Dive Brief:
- Pacific Gas & Electric (PG&E) parent company PG&E Corp recorded a net loss of $7.7 billion in 2019, the company announced on Tuesday, reflecting a $5 billion pre-tax charge for settling claims associated with the 2015, 2017 and 2018 Northern California wildfires.
- The company expects to emerge from bankruptcy by June 30 — but it still faces risks, including potential liabilities from the Kincade Fire, which occurred after it filed for bankruptcy and could materially affect its financial condition, PG&E Corp said in its 10-K filing with the U.S. Securities and Exchange Commission.
- Wildfire risks aren't going anywhere, even if PG&E exits bankruptcy, Helen Kou, an analyst at BloombergNEF, told Utility Dive. Utilities need to look at solutions around grid management, like microgrids and back-up power, among other measures.
Dive Insight:
PG&E's $7.7 billion loss in 2019 compares to a $6.9 billion net loss attributable to common shareholders the previous year. Its net loss for the fourth quarter of 2019 specifically came in at $3.6 billion, or $6.84 per share.
The company's financials were also affected by a proposed settlement under the CPUC's order-instituting investigation into the 2017 wildfires, a penalty for violating locate-and-mark protocols, and the cost of accelerated inspections of its infrastructure.
The company filed for bankruptcy last January after facing an estimated $30 billion in liabilities from a series of wildfires in Northern California caused by its power lines. PG&E plans to exit bankruptcy by June 30 — the deadline set by Assembly Bill 1054 in order to participate in California's new wildfire insurance fund — with an updated plan that would refresh its board of directors and settle with victims of previous wildfires to the tune of more than $25 billion.
"We have resolved essentially every consequential issue within the Bankruptcy Court's jurisdiction, most notably reaching a settlement with wildfire victims. Our focus now is on working with all key stakeholders, including elected officials and state regulators, to position PG&E for emergence as a financially stable company with a renewed and rigorous focus on safe operations and customer service, while meeting California's energy needs and goals in a changed climate," PG&E Corp President and CEO Bill Johnson said in a press release.
However, the company still faces several financial risks — including potential liabilities from the Kincade Fire, which burned nearly 78,000 acres of Northern California last October. The California Department of Forestry and Fire Protection (CAL FIRE) is investigating the origin of the fire, but PG&E could be saddled with liabilities that exceed its insurance coverage if it is found to have caused it, the company reported in its 10-K filing.
The company is responding to data requests from the CPUC's Safety and Enforcement Division regarding the Kincade Fire, it said in the SEC filing, and the findings could make it the subject of more investigations and lawsuits. And regardless of CAL FIRE's eventual investigation report, potential claims from the Kincade Fire could hinder PG&E's bankruptcy plan and affect its ability to participate in California's wildfire fund.
PG&E still faces a lot of uncertainty, including whether it can get out of bankruptcy under its current reorganization strategy, according to Andrew Campbell, executive director at the Energy Institute at Haas, University of California, Berkeley. The best-case scenario for the company is to exit bankruptcy in time to access California's wildfire fund and hope that any potential liabilities from the Kincade Fire and future wildfires are small enough to be covered through a combination of insurance and the fund.
But under the worst-case scenario, a large fire this year could disrupt the viability of its reorganization plan.
"Even after 2020, a big fire could exhaust the wildfire fund and so … a bad-scenario is PG&E goes back into bankruptcy again because of wildfire liabilities," he told Utility Dive.
Policymakers are looking at different solutions to address wildfire risks, including back-up power systems, microgrids and undergrounding power lines, Kou said.
"All of those proposals and approaches will need to be considered and all of them have different trade-offs," she continued.
In addition, PG&E could face financial risks from its public safety power shut-off program, which involves proactively de-energizing portions of its system during times of high fire risk, the company said in its 10-K filing. The shut-offs could potentially affect 5.4 million electric customer accounts, and have faced widespread criticism from California Gov. Gavin Newsom, D, lawmakers and regulators.
In November, the CPUC issued an order asking PG&E to show cause as to why it shouldn't be fined for violating communication protocols during the shut-offs in 2019. And last month, SB 378 — proposed legislation that would place hourly fines on utilities for shut-offs that the CPUC determines are not prudent — was passed by the state Senate.
