Utilities commission considers changes for PG&E after deadly wildfires

State regulators are considering replacing Pacific Gas and Electric Co. leadership, splitting its operations into separate entities or converting it into a publicly-owned utility, among other proposals listed in a recent order.

The California Public Utilities Commission issued the potential changes in response to allegations the state's largest utility is responsible for causing California's two most destructive wildfires in the next phase of a prolonged investigation into PG&E governance.

The embattled utility, which did not respond to emailed and phone requests for comment, has long maintained it is focusing on assessing infrastructure and helping to rebuild communities and noted the cause of the fires has not been determined.

State Sen. Jerry Hill, D-San Mateo, whose district was severely impacted by last year's wild fires, commented Thursday on the proposals. "To me, the most promising, the one that I believe solves the problem permanently, would be the public ownership of the utility," he said. "I question the business model that PG&E adopted so strongly, which prioritizes corporate profit."

The commission authorized a probe into PG&E's corporate culture as a part of its probation following the 2010 San Bruno pipeline explosion and is now expanding the investigation.

Hill said the most far-reaching of the proposals is to eliminate PG&E as an investor-owned utility and change it into a public-owned utility. This could mean PG&E only providing electric distribution and transmission services and leaving power generation to other entities, according to the order.

The state's largest utility operates as a regulated monopoly.

Regulators will also explore whether "part or all of the existing Board of Directors resign and be replaced by directors with a stronger background and focus on safety," Commission President Michael Picker wrote in the order, which also proposes tying the utility's return on equity to safety performance.

Other options include reorganizing the utility into regional subsidiaries, which would do away with PG&E's current holding company structure. This would divide PG&E into "multiple smaller utilities operating under a single parent company," Picker wrote.

Proposals for a "stress test," authorized as a part of SB 901 passed in November, on the maximum amount PG&E can pay for wildfire damages without going bankrupt, will also be considered at the commission's Jan. 10 meeting. Critics have called the bill a bailout for the utility because ratepayers will foot the remainder of the balance.

PG&E faces an estimated $15 billion in liability solely for last year's blazes, according to JPMorgan Chase & Co. It is being sued by thousands of home and business owners and insurance companies. California North Bay Fire Cases, CJC-17-0049555 (San Francisco Super. Ct., filed Nov. 20, 2017).

Lead plaintiffs' attorneys for the North Bay fire cases, Frank Pitre and Michael Kelly, did not respond to requests for comment.

In an order issued on Dec. 13, the CPUC also accused PG&E of falsifying gas pipeline safety documentation from 2012 to 2017. A staff investigation report alleged the utility "falsified locate and mark records" because "supervisors and locators felt pressure to falsify tickets so they would not appear" late, Picker wrote in the order.

Hill called the development the "tipping point" that prompted the commission to make the proposals.

The Department of Forestry and Fire Protection concluded PG&E equipment sparked 17 Northern California fires last year and referred its findings to the appropriate district attorneys' offices for prosecution, which may put the utility in violation of its parole if it is found guilty.

The department has not yet issued reports on the causes of the Tubbs and Camp fires and whether PG&E may be found responsible for the deadliest blazes in state history, which killed 22 and 88 people, respectively. U.S. District Judge William Alsup, who is overseeing PG&E's probation, demanded answers last month from the utility concerning its role and potential culpability in recent wildfires. He asked for an "accurate and complete" statement of any connection between PG&E and the cause of the Camp Fire in addition to guidance from the state attorney general on the standard to which PG&E should be held if it committed a crime in failing to maintain infrastructure leading up to the blazes.

PG&E and state Attorney General Xavier Becerra have until Dec. 31 to respond.

Two weeks before the Camp Fire renewed scrutiny aimed at PG&E, a state regulatory judge also voiced skepticism at the utility's commitment to implementing safety changes.