In the midst of a Chapter 11 bankruptcy proceeding, Pacific Gas and Electric Co. (PG&E) is responding to questions from a San Francisco federal court and California regulators about wildfire liability allegations.
Late last month, PG&E denied allegations that it knew ahead of last year's fires that there were unsafe maintenance conditions on its transmission lines, and that it had deferred work to correct them. The claims were in response to requests from U.S. District Court Judge William Alsup of the Northern District of California. He is overseeing PG&E’s five-year probation related to its conviction in the San Bruno gas transmission pipeline explosion in 2010.
"PG&E hopes to work with stakeholders to recalibrate the level of investment in transmission asset replacement," PG&E told Alsup.
The California Public Utility Commission (CPUC) has suggested the utility is overdoing its replacement and repair in order to "gold plate" the infrastructure and inflate its rate base.
Allegations that PG&E delayed planned transmission maintenance that could have prevented the devastating Camp Fire were misplaced, according to PG&E, because it would have involved “non-routine” transmission work, which may not have prevented the tower failure that caused the devastating fire.
"Since the Camp Fire, PG&E has fundamentally changed its approach in light of the new increased risk to the environment by, among other things, comprehensively inspecting its transmission, distribution and substation assets in elevated and extreme fire-threat areas before the 2019 fire season," according to the court filing.
Alsup has ordered PG&E to respond to periodic lists of questions, and late last year he demanded answers concerning the utility's role in the Camp Fire.
The beleaguered combination utility recently revised its proposed return on equity (ROE) to 12% from 16%. The 16% ROE request was predicated on the higher risk and liabilities PG&E was facing from the past two years of fires.
California has implemented Assembly Bill 1054 (AB 1054), which created a wildfire relief fund.
"AB 1054 was effective immediately as an urgency statute," PG&E said in a CPUC filing. "It establishes the wildfire fund and enacts new rules that are expected to reduce the financial impact of future wildfires on PG&E and other participating utilities, and as a result, [we] are revising downward the ROE request."
PG&E's expert witness, Michael Vilbert, estimated that a typical utility’s ROE without any wildfire risk would be 10-11%, but ROEs reflecting PG&E’s risk would be 14-16%. Another third party witness for the utility estimated that the annual cost tied to the wildfire risk for PG&E shareholders is about $1 billion.
Separately, in a Securities and Exchange Commission Form 8K filing, PG&E said it expects to file a new cost-of-capital filing to the CPUC at about the time it emerges from Chapter 11.