PG&E warned on Thursday that financial losses are “probable” as a result of the Dixie Fire that has scorched parts of Northern California, a reminder that the utility is facing a potentially mounting array of wildfire-linked money challenges.
San Francisco-based PG&E also warned on Thursday that it might be forced to confront a “material impact” if it doesn’t have sufficient insurance to cover potential costs connected to the Dixie blaze that is roaring through Butte County and Plumas County in the rugged and remote Feather River Canyon region.
A material impact is a situation that typically would have a significant — and usually adverse — effect on a company’s financial results.
The disclosures were contained in a quarterly report that PG&E and its utility subsidiary Pacific Gas & Electric Co. issued on Thursday in connection with the company’s second-quarter financial results that covered the April through June period of 2021.
“PG&E Corp. and the utility believe it is probable that they will incur a loss in connection with the 2021 Dixie fire,” the company stated in a filing with the Securities and Exchange Commission.
However, it’s too soon to precisely sketch out the financial woes the company might be facing, the SEC filing stated.
“Due to the limited amount of time that has elapsed since the start of the 2021 Dixie fire, the preliminary stages of the investigations, and the uncertainty as to the extent and magnitude of possible losses, PG&E cannot reasonably estimate the amount or range of such possible loss at this time,” the company said in the SEC documents.
Liabilities linked to a string of blazes in Amador County and Calaveras County in 2015, the North Bay Wine Country in 2017, and Butte County in 2018 were major factors that caused PG&E’s finances to buckle and force the company into bankruptcy in 2019.
Now, PG&E in the regulatory filing rattled off a string of incidents that could cause fresh financial pressures to jolt the utility.
The 2019 Kincade Fire in Sonoma County, the 2020 Zogg Fire in Shasta County and Tehama County, and the current 2021 Dixie Fire all have connections to PG&E’s equipment as their respective causes.
“While the cause of the 2021 Dixie fire remains under investigation and there are a number of unknown facts surrounding the cause of the 2021 Dixie fire, the utility could be subject to significant liability in connection with this fire,” PG&E stated in the regulatory filing.Some of the utility’s financial difficulties could ease if PG&E were to tap a wildfire fund established by AB 1054 that is available for electric utility companies. The wildfire fund can enable payment of claims for liabilities arising from wildfires that are caused by the utility’s electricity equipment.
It’s unclear whether PG&E’s insurance is sufficient to cover all of the potential liabilities linked to the Dixie Fire, the utility noted.
“If such liability were to exceed insurance coverage, it could have a material impact on PG&E’s and the utility’s financial condition, results of operations, liquidity, and cash flows,” PG&E stated in the SEC filing on Thursday.
PG&E’s ongoing difficulties with wildfires and vegetation management in high-risk fire zones have alarmed observers and experts.
The problems are severe enough that the state Public Utilities Commission has been authorized to undertake a multi-step review of PG&E’s ability to operate safely. If PG&E falters in its safety efforts it could eventually be taken over by a non-profit public benefit corporation called Golden State Energy.
“PG&E is already on Step 1 of this review,” said Mark Toney, executive director with The Utility Reform Network, or TURN, a consumer group. “Step 6 is Golden State Energy taking over from PG&E.”
Worries continue to emerge about PG&E’s ability to make its system safe from wildfires.
“Every review that is done by the PUC or the external monitor to PG&E seems to find deficiencies in vegetation management or problems with flawed inspections,” Toney said.