It’s hard to imagine that a $1.7 billion settlement was considered lenient. But such was the case in California when power regulators previously agreed to that number in December of 2019 as the amount of compensation owed by the now-bankrupt Pacific Gas & Electric (PG&E) for its part in igniting the wildfires that year.
Several consumer groups complained about the amount, so the California Public Utilities Commission reevaluated the case. Ultimately, it added another $500 million to the settlement for the destruction caused by fires resulting from the outdated electrical grid and negligence. This harsher punishment also includes $200 million earmarked for the state’s general fund.
The San Francisco-based utility has already set up a $13.5 billion fund to help families who lost family members (130 people died) and property damage to businesses and communities (28,000 homes and buildings) destroyed by fires in 2017 and 2018.
The bankruptcy filing was to protect the beleaguered company from an estimated $50 billion in claimed losses — there have been 81,000 claims filed in relation to PG&E’s bankruptcy case. So far, PG&E has reached a total of $25.5 billion in settlements to wildfire victims, insurers and government agencies.
Utility responds to the new settlement
PG&E was understandably disappointed in the new additional penalty after working for months on an equitable solution. In a statement, a spokesman added: “We recognize our fundamental obligation is to operate our system safely and we share the same objectives as the Commission and other state leaders — namely in reducing the risk of future wildfires in our communities.”
Burden moved from customer to shareholder
Under the previous agreement, $1.82 billion was to come from the utility raising rates to customers, but this new settlement puts the burden squarely upon the utility’s shareholders. The company also expected to get some tax relief under the old agreement, but any tax breaks now will be passed on to the utility’s customers.
Story far from over
Climate-related issues will continue to exacerbate the state’s naturally dry and windy conditions. While everyone hopes that 2020’s summer and fall will not be as bad as recent years, it remains likely that utilities will continue to cause catastrophic damage. Moreover, Governor Gavin Newsom continues to threaten a government-led takeover of the utilities. It all adds up to a story that will stay in the news for the foreseeable future.