Stunning admission: PG&E says its equipment likely to blame for Camp Fire

San Jose Mercury News (CA)

Feb. 28-- Feb. 28--In a startling admission that could further impact PG&E's future, the utility told federal regulators Thursday that it believes its equipment will be found to have caused the Camp Fire, an inferno that scorched Butte County in November 2018 and became the deadliest and most destructive fire in California history.

That grim prognosis -- PG&E's first official acknowledgement of potential fault -- was contained in the company's fourth-quarter and full-year financial report released Thursday.

"The company believes it is probable that its equipment will be determined to be an ignition point of the 2018 Camp Fire," PG&E stated. The fire consumed nearly 14,000 homes, essentially leveling the town of Paradise, and killed 85 people who could not escape the fierce flames that overwhelmed the communities along the Feather River Canyon.

In recent years, financial, credibility, legal and liability woes have mounted dramatically for the utility, which already was a convicted felon after being found guilty for crimes it committed before and after a fatal natural gas explosion caused by PG&E that killed eight people and destroyed a San Bruno neighborhood in 2010. The company has also been found responsible for starting North Bay wildfires in 2017 that killed 22 people.

Third-party claims connected to the Camp Fire now total at least $10.5 billion, while claims arising from the 2017 infernos have reached the $3.5 billion mark, including a $1 billion increase during the final three months of 2018, PG&E stated. Through the end of 2018, PG&E's insurance had covered just $1.38 billion of the company's expenses and liabilities from the Camp Fire disaster, and only $842 million from the 2017 infernos.

On Jan. 29, confronted by the strain of estimated wildfire-related liabilities that could reach $30 billion, along with other debts, PG&E filed for a Chapter 11 bankruptcy.

Steven Weissman, a professor with UC Berkeley's Goldman School of Public Policy and former California Public Utilities Commission law judge and policy adviser, noted PG&E had signaled before Thursday's disclosure that it could be liable for the Camp Fire. The bigger question, he said, remains to be decided between the bankruptcy court and the utilities commission of how the estimated $10 billion liability is shared between the company and its ratepayers.

"If the utility is found liable and can't recover (the $10 billion) from ratepayers, that would certainly represent by far the largest disallowance that's ever occurred as far as I know for any utility in the U.S.," Weissman said. "It's going to be very challenging for PG&E to be able maintain its credit rating and keep shares of its stock high enough that it can successfully offer more shares.

"On the other hand," Weissman continued, "if ratepayers had to absorb that, it would lead to a very dramatic increase in utility rates, one that undoubtedly would lead to challenges for people on fixed or limited incomes, so that would be a very serious problem."

Families afflicted by the fire already fear they will be shortchanged in the bankruptcy process.

"There's 85 deaths and untold suffering," said Gary Smith Jr., whose uncle Larry Smith died in the Camp Fire. "If they don't step up and admit their faults and get right what needs to be done, I hope there's an upswell of people against business-as-usual and letting them hide behind bankruptcy laws."

It's unknown how PG&E's admission will affect its ongoing criminal probation stemming from the San Bruno gas explosion. U.S. District Judge William Alsup, who is overseeing that case, has been highly critical of the company for its role in sparking several deadly fires, and is considering whether to add extensive and costly steps for the utility to undertake before it can meet its probation obligations.

The admission by PG&E, even if the company's expectations are formally confirmed by fire investigators, may provide only cold comfort for the victims.

"Everyone is concerned that the fire victims are not going to be fully compensated for their losses in the Camp Fire," said Paradise Mayor Jody Jones, who also lost her home in the inferno. "I don't think anybody is going to be made whole because of the bankruptcy."

Julian Martinez, a Paradise resident, commended PG&E for admitting its potential role in causing the Camp Fire.

"It is better to own up to mistakes so that problems can be addressed and resolved," Martinez said.

In its bankruptcy filing, PG&E listed $51.69 billion in debts and is hoping to ward off its creditors until it can reorganize its shattered finances.

"It's unfortunate that PG&E's equipment may have started the worst fire in California history," said state Sen. Jerry Hill, whose district includes parts of Santa Clara County and San Mateo County and contains San Bruno. "But at the same time, PG&E's bankruptcy may prevent the victims of that fire from receiving just compensation."

PG&E pointed to four key developments for the new assessment of its involvement in the Camp Fire, which is being investigated by both the state Department of Forestry and Fire Protection (Cal Fire) and the state Public Utilities Commission.

--Cal Fire has posted coordinates on its website for the Camp Fire origin that are near a PG&E transmission tower on the company's Caribou-Palermo complex of transmission lines, stating the blaze began at 6:33 a.m. on Nov. 8, 2018.

--At 6:15 a.m., the Caribou-Palermo line de-energized, and at 6:30 a.m., a PG&E employee reported that a fire was burning near the tower.

--At 6:45 a.m on Nov. 8, nearby PG&E facilities known as the Big Bend Circuit experienced a power failure.

--Later in November, PG&E observed an array of damage at the Caribou-Palermo transmission tower, including broken equipment, signs of worn components and a flash mark.

San Francisco-based PG&E recorded a $10.5 billion pre-tax accounting expense, formally known as a charge, connected to claims arising from the Camp Fire that was recorded against the company's financial results for the fourth quarter of 2018 as well as all of 2018.

In addition, the company also took a $1 billion pre-tax charge linked to claims arising from the October 2017 infernos in the North Bay Wine Country and nearby regions. That was in addition to a previous charge of $2.5 billion for those blazes. The new charge was specifically connected to the Atlas and Cascade fires of 2017.

The Caribou-Palermo circuit has been taken out of service in the wake of the Butte County firestorm. The 56-mile line was de-energized in December 2018.

Paradise Mayor Jones wondered whether PG&E has been diligent enough in keeping the Caribou-Palermo in good working condition.

"If it is determined that PG&E did not properly maintain these lines, they need to be held accountable," Mayor Jones said.

Also of concern, according to Weissman, are PG&E's long-stalled efforts to repair and replace equipment on the Caribou-Palermo circuit. Of particular concern is that, after being warned in a 2013 assessment by the North American Electricity Reliability Corp., or NERC, that significant upgrades were needed on the line, PG&E didn't schedule repairs until December 2018 -- weeks after the Camp Fire erupted.

It wasn't until July 2017 that PG&E proposed to the Federal Energy Regulatory Commission that a $30.3 million program be launched to ensure that power lines didn't contact the ground or make contact with towers or other lines on the Caribou-Palermo circuit.

"At a minimum, the fact that PG&E has been delaying compliance with its obligations under the NERC directive, it raises questions as to whether PG&E is adequately staffing its work in this area," said Weissman.

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