Jan 10, 2019, by Mark Chediak
California has already determined that PG&E Corp. is responsible for a string of wildfires in 2017. Regulators are now getting ready to figure out how much that could cost the company.
The California Public Utilities Commission voted unanimously Thursday to open proceedings to develop a so-called stress test for utilities’ wildfire costs. The goal is to see how big a financial blow companies like PG&E could withstand and still remain viable. Shares tumbled after the vote.
PG&E shares have plunged as investors weigh concerns that the company may seek bankruptcy protection in the face of mounting fire liabilities that could exceed $30 billion, by some estimates. Its credit rating was slashed to junk this week by S&P Global Ratings, which cited a “souring political and regulatory environment” and few options for the company. The stress test will put a cap on those looming financial liabilities, and Wall Street is looking for any signs that the state will aid the company.
“Given the current movements on the stock, all the attention will be focused on any potential comments that are made on this specific proceeding or about any relief that may be provided for the utilities,’’ said Paul Patterson, a utility analyst for Glenrock Associates.
Shares of PG&E erased gains to trade down 12 cents at $17.71 at 1:28 p.m. in New York. They were trading at about $18.83 before the vote.
Newly minted Governor Gavin Newsom said Tuesday the state needs a “healthy” utility that’s able to invest in the state’s clean energy future, and is in talks with state energy regulators, members of the previous administration and incoming staff “to address the solvency” of PG&E.
California enacted a law in September to help PG&E deal with mounting fire costs, letting the company issue bonds to pay for damages tied to 2017 blazes that hit Northern California wine country. It also included a directive to regulators to “determine the maximum amount the corporation can pay without harming ratepayers or materially impacting its ability to provide adequate and safe service.”
State investigators have blamed PG&E equipment for sparking 17 of the 2017 fires and are looking at a utility transmission line as a possible ignition point for November’s Camp Fire, which killed 86 people and leveled the town of Paradise in November.