California Utility Takes $2.5B Charge for Wildfires

"Years of drought, extreme heat, and 129 million dead trees have created a 'new normal' for our state that requires comprehensive new solutions," PG&E Corporation CEO and President Geisha Williams said.

San Francisco-based PG&E Corporation and its subsidiary, the utility Pacific Gas and Electric Company, announced June 21 that they will record an estimated pre-tax charge of $2.5 billion for the quarter ending June 30, 2018, that is associated with wildfires in California.

The company filed a Form 8-K with the U.S. Securities and Exchange Commission on June 21, and company officials discussed the expected charge on an investor conference later in the day. The company's announcement said that, "in accordance with generally accepted accounting principles, PG&E Corporation and the utility evaluate the range of reasonably estimated losses and record a charge based on the lower end of the range unless an amount within the range is a better estimate than any other amount. The companies are currently unable to reasonably estimate the upper end of the range because there are a number of unknown facts and legal considerations that may impact the amount of any potential liability."

The charge is expected to be recorded in connection with the Northern California wildfires referred to as the La Porte, McCourtney, Lobo, Honey, Redwood, Sulphur, Cherokee, Blue, Pocket and Sonoma/Napa merged fires. PG&E said the charge does not include any amounts for potential penalties or fines that may be imposed by governmental entities and does not include any amounts in connection with any other Northern California wildfires, including the Atlas, 37, Tubbs, Cascade, Maacama, Pressley and Point fires, "because at this time PG&E Corporation and the utility have not concluded that a loss arising from those fires is probable. However, in the future it is possible that facts could emerge that lead PG&E Corporation and the utility to believe that a loss is probable, resulting in the accrual of a liability at that time, the amount of which could be significant."

PG&E Corporation CEO and President Geisha Williams said recording the charge was made necessary because of the state's flawed policy of inverse condemnation and demonstrated the urgent need to reform the policy. 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. "These fires were tragic, and we remain focused on helping communities recover and rebuild. Looking forward, the state, first responders and California's utilities are all in agreement that we must work together to prevent and respond to wildfires and enhance infrastructure resiliency. Years of drought, extreme heat, and 129 million dead trees have created a 'new normal' for our state that requires comprehensive new solutions," Williams said.

The announcement said extreme weather is increasing the number of large wildfires and the length of the wildfire season in California, and that in 2017 alone, CAL FIRE confronted 7,117 wildfires, compared to an average of 4,835 during the preceding five years. Five of the 20 most destructive wildfires in the state's history burned between October and December 2017.

"We are committed to advocating with legislative leaders and policymakers across the state on comprehensive legislative solutions for all Californians, as we collectively seek to meet the challenge of climate change and position the California economy for success," Williams said.

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