PG&E asked last month to hike bills over California wildfires
SACRAMENTO — A utility facing severe financial pressure amid speculation its equipment may have sparked a deadly Northern California wildfire asked U.S. energy regulators last month for permission to raise its customers' monthly bills to harden its system against wildfires and deliver a sizable increase in profits to shareholders.
In an October filing with the Federal Energy Regulatory Commission, Pacific Gas & Electric Co. laid out a variety of dangers confronting its transmission lines running through Northern California, saying its system faced a higher risk of wildfires than any other utility.
"The implications of PG&E's exposure to potential liabilities associated with wildfires are dramatically magnified," the filing said. "Overcoming the negative financial impact of any significant damages that might ultimately be attributed to PG&E will require an ongoing commitment of capital from investors."
San Francisco-based PG&E — one of the nation's largest electric utilities serving most of Northern and Central California — made the request a month before the Camp Fire broke out Nov. 8 and quickly ballooned into the deadliest U.S. wildfire in a century. No cause has been determined, but speculation has centered on PG&E, which reported an outage around when and where the fire ignited.
The company has lost $15 billion in market value, its shares plummeting 60 percent in a week.
PG&E already faced financial pressure from its suspected role in a series of deadly fires in California wine country last year. The company's filing last month said it needed to boost revenue to keep investors from fleeing, noting that its credit rating was downgraded and its shares had plummeted since the 2017 fires.
Wildfires threaten PG&E's ability to attract and maintain the investment necessary to support its system and meet California's clean energy goals, company spokeswoman Lynsey Paulo said.
"PG&E's electrical system is not immune from the impact of increases in the frequency and severity of extreme weather," Paulo said.
California Public Utilities Commission President Michael Picker sought to calm financial markets late Thursday with a statement noting "an essential component of providing safe electrical service is the financial wherewithal to carry out safety measures." But he added that he's expanding an investigation of PG&E's safety culture to look at the company's "corporate governance, structure and operation."
PG&E shares rebounded in after-hours trading, regaining Thursday's losses but remaining far below their value when the fire broke out.
The company said in its rate-hike request that the extreme wildfire risk justified a higher profit than an average utility is allowed to earn. It cites a California legal standard holding utilities entirely liable for damage caused by their equipment regardless of whether the company was negligent.
A state law approved this year makes it easier for the company to raise rates to pay off lawsuits, but the company says it still faces high risk and got no relief for fires that started this year.
The precipitous drop in the stock price shows investors are taking into account not just the fires but also the risk of future wildfires for which the utility could be responsible, analysts said.
"It's going to be very difficult for PG&E to finance its needs in the short run, so we think at this point, regulators need to step in and give the market some reassurance," said Travis Miller, a strategist at Morningstar.
PG&E is asking for a 9.5 percent increase in transmission charges — the cost of high-voltage lines that move power across large distances. That amounts to about $1.50 more per month for the average residential customer, Paulo said.