PG&E warns investors of ‘significant liability’ due to fire losses

Pacific Gas and Electric Co. warned investors and shareholders that it expects to record a "significant liability for losses" associated with 14 Northern California wildfires across seven counties, according to a Monday filing with the U.S. Securities and Exchange Commission.

The utility attributed liability primarily to "the current state of the law on inverse condemnation" and the state Department of Forestry and Fire Protection's findings on the causes of the blazes.

Inverse condemnation holds utilities responsible for all resulting property damage when their equipment or facilities cause a fire, regardless of whether the utility was negligent or engaged in wrongful conduct.

The financial disclosure came after the state Department of Forestry and Fire Protection's report last week found PG&E's equipment responsible for 12 of last October's Northern California wildfires. A department report released last month also found the utility responsible for three other fires, concluding it violated state Public Resources Code 4293, which requires adequate clearance between trees and power lines.

Cal Fire has referred investigations to six district attorneys' offices in the Sonoma, Napa, Humboldt, Lake, Nevada and Butte counties.

The utility, however, also reported that it does not expect to record losses for liability in two of the Northern California wildfires despite the California Department of Forestry and Fire Protection concluding that the utility's equipment was at fault, according to the SEC filing.

Plaintiffs' attorneys are unsure if the utility is suggesting that it does not believe its equipment was responsible for the Atlas and Highway 37 fires that combined to destroy over 53,000 acres and 780 structures in addition to killing six residents in Sonoma and Napa counties or if PG&E expects its insurance to cover the amount.

"For the Atlas and Highway 37 fires, PG&E Corporation and the Utility do not believe a loss is probable at this time, given the information currently available," PG&E wrote. "However, it is reasonably possible that facts could emerge that lead PG&E Corporation and the Utility to believe that a loss is probable, resulting in the accrual of a liability in the future, the amount of which could be significant."

The Atlas Fire investigation was among the 11 that have been referred to district attorneys' offices for potential criminal or civil inquiries but the Highway 37 Fire was not.

PG&E attorneys Keith Eggleton of Wilson Sonsini Goodrich and Rosati PC, Kate Dyer of Clarence Dyer & Cohen LLP and Jacqueline D. Harrington and Damaris Hernandez of Cravath, Swaine & Moore did not respond to requests for comment.

Approximately 200 civil complaints on behalf of 2,700 plaintiffs for claims exceeding $10 billion have been filed against the utility. California North Bay Fire Cases, CJC-17-004955 (S.F. Super. Ct., filed Nov. 20, 2017).

Michael Kelly of Walkup, Melodia, Kelly & Schoenberger, one of the lead plaintiffs' attorneys, said none of the evidence he has examined suggests the utility should not be liable for the Atlas or Highway 37 fires.

"If there's something that they know of . . . that puts their liability for those fires off to the side as unique or having a cause of origin independent of their equipment, I don't see it in what's been released by investigators," he said.

Frank Pitre of Cotchett, Pitre & McCarthy LLP said the utility may be suggesting its insurance, which will cover up to $800 million, can absorb the loss.Napa County is coordinating with the Sonoma and Lake County district attorneys and the state attorney general's office, "in determining the appropriate jurisdiction, remedies and litigation," against the utility, according to Assistant District Attorney Paul Gero.

The Mendocino County district attorney did not receive a referral despite the department's findings that the Redwood Fire was caused by a "tree or parts of trees falling onto PG&E power lines." Mendocino County district attorney's office spokesperson Mike Geniella said the office believes it should have received a referral for an investigation but does not know "what the criteria is."

Sonoma County District Attorney Jill Ravitch did not respond for comment.