PG&E responds to judge’s query about investigative report

Pacific Gas and Electric Co. said it "strongly disagrees" with a newspaper investigation suggesting it prioritized lobbying efforts and investor returns ahead of maintenance on equipment it knew posed a wildfire risk.

Lawyers for the utility characterized accusations made in the article as an "oversimplification and misrepresentation" of complex issues.

"Critically, the WSJ Article fails to mention that the tower identified as the origin point of the Camp Fire was not one of the towers slated for replacement," PG&E attorneys said.

The court filings were in response to a San Francisco federal judge requiring the company to respond paragraph-by-paragraph to a July 10 Wall Street Journal article, which reported the utility knowingly deferred critical maintenance on its equipment.

U.S. District Judge William Alsup also inquired about "large campaign contributions" and nearly $5 billion paid out in shareholder dividends ahead of the utility filing for bankruptcy in January when it knew of critical shortfalls in safety upgrades.

Alsup oversees PG&E's criminal probation stemming from the 2010 San Bruno pipeline explosion and has the discretionary authority to replace current management with a trustee. He has taken a keen interest in exercising his powers to prepare the utility for the upcoming wildfire season.

"PG&E pumped out $4.5 billion in dividends and let the tree budget wither," the judge said at a January hearing.

PG&E declined to comment.

The purpose of the maintenance that supposedly could have prevented the Camp Fire was not to repair broken parts, including the hook on the tower that failed and caused the blaze to ignite, but to "address the clearance between transmission line conductors and from transmission line conductors to the ground," according to court filings.

"PG&E strongly disagrees with the WSJ Article's suggestion that PG&E knew of the specific maintenance conditions that caused the Camp Fire and nonetheless deferred work that would have addressed those conditions," attorneys wrote in the filing.

Responding to reporting that the utility knew hundreds of miles of power lines could fail yet "repeatedly failed to perform the necessary upgrades," attorneys for PG&E said it considered vegetation management a more critical issue.

Utility lawyers added that equipment failure on high-voltage lines only accounted for seven of the 1,552 fires compared to 426 blazes caused by vegetation contact with distribution lines.

"PG&E denies the generalized assertion that it repeatedly failed to perform the necessary upgrades to prevent failures on its transmission lines," wrote Reid J. Schar of Jenner & Block LLP; Kate Dyer of Clarence Dyer & Cohen LLP; and Kevin J. Orsini of Cravath, Swaine & Moore LLP, representing the utility. "The suggestion that PG&E has ignored investment in its transmission lines is inaccurate."

But the utility did not address allegations in the Wall Street Journal story claiming it did not replace dozens of towers carrying electrical lines that have failed in the past.

The PG&E attorneys responded that none of the towers identified for replacement was the one at which the Camp Fire originated. They did not say why those replacements were not made.

PG&E did admit federally mandated work on the transmission line that sparked the Camp Fire was delayed for five years because of a "variety of reasons, including engineering, operational and permitting reasons."

The company's attorneys defended that decision by arguing it used a risk-based methodology "that weighs safety, reliability and environmental risks to priorize asset management projects," which identified nearly 600 other projects with higher risk scores.

In response to Alsup's questions about shareholder returns, PG&E argued the practice is necessary to continue to keep and attract investors so they can further fund other investments, including safety efforts.

"The payment of dividends and the performance of work on all aspects of PG&E's system are not an 'either/or' calculus," the company filing said. "On the contrary, they are mutually reinforcing, as dividend payments are essential to PG&E's ability to continue to attract the capital needed to make required investments in safety and other aspects of PG&E's operations."

Approximately $5.1 billion was paid in dividends from 2012 to 2017 compared to shareholders contributing $6.5 billion for infrastructure investments, according to court filings.

PG&E said a critical element to emerge from bankruptcy will be to "require payment of a dividend" to enable the utility to attract favorable investments.