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PG&E to Record $10.5B in Camp Fire Charges, Raises Doubt on Future

Pacific Gas and Electric Co. (PG&E) on Thursday acknowledged that a 98-year-old transmission line in Northern California likely will be identified as the cause of last year’s tragic Camp Fire.

The wildfire damage led the San Francisco-based utility to record 4Q2018 charges of $10.5 billion linked to last year’s wildfires. It also recorded a $1 billion charge related to 2017 wildfires.

In a Securities and Exchange Commission filing, the parent holding company PG&E Corp. cautioned that there is “substantial doubt” about its prospects as a going concern.

The holding company has booked total charges of $14 billion from the Northern California fires and said it cannot provide operating earnings guidance for 2019 as it is facing "extraordinary" near-term challenges.

"We recognize that more must be done to adapt to and address the increasing threat of wildfires and extreme weather in order to keep our customers and communities safe," said interim CEO John Simon. "We are taking action now on important safety and maintenance measures identified through our accelerated and enhanced safety inspections and will continue to keep our regulators, customers and investors informed of our efforts."

The utility, which filed for bankruptcy in January, already has estimated total wildfire liabilities may exceed $30 billion.

"The company is facing extraordinary challenges relating to the 2018 Camp Fire and 2017 Northern California wildfires,” the company stated. “Management has concluded that these circumstances raise substantial doubt about PG&E Corp.'s and the utility's ability to continue as going concerns.”

The Camp Fire’s suspected cause, the Caribou-Palermo transmission line that runs 56 miles, is to remain out of service "until it is determined to be fully safe or decommissioned." It was shut in December.

Based on assessments from the state fire officials, the California Public Utilities Commission, and internal work, PG&E said "it is probable that its equipment will be determined to be an ignition point of the Camp Fire." Preliminary results from the enhanced inspections identified some equipment needing repair or replacement.

Meanwhile, the San Francisco-based combination utility is under scrutiny for reports that in the last five years it has deferred maintenance and upgrades on the 115 kV Caribou-Palermo line.

In response, utility spokesperson James Noonan said the reports have "inaccurately portrayed" the deferred planned regulatory compliance work with other ongoing work to enhance safety.

"It is important for our customers to know that we are taking action now on important safety and maintenance measures identified through out accelerated and enhanced inspections.”

The Wall Street Journal and other news organizations reported on PG&E's response to a North American Electric Reliability Corp. alert on transmission line maintenance work. However, the response did not involve maintenance work identifying and fixing worn or broken parts, Noonan said. The utility has corrected more than 80% of the thousands of discrepancies found under the multi-year NERC program.

In the meantime, PG&E has now completed two-thirds of its enhanced electric transmission inspections in high fire-threat areas since last November, and expects to complete all of them by the end of March.

For 4Q2018, PG&E (the utility) net losses were $6.9 billion (minus $13.24), versus year-ago income of $114 million (22 cents). PG&E Corp. reported full-year 2018 net losses of $6.9 billion (minus $13.25/share), compared with year-ago profits of  $1.6 billion ($3.21).

The $14 billion in one-time charges ($10.5 billion for Camp Fire and $3.5 billion for 2017 fires) are expected to be partially offset by probable insurance recoveries of $2.2 billion.

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