Dive Brief:

  • PG&E Corp. filed quarterly earnings on Thursday, revealing that the corporation and its utility subsidiary Pacific Gas & Electric are facing an investigation by the U.S. Securities and Exchange Commission (SEC) into “public disclosures and accounting for losses” related to the 2015 Butte fire as well as 2017 and 2018 fires.
  • The company reported first quarter net income of $136 million, or $0.25/share, compared with $442 million in Q1 2018. Management said those results include hundreds of millions in costs not considered part of normal ongoing operations — largely related to wildfires and the company’s Chapter 11 bankruptcy case.
  • According to the company, GAAP results include $410 million after-tax from items such as wildfire cleanup and recovery that management “does not consider part of normal, ongoing operations.”

Dive Insight:

California’s devastating wildfires, combined with the state’s strict liability rules, have forced utilities to take billions in charges and in January PG&E filed for bankruptcy.

PG&E’s earnings topped analysts estimates, yet still revealed the ongoing costs and scrutiny the utility company will face.

“This was primarily driven by enhanced and accelerated electric asset inspection costs, clean-up and repair costs related to the 2018 Camp Fire, legal and other costs related to the 2017 Northern California wildfires and the 2018 Camp Fire, and financing, legal, and other costs” related to the company’s bankruptcy, PG&E said in a statement.

And while the company’s 10-Q contains the word “investigation” dozens of time, the filing revealed new scrutiny from the SEC related to wildfires.

The utility said it learned in March that the SEC’s San Francisco Regional Office “is conducting an investigation related to PG&E Corporation’s and the Utility’s public disclosures and accounting for losses associated with the 2017 and 2018 Northern California wildfires and the 2015 Butte fire.”

The company said it cannot predict the “timing and outcome of the investigation.”

PG&E is involved in multiple investigations by the California Public Utilities Commission (CPUC) and California Department of Forestry and Fire Protection (Cal Fire).

The company has said it will take a $10.5 billion pre-tax charge related to third-party claims in connection with the 2018 Camp Fire, as it believes its equipment was likely the cause of the deadly blaze. Cal Fire has yet to make a determination.

Heading into the next wildfire season, which typically begins in mid-summer, the CPUC on Monday issued a number of proposed decisions to approve utility wildfire mitigation plans. PG&E’s plan was flagged for some improvements, including requesting an expanded strategy on how the utility can avoid power line de-energization, but was otherwise found in compliance with state law.

PG&E in April filed revisions to its wildfire mitigation proposal, asking to push back inspection and corrective action deadlines the utility is unlikely to meet. The CPUC’s proposed approval does not consider those changes.