Nine months after the unprecedented fires that destroyed large sections of California Wine Country, Pacific Gas & Electric Co. could be facing a fall from which it may not recover. The fires, which killed 45 and burned 8,900 structures, may have been caused by trees that were not properly trimmed around PG&E power lines. If the Cal Fire report on the cause of the fires finds PG&E responsible, it will fuel a campaign of accountability that has given rise to 100 lawsuits.
The total insurance claims from the fire are valued at $10 billion—more than ten times the $800 million in liability insurance covering PG&E. The company's stock price has fallen more than a third since last October, presumably from the public scrutiny and wave of lawsuits. But financial analysts don't think those are fatal—what is fatal would be if legislators followed through on plans to break up the company. “They may be too big to succeed,” State Sen. Jerry Hill said Friday.
Lawmakers are looking back to the 2010 San Bruno explosion that was caused by a PG&E pipeline, an explosion that led to the death of 8 people and triggered a $1.6 billion fine from the state. It also resulted in a felony conviction from a federal court.
Not Their First Bankruptcy
Financially, it would be difficult to outright end PG&E. Last year, the utilities company earned $1.6 billion in profit—the debt or equity to handle the lawsuits and fines would be within their reach. However, declaring bankruptcy is a possibility, according to Wall Street analysts. It wouldn't be the first time—in 2001, PG&E declared bankruptcy and re-emerged three years later after reorganizing.
However, the largest obstacle that could risk thousands of homeowners' ability to recover from the Wine Country fires is whether or not PG&E could be sued under inverse condemnation. Inverse condemnation is a legal principle that holds California utilities responsible for damage caused by their equipment. Recently, a judge ruled that PG&E should not be exempt from inverse condemnation (which was part of their legal defense against the lawsuits). The people of California (and the executives at PG&E) are awaiting the Cal Fire report with some anxiety—for hundreds of Californians, their lives hang in the balance of who is found at fault by the investigation. Our sincere hope is for them to have a clear road to recovery, not an uncertain one.