California Imposes Record $1.9 Billion in Penalties Against PG&E for Role in Wildfires

The California Public Utilities Commission on May 7 approved a settlement imposing $1.937 billion in penalties against Pacific Gas and Electric Company for its role in causing the catastrophic wildfires in 2017 and 2018. The decision permanently suspends the utility’s obligation to pay a $200 million fine, so that the payment does not reduce the funds available to satisfy wildfire victims’ claims. Tax savings from the operating expenses related to the agreement, which PG&E estimates at $425.5 million, will be returned to the utility’s customers. PG&E must emerge from bankruptcy by June 30, the deadline set forth by legislation enacted last July, for participation in a newly-established wildfire fund.

The settlement resolves all issues in the commission’s investigation concerning penalties and remedies that should be imposed on PG&E for the role of its electrical facilities in igniting wildfires in its service territory. Resolving this investigation is an important step for PG&E to emerge from bankruptcy.

The penalties include more than $1.82 billion in disallowances for wildfire-related expenditures, meaning that shareholders will bear those expenses which the company would otherwise seek to recover from customers. PG&E will pay $114 million in system enhancement initiatives and corrective actions to further public safety measures. Disallowances of cost recovery, are expected to result in about 3 percent savings for PG&E residential customers in 2021 and beyond.

Last January, PG&E filed to reorganize under Chapter 11 of the U.S. bankruptcy code to deal with billions of dollars in potential liability arising from the 2017 and 2018 Northern California wildfires. In June 2019, the commission opened a formal investigation into the utility’s operations in connection with its electric facilities that were involved in igniting the fires, and to determine the penalties for violations. PG&E subsequently pled guilty to 84 counts of involuntary manslaughter for its role in causing the 2018 Camp Fire that originated in Butt County destroying more than 150,000 acres.