The bad news keeps on coming for PG&E Corp. (NYSE: PCG), the California utility company that provides both electricity and natural gas to much of the northern part of the state. On Monday, shareholders sold off on the threat of litigation against PG&E for its part in the Camp Fire that has swept through an area around Butte County, about 150 miles northeast of San Francisco. So far 42 deaths and the destruction of more than 6,500 homes have been attributed to the fire.
In an SEC filing on Tuesday, PG&E acknowledged that on Thursday, November 8, it experienced an outage on a 115-kV transmission line “in the area of the Camp Fire.” That was the same day that lieutenant governor Gavin Newsom issued an emergency proclamation for Butte County stemming from the Camp Fire.
The utility company also reported that it had renewed its liability insurance coverage in the amount of $1.4 billion for the period between August 1, 2018, through July 31, 2019. Then comes the bad news for PG&E and its investors:
While the cause of the Camp Fire is still under investigation, if the Utility’s equipment is determined to be the cause, the Utility could be subject to significant liability in excess of insurance coverage that would be expected to have a material impact on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.
Beginning with last Friday’s trading session, PG&E stock dropped about 16.5%, followed by another 17.4% on Monday and just 0.7% on Tuesday. In the late morning Wednesday, the stock is down more than another 20%, trading at $25.89, and down 46% from Thursday’s closing price of $47.80.
Last year the state legislature agreed to allow the company to issue state-backed bonds to pay off 2017 claims that may have totaled as much as $17.3 billion. The legislature also authorized PG&E to issue similar bonds in 2019, but this year was not included. In general, the legislation gives the state’s utility companies a way to recover some costs from wildfire damages, provided that the fire damage was not caused by the utility’s negligence.
Newson and Governor Jerry Brown, who Newsom will replace in January, are “assessing all the facts” before reaching a decision on what help may be made available this year to PG&E and to Edison International, the utility serving the area around Malibu where the Woolsey fire raged.
The newly elected legislature meets for the first time in January and there appears to be no great sense of urgency in resolving the problem that PG&E before then.
In the meantime, PG&E’s stock continues to drop and set a new 52-week low of $25.01 shortly before noon Wednesday. The stock’s 52-week high is $58.38.