Citing Pacific Gas and Electric’s “serious safety problems,” California utility regulators will now consider replacing its board of directors, breaking up the company in favor of smaller, regional energy suppliers and even taking it over and converting it to a public agency, they announced.
In an extraordinary statement issued late Friday at the start of the holiday weekend, the state Public Utilities Commission announced it will deeply investigate PG&E’s “safety culture by examining the company’s current corporate governance, management, and structure to determine the best path forward for Northern Californians to receive safe energy service.”
The announcement comes in the wake of last month’s Camp Fire in Butte County, the most destructive blaze in state history. It killed 86 people and destroyed the town of Paradise, burning nearly 19,000 structures. CalFire has yet to announce a cause, but it is investigating wind damage to a PG&E transmission tower at the site where the fire started. Numerous lawsuits against the company alleged the tower was poorly maintained.
Following the San Bruno gas pipeline explosion, the North Bay fires last year and other blazes blamed on the utility, regulators will now consider actions PG&E critics have clamored for years.
Commission president Michael Picker expressed caution over what he and other regulators will attempt.
“This process will be like repairing a jetliner while it’s in flight. Crashing a plane to make it safer isn’t good for the passengers,” Picker said in the announcement.
“This is not a punitive exercise. The keystone question is would, compared to PG&E and PG&E Corp. as presently constituted, any of the proposals provide Northern Californians with safer natural gas and electric service at just and reasonable rates,” Picker said.
According to its statement, the commission is looking at seven possible actions against the company. It will consider whether:
- ”some or all of the existing PG&E” directors be replaced by directors with a stronger background and focus on safety.” The 12-member board of directors includes Benito Minicucci, head of Alaska Airlines, Roger Kimmel, vice president of the investment bank Rothchild Inc, Richard Meserve, former president of the Carnegie Institution of Washington and Anne Shen Smith, the former CEO of the Southern California Gas Company.
- “the company retain new corporate management.”
- the commission “condition PG&E’s return on equity on safety performance;
- “PG&E’s natural gas and electric distribution and transmission divisions be split into separate companies controlled by a holding company.
- “PG&E’s corporate structure be reorganized with regional subsidiaries based on regional distinctions.”
- should the commission “revoke holding company authorization so PG&E is exclusively a regulated utility;
- “some or all of PG&E be reconstituted as a publicly owned utility or utilities.”
The head of a utility watchdog group, while saying the PUC must act, also said it’s waited too long to take decisive against the company.
“It is about time that the CPUC realized there must be fundamental change at PG&E in order to get the safe, reliable power that California customers pay for through the nose,” Mark Toney, executive director of the Utility Reform Network, wrote in an email to this news organization. “Whether it is a break up, management change, board shake up, or takeover by the state or another company—the one thing we cannot afford is business as usual.”
PG&E is also facing “approximately 500” lawsuits involving “at least 3,100 plaintiffs” stemming from Northern California wildfires, according to recent documents on file with the U.S. Securities and Exchange Commission. Many are from the North Bay fires, where the state blames 12 of the fires on PG&E equipment failures.
Also, Cal Fire is seeking to recoup more than $87 million in costs for putting out the Butte Fire in Calaveras County in 2015, which it blamed on a pine tree coming in contact with an electric line. It claims the contact occurred because of PG&E’s failure to properly manage vegetation in the area.
The state Office of Emergency Services, Calaveras County and other agencies are also suing PG&E.
PG&E is the early steps of asking for a rate hike to pay for its troubles. SEC filings show it has $1.4 billion in wildfire insurance for the period of Aug. 1, 2018 through July 31, 2019 and that potential liabilities from the Camp Fire are likely to dwarf that dollar amount.
“If the utility’s equipment is determined to be the (Camp Fire’s) cause, the utility could be subject to significant liability in excess of insurance coverage that would be expected to have a material impact on (the company’s) financial condition, results of operations, liquidity, and cash flows,” company officials wrote in an SEC filing last month.
The company also faces a looming decision by a U.S. district judge who presided over its 2016 conviction on criminal charges stemming from the San Bruno explosion. The company is a convicted felon and on probation.
Now, after the Camp Fire, Judge William Alsup is looking into whether PG&E has violated the terms of its probation by ignoring safety issues. He has set a Dec. 31 deadline for the state justice department to file documents showing whether or not the company is in violation.
In a statement, PG&E said: “We’re open to a range of solutions that will help make the energy system safer for the customers we serve. “PG&E’s most important responsibility must always be public and employee safety.”