California lawmakers outlined a proposal to help PG&E Corp. and other utilities cope with billions of dollars of potential damages from deadly wildfires that ravaged the state last year.
The plan, part of a broad package addressing the growing threat of wildfires such as forest management practices, doesn’t go as far as PG&E wanted to alleviate its liabilities, but could help ease Wall Street’s concerns regarding the company’s liquidity. It includes allowing utilities to float bonds to cover fire costs.
The proposal would also direct state regulators to consider factors such as extreme weather events and those outside a utility’s control when weighing whether companies can pass along liability costs to customers. A bill, which will be presented next week, must be passed by lawmakers before the legislative session ends Aug. 31.
“We must protect the long-term interest of the utility ratepayer,” said California Senator Bill Dodd, co-chair of a conference committee set up to address wildfire risks. “We can all agree the status quo is unacceptable.”
PG&E, the state’s biggest utility owner, has spent months lobbying lawmakers for relief from wildfire costs that JPMorgan Chase & Co. estimates could reach as much as $17 billion. The San Francisco-based company wanted to change a state law that says property owners can collect compensation from utilities linked to fires even if the companies weren’t negligent. Governor Jerry Brown had proposed relaxing that standard, although lawmakers on the wildfire committee ultimately abandoned the idea.
“What we want to be able to do is put together a proposal that makes sure that we have investor-owned utilities that aren’t going to go belly up, and that we are going to protect ratepayers at the same time,” Chad Mayes, a state assemblymember, said at Friday’s hearing.
Scott Wetch, a lobbyist for the Coalition of California Utility Employees, said if legislation fails to provide a “meaningful solution” to fire liabilities facing PG&E from last year, the company could face a liquidity issue that would threaten contracts with power producers including renewable energy providers.
PG&E said in a statement that it looks forward to reviewing the language of the bill when it is released.
The ability to issue bonds to cover potential fire liabilities could help PG&E spread the costs over an extended period of time. Consumer advocates said the practice may open the door to having ratepayers instead of shareholders pay for all the liability costs for last year.
“We urge legislators to reject any bailout of PG&E, the other utilities, their executives and shareholders,” said Becky Warren, a spokeswoman for the Ratepayer Protection Network, which represents a group of agricultural, industrial and residential customers.
PG&E has lost more than $13 billion in market value since early October, when blazes broke out in Northern California wine country. State investigators have said the company’s equipment caused 16 of last year’s fires. They haven’t yet made a ruling on the cause of the Tubbs fire, the deadliest and most destructive in the area.
“The real question for investors is how much will shareholders will have to pay for these unprecedented wildfire costs,” said Paul Patterson, a utility analyst for Glenrock Associates. “The devil will be in the details.”