Northern California utility Pacific Gas & Electric on Tuesday reported a $3.6 billion loss in the fourth quarter and a $7.7 billion loss for 2019 as a whole, weighed down by continued costs and charges related to the wildfires that drove it into bankruptcy last year.
But the company still expects that its multibillion-dollar settlements with wildfire victims and its expanded plans to improve power grid safety will allow it to emerge from bankruptcy by the end of June, a critical deadline to access the $21 billion wildfire insurance fund meant to protect it and other utilities from future wildfire-driven bankruptcies.
Tuesday’s earnings report highlighted the massive liabilities PG&E faces from the wildfires caused by its power lines. In the fourth quarter of 2019 alone, PG&E recorded $5 billion in pretax charges as part of its $13.5 billion settlement with wildfire victims in December, and nearly $400 million as part of its $1.7 billion settlement with the California Public Utilities Commission over fires caused by its equipment in 2017 and 2018.
PG&E’s fourth-quarter results also took a hit from $86 million in compensation for customers who lost power during its first massive fire-prevention grid blackouts in October. The CPUC is investigating PG&E’s poor performance in alerting and supporting communities and customers hit hard by the multiday outage, which drew intense criticism from local and state leaders.
Despite these headwinds, PG&E “believes it remains on track” to meet the June 30 deadline to participate in the wildfire fund. Its bankruptcy plan won backing from wildfire victims in December, after it raised its settlement offer from $8.5 billion to $13.5 billion, bringing its total fire-related settlements to $25 billion.
Last month, it reached an agreement with a competing group of Wall Street bondholders, providing set terms for future interest and make-whole payments for their debt.
“Our focus now is on working with all key stakeholders, including elected officials and state regulators, to position PG&E for emergence as a financially stable company with a renewed and rigorous focus on safe operations and customer service, while meeting California’s energy needs and goals in a [changing] climate,” CEO Bill Johnson said in a prepared statement.
Tuesday’s earnings report included a new five-year financial forecast, including capital and rate-base growth projections as a guide to its long-range plans on that front, including billions of dollars on grid-hardening and fire prevention.
Still to convince: Governor Newsom, California lawmakers and the public
But some key stakeholders in PG&E’s bankruptcy may be hard to convince. Gov. Gavin Newsom rejected PG&E’s bankruptcy plan in December on grounds including its heavy reliance on debt financing that could leave it “limited tools to finance itself” in the event of an unforeseen crisis.
But most potentially challenging for PG&E is Newsom’s demand for an “escalating enforcement process” to hold it to account for future safety failures or broken promises, up to and including the possibility of the state taking it over if it fails to meet its goals.
PG&E has made some concessions to Newsom’s safety demands since then, including changes to its board of directors to bring more California residents and safety experts on board. PG&E has also promised to hire an independent safety monitor and create regional operating units with accompanying safety officials to oversee its operations. But these concessions, reached after intense negotiations with state leaders, have yet to win Newsom’s explicit approval.
Meanwhile, Newsom’s verbal threats to pursue a state takeover option were bolstered earlier this month by the introduction of a new bill, Senate Bill 917, which would authorize the state to use eminent domain to acquire PG&E and replace it with a Northern California Energy Utility District, similar to a municipal utility district. Proponents say this could yield a more financially stable entity that doesn’t need to pay federal and state taxes or shareholder dividends, and can thus spend more on safety improvements and customer services.
The legal and economic ramifications of such a move are hard to predict since no state has ever attempted to take over a utility of PG&E’s size. PG&E has stated its opposition to selling its assets to any public entity, including cities like San Francisco that have sought to acquire the utility’s infrastructure within their borders.