CPUC Imposes Record $1.9B Penalty On PG&E For 2017, 2018 Wildfires

The California Public Utilities Commission on Thursday imposed a record $1.937 billion penalty against PG&E Co. for its role in the catastrophic 2018 Camp Fire in Butte County and 16 North Bay wildfires in 2017.

The penalty was unanimously approved by the five members of the San Francisco-based commission in a live-streamed public meeting that was held remotely with commissioners and other participants in various locations.

The penalty adds $262 million to an approximately $1.7 billion penalty settlement agreed to last year by PG&E, the commission’s safety staff, and utility union representatives for violations of regulations.

Commissioner Clifford Rechtschaffen stated, “The scope of the devastation caused by PG&E’s misconduct demands this record penalty.”

The utility said in a statement that PG&E accepts the decision.

“We remain deeply sorry about the role our equipment had in tragic wildfires in recent years. We recognize our fundamental obligation to operate our system safely,” PG&E said.

The utility “will work to implement the shareholder-funded system enhancements and corrective actions called for in the settlement,” PG&E said.

Under the decision, PG&E will not be able to recover $1.823 billion in wildfire-related costs it has incurred or will incur by raising rates for its customers in Northern and Central California. Instead, those costs will be absorbed by the utility’s shareholders.

The penalty also includes a mandate for spending another $114 million on system enhancement initiatives and corrective actions.

But it does not include a requirement for paying an additional $200 million fine recommended in February by CPUC Administrative Law Judge Sophia Park.

The commission’s Thursday decision imposes the fine, but permanently suspends it. The suspension of the fine was recommended by Rechtschaffen last month “to ensure that payment of the fine does not reduce the funds available to satisfy the claims of wildfire victims.”

The decision covers 16 North Bay fires in 2017 for which Cal Fire found that failures in PG&E electrical equipment was the cause, plus the 2018 Camp Fire, which was caused by a broken hook on a transmission tower carrying high-voltage lines in eastern Butte County.

The Camp Fire took the lives of 84 people and the North Bay fires for which PG&E was found responsible killed 22 people. Another 22 people died in the 2017 Tubbs Fire in Sonoma County, for which PG&E has not been found liable.

PG&E expects to be able to deduct $1.675 billion of the penalty on its federal and state income taxes, according to the commission’s written ruling. But the decision provides that any tax savings associated with shareholder-funded operating expenses required by the settlement will be returned to PG&E customers and not to shareholders.

The CPUC said the amount of these savings is uncertain, but said PG&E has estimated it could be $425.5 million.

PG&E is currently in Chapter 11 bankruptcy proceedings in U.S. Bankruptcy Court in San Francisco, seeking to have a financial reorganization plan approved before a June 30 deadline for participating in a state insurance fund to cushion utilities from future wildfire claims.

The utility’s proposed bankruptcy exit plan would include a trust fund of up to $13.5 billion for victims not compensated by insurance, $11 billion for insurance companies that paid claims and $1 billion for local governments.

In 2015, the CPUC imposed a then-record $1.6 billion penalty on PG&E for a fatal natural gas pipeline explosion in San Bruno in 2010.