June 21 -- PG&E will be forced to endure a $2.5 billion charge to cover its potential liability in several — but not all — of a series of lethal infernos that scorched the North Bay Wine Country and nearby regions, the embattled utility disclosed Thursday.
The mammoth scope of the charge suggests financial pressures have begun to mount on PG&E, which, in a separate matter, has been branded a convicted felon for crimes it committed before and after a fatal natural gas explosion that the utility caused and resulted in eight deaths in San Bruno. PG&E intends to take the charge in the current fiscal quarter, which is due to end on June 30.
San Francisco-based PG&E made it clear Thursday the company blames a California legal and regulatory doctrine known as inverse condemnation as a big reason it’s landed in a hazardous financial situation in the wake of the deadly North Bay wildfires.
Multiple theories of litigation are in play, according to PG&E, including negligence and California’s policy of allowing inverse condemnation to determine liability. Under inverse condemnation rules, PG&E and other major power companies in California could be strictly liable for property damages and attorneys’ fees if its equipment was a substantial cause of a fire, even if the utility followed established inspection and safety rules.
“A flawed policy of inverse condemnation” is how Geisha Williams, PG&E’s chief executive officer, described the California legal theory during a conference call Thursday with analysts to discuss the huge financial charge.
PG&E executives have vowed to wage a multi-front battle to upend rules arising from the inverse condemnation policies. Some PG&E critics have warned that PG&E wants to pave a smoother path to saddle its customers with higher monthly power bills to ease its financial liability from the wildfires.
It’s also possible that even more massive financial accounting charges loom to help PG&E cover its liabilities from the wildfires.
State fire investigators have issued rulings on just 14 of the blazes, which occurred in October 2017 — and have not issued a determination regarding the cause of the destructive Tubbs Fire.
On June 8, PG&E was deemed to bear a measure of responsibility for blazes in Sonoma, Napa, Mendocino, Humboldt, Butte and Lake counties because its equipment and facilities were involved in 12 of the fires, according to the state Department of Forestry and Fire Protection, known as Cal Fire. In late May, Cal Fire determined PG&E was responsible for four blazes in Nevada and Butte counties that occurred in October.
“The charge is based on the low end of liability estimates,” Jason Wells, PG&E’s chief financial officer, said during the conferenced call. “We are unable to reasonably estimate the high end of the range.”
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