The seeds have been planted for the possible demise of PG&E and perhaps even a wide swath of PG&E sympathizers in Sacramento.
PG&E could soon find itself on the hook for another $15 billion in wildfire loss liabilities on top of the $30 billion they incurred as the result of aging and improperly maintained equipment that they concede likely caused the Butte County fire in November that killed 86 people, destroyed 14,000 homes, and burned 5,000 other structures. That high profile example of PG&E’s long-term commitment to short-term profits at the expense of customer safety and maintenance is a $30 billion liability.
On Friday the judge in charge of PG&E’s bankruptcy case agreed with litigants of the 2017 Tubbs Fire in the Napa Valley that they can have their day in civil court to present evidence that they contend proves malfunctioning or unsafe PG&E equipment also started that inferno that killed 22 people and destroyed 4,658 homes
The news sent PG&E stock into a free fall as it dropped 25 percent putting the price at $10.67 a share at the close of the market on Monday.
Cal Fire just before PG&E filed bankruptcy had determined there was no evidence the for-profit utility broke state laws or started the Tubbs Fire. Instead they placed the blame on a private electrical system.
In retrospect it looks like one of the smartest moves ever made by a community dealing with a wildfire in real time was the decision by the Butte County Sheriff’s Department to secure what is turning into a crime scene where the Camp Fire inferno started by hiring a private security firm to guard the site while deputies and other department personnel were working around the clock to save lives. That security firm barred PG&E crews from accessing equipment where the fire started. A few months later in a first for a wildfire suspected of being started with PG&E equipment, PG&E brass conceded their equipment likely started the fire that killed 86 customers and nearly wiped the Town of Paradise off the face of the earth.
The lawyers for litigants in the Tubbs Fire contend they have video and other evidence that shows PG&E is culpable for that disastrous wildfire. PG&E firmly denies they started the Tubbs Fire citing the Cal Fire report.
Stock analysts that are paid to look at the whole picture are a bit more pessimistic than PG&E. They get that there is a “significant risk” given the company’s ongoing issues with operating the electrical system, safety, and transparency issues that a jury may decide PG&E should be held responsible for the fire.
Civil jury trials by their nature tend to be crap shoots. A unanimous verdict is not required. The judge could allow a wide array of evidence about PG&E maintenance to be presented including the recently released report the bankruptcy court ordered after the Camp Fire to assess how PG&E was taking steps to reduce wildfire hazards that showed PG&E not doing a stellar job.
Trying to settle this one out of court would be a doozy. The litigants will likely include insurance companies that already aren’t happy with PG&E maneuvering in bankruptcy court and are trying to wrestle control of the company away from the PG&E corporate suite.
Selecting a jury will be an exercise in public relations hell. It may be next to impossible to secure an impartial jury in Northern California. Should PG&E be forced to seek a change of venue to Southern California to protect its interests, it will likely enrage 16 million Northern Californians that are PG&E customers who might think PG&E is shopping for a more favorable venue.
Given the number of wildfires that the south state has, a jury in that part of California may only be marginally more sympathetic to PG&E.
Then there is the real possibility a major wildfire in PG&E territory could erupt during the trial. Worse yet, PG&E may activate its plan to cut off power to urban areas away from fire zones for 2 to 5 days during extreme wildfire conditions. This would send a not-too-subtle message that PG&E has zero confidence in their equipment being functional and safe to operate in extreme wildfire conditions thus underscoring arguments of the litigants.
PG&E could ill afford to settle out of court as it would become open season on PG&E given the victims of other wildfires PG&E is suspected of having had a role in starting would declare open season on the utility.
The courts, that PG&E over the decades have used to effectively string along those they oppose such as the nearly decade old battle to block South San Joaquin Irrigation District from exercising its authority in the State Constitution to take over retail power within its boundaries, will no longer be PG&E’s friend.
Finding ways they could string along such a civil case would backfire spectacularly as it would keep PG&E’s systematic woes front and center in a high profile day-to-day venue making a company already in the throes of bankruptcy viewed as even a greater risk to investors.
If the jury finds them culpable it’s likely the damages they award will be in stick-it-to-them proportions that means even higher liability exposure.
Of course an appeal would weaken PG&E ability to attract investors as it would re-enforce that even as a state propped up monopoly with guaranteed profits that the company has been ineptly run on a scale never seen in the annals of mankind.
PG&E just with the specter of a possible massive civil judgment would be clobbered. It had $9.2 billion in assets at the end of 2018. The two wildfires alone, if they ultimately are found liable in both, could represent $45 billion in liabilities.
Another “oops” would have major consequences in Sacramento for those who tossed a lifeline to PG&E last month instead of acting in the best long term interests of 16 million Californians which would have been to start removing the cancerous head and chopping up the serpent into manageable pieces that could be operated by public concerns that already exist or could be created.
The possibility of a major civil trial tied to a disastrous wildfire second only to the Butte County Fire won’t play well with investors or ratepayers. Investors may vote but not in the sheer numbers as ratepayers. The dim view people have of PG&E — at least outside of the confines of the Capitol where people suck up campaign donations like addicts snort cocaine — crosses party lines, ideological differences, and economic classes. The most unifying force in Northern California is the disdain and distrust people have not for the PG&E line workers but for the Great Gatsby class that waltzes in and out of the PG&E executive suite pushing wheelbarrows of money from platinum grade parachutes after either plundering the company or destroying the lives of ratepayers.
It is clear more than ever that if Sacramento doesn’t move to protect 40 percent of the state’s residents and close to half of the California economy a reaction will make Proposition 13 and the recall election that brought us Arnold Schwarzenegger as governor seem like minor hiccups in terms of backlash at the ballot box.