildfires that tore through Northern California during days when high winds whipped the blazes into fast-moving infernos.
“After an extensive and thorough investigation, Cal Fire has determined the Tubbs Fire, which occurred during the October 2017 fire siege, was caused by a private electrical system adjacent to a residential structure,” the agency said. “Cal Fire investigators did not identify any violations of state law … related to the cause of this fire.”
That was not the case for the San Bruno gas explosion and fire, which killed eight residents and wrecked a neighborhood in suburban San Francisco. Jurors in 2016 convicted PG&E of six felony counts for violating safety regulations and obstructing an investigation. The company has been on probation, with a federal judge and a monitor overseeing it, since January 2017.
The judge in the case recently pressed PG&E and federal officials for information on whether the utility may have violated the terms of its probation by sparking other wine country fires. The utility is also suspected of causing the Camp Fire, the deadliest fire in state history, which killed 86 people and wiped out the town of Paradise in November.
On Jan. 9, Judge William Alsup, of the U.S. District Court in San Francisco, ordered PG&E and federal prosecutors to show cause why he should not impose sweeping new probation conditions on PG&E. (See Judge, Gov., CPUC and Protesters Weigh in on PG&E Mess.) The proposed conditions include requiring the utility to inspect its entire grid, to trim trees and branches encroaching on wires, and to fix problematic lines, poles and transformers — all before the start of the 2019 fire season this summer.
PG&E could only deliver electricity through parts of its system deemed safe under the judge’s plan, which Alsup said is intended to “reduce to zero” the number of wildfires sparked by PG&E equipment during the coming fire season.
Last week, Alsup asked PG&E and government prosecutors to comment on his tentative finding that the “single most recurring cause of the large 2017 and 2018 wildfires attributable to PG&E equipment has been the susceptibility of PG&E’s distribution lines to trees or limbs falling on them during high-wind events.”
That has often happened in rural areas where uninsulated power conductors are pushed together by falling trees or limbs, dropping electrical sparks on the vegetation below. During California’s dry wildfire season, “these electrical sparks pose an extreme danger of igniting a wildfire,” the judge wrote.
Alsup scheduled a hearing for Jan. 30 to weigh the matters and required the parties to file their briefs by Wednesday.
In its response filing with the court, PG&E argued it has more than 100,000 miles of overhead lines, making Alsup’s plan virtually impossible to comply with and extremely expensive, even if it could. Inspections, repairs and extensive tree clearing could cost between $75 billion and $150 billion, requiring PG&E to quintuple for one year the rates it charges its 16 million California customers, the utility contended.
The judge’s plan could also undermine the regulatory authority of FERC and the California Public Utilities Commission, PG&E argued.
“The proposed modifications involve a host of policy decisions about how to address safety, reliability and cost, and, in particular, how to do so against the backdrop of both drastic climate change and a complex state and federal regulatory framework that requires the delivery of electricity to everyone in California through an interconnected grid,” the utility’s lawyers wrote. “The court’s proposal would make these policy decisions in the context of a probation hearing, even though regulators are currently grappling with these very same issues.
“And the proposed modifications would do so by giving PG&E only two options: either remove an extraordinary number of trees across every segment of its electric grid within six months, or instead de-energize transmission and distribution lines, shutting off power across Northern California and potentially beyond.”
Government lawyers said they too were worried about the court impinging on federal and state authority and did not support the proposed probation changes.
“While the United States shares the court’s interest in imposing conditions of probation aimed at ensuring that the inhabitants of the Northern District are protected from the death and destruction caused by wildfires, on this record, the United States is not in a position to address the feasibility of implementing the conditions and the chance that they will effectuate that goal,” lawyers from the U.S. Attorney’s office wrote.
“As a threshold matter, the government does not believe the record supports imposition of the proposed conditions as they are currently drafted. Moreover, as drafted, the court’s proposed conditions may overlap with state and federal regulations (e.g., the Federal Power Act and the California Public Utilities Code) and touch on the province of state and federal regulators (e.g., California Public Utilities Commission and the Federal Energy Regulatory Commission).”
They recommended that the judge ask the federal monitor overseeing PG&E to review and evaluate the proposed conditions.