California entities, PG&E file approximately $1.68bn settlement regarding 2017, 2018 wildfires

As part of the settlement, PG&E, in partnership with International Brotherhood of Electrical Workers and educational institutions in Northern California, will establish a training program designed to provide the skills and knowledge necessary to perform tree crew work safely and competently

The California Public Utilities Commission on Dec. 17 said that its Safety and Enforcement Division (SED) has filed a proposed settlement addressing issues involving the role of Pacific Gas and Electric’s (PG&E) facilities in igniting fires in its service territory in 2017 and 2018, including wildfires that occurred in 2017 in Butte, Calaveras, Lake, Mendocino, Napa, Nevada, Sonoma, and Yuba counties, as well as the 2018 Camp Fire.

The proposed settlement between SED, the commission’s Office of the Safety Advocate, the California Coalition of Utility Employees (CUE), and PG&E, prevents the utility from recovering about $1.63bn in wildfire-related costs from ratepayers and would fund an additional $50m by PG&E shareholders in system enhancements and community engagement initiatives to strengthen its electric operations and maintenance in an effort to mitigate the risk of wildfires, the commission said, adding that that amounts to a total financial obligation by PG&E shareholders of about $1.68bn.

As noted in the settlement, multiple wildfires occurred in October 2017 and November 2018 across the utility’s service territory in Northern California. The settlement noted that regarding certain of the 2017 Northern California wildfires, SED alleged that PG&E violated, for instance:

  • General Order (GO) “95, Rule 31.1, for failing to identify and abate dying, diseased or weakened trees and tree parts; improper performance of vegetation management activities, such as pruning, removal, etc.; failing to perform a complete patrol of its system and according to best practices described in PG&E procedures; failing to retain documents related to vegetation inspections and a work order; late completion of work orders according to PG&E’s own procedures; and for PG&E’s records indicating that a work order had been completed when, in fact, the work had not been performed”
  • GO 95, Rule 35, for allowing vegetation to contact energized, bare conductors operating at distribution voltages, and for improperly prioritizing and deferring abatement of vegetation straining and abrading a secondary/service voltage conductor
  • Resolution E-4184 for failing to report one of the fire locations in the Potter/Redwood Fire

The settlement also noted that regarding the 2018 Camp Fire, SED alleged that PG&E violated, for instance:

  • GO 95, Rule 18, for improperly prioritizing a disconnected insulator hold-down anchor
  • “PU Code section 451 for failing to maintain an effective inspection and maintenance program to identify and correct hazardous conditions on transmission lines in order to furnish and maintain service and facilities”

As noted in the settlement, PG&E in late July submitted its “Initial Report in Response to OII and Order to Show Cause,” acknowledging that, with regard to the operation and maintenance of its electric facilities, there were some areas in which it could have performed better to mitigate risks, but it noted that PG&E respectfully disagreed with many of SED’s findings included in the commission’s Order Instituting Investigation (“2017/2018 Wildfire OII” or “OII”). With regard to legal contentions made in the OII, for instance, PG&E submitted that the commission erred in its interpretation and application of GO 95, Rules 31.1, 35, and 38, and that the commission misapplied GO 95, Rule 19, and Resolution E-4184, the settlement said.

The settlement consists of three primary substantive components, including the settling parties stipulating to a series of facts and violations, with those facts covering such topics as the conditions of the subject trees identified in the SED Fire Reports; instances of missing records; circumstances surrounding disposal of evidence; the conditions of equipment relevant to the 2018 Camp Fire investigation and alleged violations; as well as the inspection and maintenance history related to equipment relevant to the 2018 Camp Fire investigation and alleged violations.

The settlement added that the settling parties agreed that PG&E would not contest that some of the events and circumstances described in the stipulated facts violated GO 95, Rules 19 and 31.1, GO 165, Section IV, and Resolution E-4184; PG&E continues to dispute the other alleged violations.

Per the settlement, PG&E will not seek rate recovery of certain specified wildfire-related expenditures in future applications, which will total about $1.63bn. The settlement added that PG&E will spend $50m, funded by shareholders, on 20 system enhancement initiatives, which include vegetation management and electric operations-focused initiatives, system-wide analyses, community engagement-focused initiatives, as well as transparency and accountability focused initiatives.

Further discussing the system enhancement initiatives, the settlement noted, for instance, that PG&E, in partnership with International Brotherhood of Electrical Workers and educational institutions in Northern California, will establish a training program designed to provide the skills and knowledge necessary to perform tree crew work safely and competently. Also, PG&E will implement a Vegetation Management Oversight pilot program designed to provide enhanced oversight of pre-inspection and tree work performed on behalf of PG&E. Among other things, the settlement also noted that PG&E shareholders will pay for an independent root cause analysis company to conduct a Root Cause Analysis for each of the wildfires included in the OII that were reportable incidents to the commission and for which the California Department of Forestry and Fire Protection (CAL FIRE) determined that the ignition involved PG&E facilities, including fires that related to vegetation.

As noted in the settlement, PG&E faces numerous other financial obligations — totaling about $32bn — arising from the 2017 and 2018 wildfires, including that:

  • PG&E entered into a settlement agreement with the Official Committee of Tort Claimants (TCC) and with firms representing individual claimants who sustained losses from wildfires, including the 2017 Northern California Wildfires and 2018 Camp Fire, which, if approved by the Bankruptcy Court, would provide for PG&E, as part of its proposed Plan of Reorganization, to pay $13.5bn in restitution
  • PG&E entered into another settlement agreement, which, if approved by the Bankruptcy Court, would provide for PG&E, as part of its Plan of Reorganization, to pay $11bn in restitution to entities representing insurance subrogation claims relating to the 2017 and 2018 wildfires

The next steps in the matter include review by an administrative law judge, a 30-day comment period, and public review by the state commissioners, the commission said in its statement, noting that parties have 30 days to comment on the proposed settlement. The parties involved in the proposed settlement have requested expedited approval by the commissioners so that the utility’s Chapter 11 bankruptcy case can be resolved by June 30, 2020, enabling PG&E to participate in the state’s special wildfire fund to pay future wildfire claims, the commission said.

In a separate Dec. 17 statement, Bill Johnson, CEO and president, PG&E Corporation, said: “We remain deeply sorry about the role our equipment had in tragic wildfires in recent years, and we apologize to all those affected. None of us wants to see another catastrophic wildfire in the communities we call home. This settlement agreement underscores our commitment to learning from the past and doing what’s right for safety in the future. We recognize our fundamental obligation to operate our system safely. We share the same objectives as the Commission and other state leaders – namely in reducing the risk of wildfire in our communities, even in a rapidly changing environment. While we have taken unprecedented actions to do so, we recognize that more must be done.”