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After a $6 billion wipeout, Sonoma, Napa county fires still imperil PG&E

FILE - In this Oct. 11, 2017 file photo, a Pacific Gas & Electric crew works at restoring power along the Old Redwood Highway in Santa Rosa, Calif. A report says California utilities have delayed efforts for nearly a decade to map where power lines pose the greatest wildfire risk. The report Sunday, Oct. 22, in The Mercury News comes as the state investigates whether downed power lines owned by Pacific Gas & Electric Co. sparked the deadliest wildfires in California history. (AP Photo/Eric Risberg, File)

MARK CHEDIAK, BLOOMBERG

The 911 calls began before midnight, with reports of downed power lines and exploding transformers. What would swiftly grow into the deadliest wildfires in California history were ablaze -- and fingers were soon pointing at PG&E Corp.

Investigators may never be able to determine what ignited the Wine Country fires, but PG&E, one of the nation's largest utilities, is struggling to fend off catastrophe anyway. The mere suggestion its equipment might be to blame was enough to send shares tumbling, wiping out about $6 billion in value. The stock was trading at $57.14 Friday, down 17 percent since Oct. 9, the first trading day after the fires started.

One reason: Under California law, if it turns out that any PG&E gear provided a spark, the company can be responsible for damages -- even if it did everything by the book. Negligence isn't required.

Investors are spooked, said Deutsche Bank Securities Inc. analyst Jonathan Arnold. "Why would they continue providing capital to a private utility if that utility could be held liable for property damage in a major catastrophe regardless of finding of fault in their operations?"

And if PG&E is found to be directly at fault? Bad blood between the state and its largest power provider runs deep, with the utility cited in previous wildfires and still under review for a 2010 natural-gas pipeline explosion that killed eight people. One legislator has already demanded regulators disband it if its carelessness or neglect is discovered to be the culprit.

"The patience level of California is very low" with PG&E, said Shahriar Pourreza, a Guggenheim Securities analyst. "It's not outside the realm of reason to see a situation where the utility is broken up, sold or taken private."

Investors began dumping the San Francisco-based company's stock on Oct. 12. The first lawsuit came five days later, filed by a Santa Rosa couple who lost their home and contend PG&E failed to maintain and inspect transmission lines.

The suit claims PG&E equipment "came in contact with vegetation and caused a wildfire," without specifying when or where.

The trigger is what the California Public Utilities Commission and the California Department of Forestry and Fire Prevention, known as Cal Fire, are probing. The PUC on Wednesday expanded to eight counties from three the scope of its directive that PG&E "preserve all evidence" in the fires' paths, and increased the number of wildfires to 15 from seven.

While investigators are looking at power-line failures as a possible agent, "they may never sort it out," Michael Picker, the PUC president, said last week. There may simply not be enough evidence left in the wake of ferocious flames that consumed more than 245,000 acres and claimed 42 lives.

PG&E has said it won't speculate about what set the multiple conflagrations off. "What caused them? The simple answer is we don't know yet," Chief Executive Officer Geisha Williams wrote in an op-ed for the San Francisco Chronicle. She did note, though, that there were "extreme gusts" of wind in Northern California and quoted a Cal Fire official who said winds contributed to the worst "fire event" in his 30-year career.

PG&E equipment has been implicated in previous wildfires. Two weeks ago, Cal Fire sued the utility to recover $3.9 million spent containing a 670-acre blaze near Hollister in 2015 that was allegedly ignited when an insulator with a live line broke off a power pole.

The company was found guilty of criminal negligence in a 1994 blaze in the Sierra Nevadas, for failing to trim trees near power lines. It was fined $8.3 million for not maintaining a line that sparked the Butte Fire in 2015, which killed two people; a judge in a lawsuit in that fire said the utility couldn't escape responsibility for damages because of the inherent danger of transmitting electric power near trees, and it didn't matter how much effort PG&E put into vegetation management.

But the disaster most damaging to PG&E's reputation in California was no doubt the deadly pipeline explosion in San Bruno seven years ago. Regulators imposed fines of $1.6 billion, and PG&E was found guilty in federal court of safety violations. When the state was weighing an even larger $2.25 billion penalty, then-CEO Tony Earley warned that such a cost could push the company to the brink of bankruptcy.

Now with the Wine Country fires, Pourreza said, "they are facing a situation here that could turn out to be worse than San Bruno."