PG&E admits equipment ‘probably’ caused Camp Fire, says its future is in doubt

6 things to know about the PG&E bankruptcy filing and how it affects you

PG&E is about to go bankrupt. Will the troubled utility keep the lights on as it finds a resolution of the billions of dollars it faces in potential liabilities from the Camp Fire and the wine country wildfires.
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PG&E is about to go bankrupt. Will the troubled utility keep the lights on as it finds a resolution of the billions of dollars it faces in potential liabilities from the Camp Fire and the wine country wildfires.

PG&E acknowledged Thursday that its power equipment is likely to blame for the Camp Fire and said its wildfire liabilities raise “substantial doubt” about the company’s future.

As part of a statement announcing its 2018 financial results, the utility pointed to a damaged “C-hook” on a high-voltage transmission tower in a remote spot about ten miles northeast of Paradise as a likely culprit in the deadliest fire in California history. “The company believes it is probably that its equipment will be determined to be an ignition point,” PG&E said.

The company, which filed for bankruptcy a month ago, also said its wildfire liabilities “raise substantial doubt about PG&E Corporation and the utility’s ability to continue as going concerns.”

The use of “going concern” language sometimes means a company’s ability to stay in business is in question, although bankruptcy law expert Jared Ellias of UC Hastings College of Law said PG&E is probably signaling “that they can’t keep all the promises they made to creditors.” PG&E has made a point of saying “we are not going out of business” in earlier statements to customers after the bankruptcy filing.

John Geesman, an energy consultant in Oakland, agreed that PG&E isn’t turning out the lights for millions of Northern Californians. He said the statement might be “more of a rebuttal” to one of its shareholders, BlueMountain Capital Management, which has insisted the company is solvent and didn’t need to file for bankruptcy.

Essentially, PG&E is saying it had to file for bankruptcy, Geesman said. “They had not previously expressed that viewpoint. Most people expected eventually they would. Now they have.”

State officials have raised the possibility of forcing PG&E to sell some of its operations, including its natural gas division, to pay wildfire claims. The idea of a state takeover of the utility has also been discussed.

The transmission tower near the community of Pulga has long been suspected as the probable cause of the November fire, which killed 85 people and destroyed much of Paradise.

PG&E said a “broken C-hook” attached to the 115-kilovolt tower was the probable cause of the fire. The break apparently allowed a wire to make contact with the tower itself, showering the dry ground below with sparks and igniting the fire, according to lawyers who are suing PG&E on behalf of Camp Fire survivors.

A PG&E employee observed a fire at that site minutes later. PG&E inspectors later found a “flash mark” and other damage on the pole.

State Sen. Jerry Hill, D-San Mateo, a fierce critic of the utility, said the disclosures show PG&E failed to conduct basic repairs that could have protected the public.

“You can go to a hardware store and get a C-hook,” said Hill, who has introduced legislation that would make it harder for PG&E to pass bankruptcy costs onto ratepayers. “These are larger than normal, but they are a standard piece of equipment used on construction all the time. I’ve seen pictures and I’ve seen a lot of corrosion on those C-hooks.”

State fire investigators on Thursday declined comment on PG&E’s announcement, saying their investigation of the fire cause is still underway, with no date set for completion.

“We will not address what PG&E said until our investigation has been completed,” CalFire spokesman Scott McLean said.

Mindy Spatt of The Utility Reform Network in San Francisco said the press statement is an indication that PG&E is finally willing to admit some of its failings. “It sounds like maybe PG&E is thinking the same thing as a lot of its customers. We need a different kind of company, possibly publicly owned, possibly smaller.”

Facing an estimated $30 billion in liabilities from the 2017 and 2018 wildfires, Pacific Gas and Electric Co. and its parent PG&E Corp. filed for Chapter 11 bankruptcy protection in late January. Many experts say it’s doubtful PG&E, which faces billions in other debts, will be able to pay the wildfire claims in full.

Energy consultant Geesman said the latest revelations will worsen the utility’s already troubled image and could influence Gov. Gavin Newsom and the Legislature as they consider what steps they should take to deal with the PG&E bankruptcy.

The quarterly financial results shed additional light on PG&E’s troubles. The company took an $11.5 billion charge against earnings, including $10.5 billion from the Camp Fire and an additional $1 billion from the 2017 fires. Previously, the company had recorded a $2.5 billion charge from the 2017 fires, which swept through Northern California’s wine country and parts of the Sacramento Valley.

“The charges represent a portion of the previously announced estimate of potential wildfire liabilities, which could exceed more than $30 billion,” the company said.

The charges plunged PG&E into the red for 2018; the company announced a loss of $6.9 billion for the year. PG&E stock fell 77 cents a share on the New York Stock Exchange to close at $17.03.

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Dale Kasler covers climate change, the environment, economics and the convoluted world of California water. He also covers major enterprise stories for McClatchy’s Western newspapers. He joined The Bee in 1996 from the Des Moines Register and graduated from Northwestern University.