In the first findings in an investigation that could lead to multibillion-dollar liabilities for Pacific Gas & Electric, California investigators have assessed four of last year’s wildfires caused by trees hitting its powerlines, and found PG&E committed legal violations in three of them — but no fault in the fourth and largest.
Friday’s release from the California Department of Forestry and Fire Protection (Cal Fire) focused on four fires in Butte and Nevada Counties, in the Sierra Nevada mountains, which caused no fatalities, rather than on the far more devastating fires in Northern California's wine country, which killed 44 people and led to more than $3 billion in insured property losses.
Of the four, Cal Fire found evidence that PG&E allegedly violated Public Resources Code 4293, which requires adequate clearance between trees and power lines, for three of the fires: The McCourtney Fire and Lobo Fire in Nevada County, which burned nearly 900 acres and destroyed 60 structures; and the Honey Fire in Butte County, which burned 76 acres. All three investigations have been referred to the appropriate county District Attorney’s offices for review, investigators wrote.
But Cal Fire also found “no violations of state law related to the cause” of the La Porte Fire in Butte County, which burned 8,417 acres and destroyed 74 structures, although it was also caused by a power line hitting a tree branch.
Friday’s findings are a relatively minor first report from a much broader set of Cal Fire investigations into the cause of last year’s devastating wildfires, which ranked as the state’s most destructive at more than a million acres.
While utility Southern California Edison is also under investigation for its role in some of last year's fires, the largest and most deadly were in PG&E territory, and many were caused by high winds knocking power lines into trees.
In October, the state opened an investigation into the utility’s share of responsibility for these ignition events, and whether it had violated state regulations on keeping equipment maintained and power line paths clear of dangerous vegetation.
PG&E announced in November that the results could “materially adversely” impact its financial conditions, liquidity and cash flows, as it contemplated spending hundreds of millions of dollars in fire repairs, with total insured losses of $3 billion, and the potential of billions more in liabilities.
PG&E’s market valuation has dropped more than $13 billion since last fall, with wild swings in share price following each new finding — or rumored finding — in the investigation. PG&E shares fell from $44.65 on Friday to $42.40 at the end of Tuesday’s trading day.
PG&E responded to the Cal Fire report in a Friday statement noting that “based on the information we have so far, we believe our overall programs met our state's high standards,” and citing its existing vegetation management and power line and power pole inspection programs.
It also pointed to the unique factors that contributed to the fire — years of drought resulting in millions of dead trees, a wet winter that fed vegetation growth, record-setting summer heat that dried that new growth, and very low humidity and very high winds at the time of the fire.
PG&E also prompted California Gov. Jerry Brown and state lawmakers to address the state’s reliance on a legal principle that could hold utilities liable for damages even if they violated no laws.
“California is one of the only states in the country where the courts have applied inverse condemnation liability to events associated with investor-owned utility equipment. This means PG&E could be liable for property damages and attorneys' fees even if we followed established inspection and safety rules,” it wrote.
Gov. Brown has identified this “inverse condemnation” principle as a danger to California’s utilities and pledged to work with lawmakers to find ways to protect them from its financial implications — exposure to future risks that could drive away Wall Street investors and bond underwriters.
PG&E has been repeatedly penalized for safety violations, most notably its $1.6 billion penalty and criminal conviction for the 2010 San Bruno gas pipeline explosion, which killed eight people and destroyed a residential neighborhood. It has also paid out hundreds of millions of dollars in settlements over its role in the 2015 Butte Fire, which burned more than 700,000 acres and destroyed 500 homes in Calaveras County.
