Bloomberg Businessweek

(Steven Felgate) #1
 BUSINESS Bloomberg Businessweek August 20, 2018



In late July and August, wildires devastated an
area north of San Francisco far bigger than New
York City. They’re part of a rash of fast-spreading
blazes that have killed at least 57 people this year
and last in the Golden State. Authorities haven’t yet
determined the cause of some of the ires, but the
region’s giant utility, PG&E Corp., sees a culprit: cli-
mate change. The blazes in recent years, it contends,
are the latest example of how global warming has
produced unusually hot, dry conditions that spawn
more frequent and intense ires. “Climate change is
no longer coming, it’s here,” Geisha Williams, chief
executive oicer of PG&E, said in an email. “And we
are living with it every day.”
California’s biggest utility has an especially
compelling reason to link the ires to the environ-
ment. State investigators have said that some of last
October’s blazes were caused by trees hitting PG&E
power lines. The ires destroyed almost 9,000 struc-
tures and killed 44 people. The utility may face legal
liabilities that JPMorgan Chase & Co. estimates could
total as much as $17 billion, potentially leading to
inancial ruin—PG&E stock is down about 37 per-
cent since the ires—unless Williams can convince
California lawmakers that the company’s problem
is, in fact, an environmental problem.
Invoking climate change is a clever strategy in a
state that’s taken on the green mantle in the face of
a skeptical Trump administration. And Williams’s
battle cry—don’t blame us, blame climate change—
is catching on. PG&E’s neighboring utilities, Edison
International and Sempra Energy, are echoing the
defense, and it may well serve as a blueprint for utili-
ties worldwide as global warming produces extreme
weather events such as the hurricanes that slammed
Texas and Puerto Rico.
California law holds that property owners can
collect compensation from utilities linked to ires—
even if they weren’t negligent. Williams argues that
because of the increasing frequency of ires, utili-
ties shouldn’t be held responsible each time a tree
branch falls on a power line during a storm if it fol-
lowed all safety rules. Instead, the test should be
whether the utility acted “reasonably” in trying
to prevent ires, doing things like trimming trees
and brush around lines, she contends. If utilities
have taken preventive measures, insurance or

government agencies would pick up the damages.
“No one is suggesting the utilities should get a
free pass if they were negligent,” Williams said in
the email. But the current legal policy of unlimited
liability has the potential to inancially cripple com-
panies, she said.
Some California lawmakers aren’t buying PG&E’s
argument, pointing to statements by the California
Department of Forestry and Fire Protection, or Cal
Fire, that allege that in some cases the utility violated
ire safety rules. “Climate change and the so-called
new normal do not ignite ires,” says State Senator
Jerry Hill. “The Cal Fire indings show that suspected
negligence by PG&E did.” PG&E says it believes it’s
met state safety standards.
The utility already has taken a $2.5 billion charge
stemming from the October ires and suspended
its dividend in December. On a recent investor call,
Williams said PG&E has even raised the prospect of
bankruptcy with lawmakers unless the state changes
the law. It’s sought court protection before. PG&E
entered bankruptcy in 2001 after incurring $9 bil-
lion in debt by buying power for more than it could
charge customers. It emerged three years later.
Williams has some supporters, including
California Governor Jerry Brown. He’s proposed a
bill to lessen utilities’ exposure to damages from
ires, citing climate change. Brown says the utility
needs to be inancially healthy to invest in renew-
able energy and help the state meet its climate goals.
—Mark Chediak

THE BOTTOM LINE PG&E shares have plunged on worries about
its exposure to 2017 wildfire damage claims. The utility has raised
the prospect of bankruptcy if state liability laws aren’t changed.

Don’t Blame Us, Blame

Climate Change

○ California utility PG&E’s
novel defense against as
much as $17 billion in wildfire
liabilities could catch on

○ Williams

 Crews work to
repair power lines in
Santa Rosa, Calif., after
a fire last October
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