Shares of PG&E fell more than 4 percent Monday after Cal Fire blamed the electric utility’s equipment for several major Northern California wildfires in October that resulted in fatalities and the loss of thousands of structures.
It comes as there are discussions going on in the state legislature to create a disaster fund for investor-owned utilities that would increase the insurance levels for extreme events such as wildfires. California has a history of power company lines becoming the sources of fires.
In a statement issued late Friday, Cal Fire said its investigators determined that a dozen wildfires in six counties, including the Nuns, Redwood and Atlas fires, were caused by PG&E’s “electric power and distribution lines, conductors and the failure of power poles.” It follows the state agency’s announcement last month that four other wildfires in last year’s so-called October Fire Siege were due to “trees coming into contact with power lines.”
The insured losses from the October wildfires statewide are estimated at nearly $10 billion, according to the California Department of Insurance. There were numerous fatalities and extensive loss of structures during the so-called wine country or North Bay wildfires.
“California is one of the only states in the country where the courts have applied inverse condemnation liability to events associated with investor-owned utility equipment,” PG&E said in a statement Friday. “This means PG&E could be liable for property damages and attorneys’ fees even if we followed established inspection and safety rules.”
In trading Monday, PG&E stock sank more than 4 percent on nearly triple its average daily volume. The stock has fallen more than 40 percent since the October wildfires.
More than 20 investigators from Cal Fire have been involved in probing the cause of October’s devastating wildfires in Mendocino, Butte, Humboldt, Sonoma, Lake and Napa counties. However, Cal Fire continues to investigate the cause of October’s so-called Tubbs fire in the wine country.
The Tubbs fire was blamed for half of the North Bay fire’s 44 fatalities and the destruction of more than 5,600 structures.
A Cal Fire spokesperson told CNBC on Monday there is “no timeline” on when the investigation report will be issued on the Tubbs fire.
Damage from the Tubbs fire in Santa Rosa could exceed $7 billion, according to some insurance estimates quoted Monday in a report from Morgan Stanley. The Tubbs blaze destroyed entire neighborhoods such as Coffey Park and Fountaingrove.
“The $10 billion number is assuming everybody files a lawsuit and they collect the claims that are within it,” said Patrick McCallum, a lobbyist with McCallum Group who lost his Fountaingrove home in the Tubbs fire in October and heads a coalition of about 6,500 displaced residents and trial attorneys called “Up From the Ashes.”
McCallum is opposing PG&E’s attempt to reform liability rules in the state. “I don’t see the votes right now to do liability reform in the legislature,” he said.
The plan to create a relief fund could be funded in part by the state with money from the cap-and-trade program. Utilities also would pay into the fund, which could operate similarly to the state’s not-for-profit, privately funded and publicly managed earthquake authority.
PG&E also has been pushing the state to reform the current inverse condemnation rules that allow utilities to be held liable for significant damages in disasters such as wildfires. The utility said in a statement Friday that reforming the rules “would not absolve utilities from responsibility. Anyone harmed by these tragic wildfires has the ability to pursue a negligence claim in court.”
PG&E didn’t respond to a request for comment Monday.
In March, California Gov. Jerry Brown suggested that lawmakers should “update liability rules and regulations for utility services,” citing extreme weather and climate change. He noted that eight of the state’s most destructive wildfires have taken place in the past five years.
Overall, more than 11,000 firefighters from 17 states and Australia were on the lines during the peak of the October wildfires in Northern California’s wine country.
Attorneys who specialize in wildfire lawsuits say PG&E — the largest investor-owned utility in California — could be on the hook for billions of dollars in damages in the deadly Northern California wildfires.
“The largest investment risk they have is wildfire,” said Eric Ratinoff, a Sacramento attorney representing about 200 families in the wine country fires. “Yet they are just not proactive but talk a good game.”
There are state regulations requiring strict vegetation management practices by utilities such as PG&E and they include standards for keeping vegetation clear of power lines.
“We look forward to the opportunity to carefully review the Cal Fire reports to understand the agency’s perspectives,” PG&E said in a statement Friday. “Based on the information we have so far, we continue to believe our overall programs met our state’s high standards.”
According to the San Francisco-based utility, the company “meets or exceeds regulatory requirements for pole integrity management, using a comprehensive database to manage multiple patrol and inspection schedules of our more than two million poles.”
PG&E said it maintains an “industry-leading” program involving vegetation management that includes inspecting and monitoring each and every overhead electric transmission and distribution line every year, and sometimes several times. It estimated it prunes or removes around 1.4 million trees every year.
Cal Fire said Friday the dozen wildfires linked to PG&E equipment include the so-called Redwood fire in Mendocino County that started Oct. 8 and burned more than 36,500 acres. There were nine fatalities linked to this blaze, which Cal Fire said “started in two locations and was caused by trees or parts of trees falling onto PG&E power lines.”
Another wildfire Cal Fire linked to PG&E is the so-called Atlas fire, started Oct. 8 in Sonoma County, and responsible for charring more than 51,600 acres, destroying 783 structures and killing six people. The state fire agency said it determined the Atlas blaze started in two locations, including one when “a large limb broke from a tree and came into contact with a PG&E power line” and a second when “a tree fell into the same line.”
PG&E equipment was linked to five other fires, including the Norrbom, Adobe, Patrick, Pythian and Nuns fires, according to Cal Fire. It said those blazes merged in Sonoma and Napa counties and burned nearly 57,000 acres, destroyed 1,355 structures and were blamed for three fatalities.