PG&E Cuts Off Power, Costs California Economy $2.6 Billion
All those years of insufficient maintenance caught up with PG&E Corp. (NYSE: PCG) in 2017 and 2018 when wildfires raged through Northern California destroying thousands of homes and causing at least 100 deaths. In order to avoid a repeat of past disasters, the company cut off power to 513,000 customers early Wednesday morning in response to forecasts for widespread areas of high winds.
Power will be shut off to another 234,000 customers at around noon PT on Wednesday with a potential for 42,000 more to lose power later. The company said they expected the winds to last through midday Thursday, although the risk in some areas remains “elevated” into Friday.
In cities affected by the power shutdown, officials have warned residents to be prepared for six powerless days.
A two-day blackout could post a loss of $2.6 billion for the affected area, and PG&E likely will be off the hook for those costs.
But avoiding another disaster is local and state governments’ primary goal. Governor Gavin Newsom on Tuesday acknowledged the disruption the power shutdown will cause at the same time that he offered a bit of praise for PG&E for finally “[waking] up to their responsibility to keep people safe.”
State Senator Jerry Hill, a long-time critic of the company, told a local television station it’s easy for PG&E to turn off the power: “There’s no liability if there’s a fire after that, rather than providing that safe system that they haven’t and that they’ve been paid to do.”
“We are not a third-world country,” Hill said.
Oakland Mayor Libby Schaaf said that PG&E should have been doing more, presumably over a long period, to maintain its power distribution system and avoid a shutdown of this size. She did say, however, that “in the interest of public safety,” the shutdown can’t be avoided.
Hill called the shutdown an overreaction, according to a report at Bloomberg News: “I think they need to spend the billions they’ve already received to harden the system. I think they’re in crisis and will do anything to prevent another wildfire.”
He appears to have a point. Investors seem to agree that the company’s bankruptcy won’t be adversely affected by the shutdown. After all, if there is no power running through the lines and a fire starts, how can it be PG&E’s fault?
PG&E stock traded up more than two points earlier Wednesday and was trading up about 1.3% at $11.05 just after the noon hour. The stock’s 52-week range is $5.07 to $49.42, and the consensus 12-month price target is $16.77.