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Is California's PG&E The First Climate Change Bankruptcy? (marketscreener.com)
"California's largest power company intends to file for bankruptcy as it faces tens of billions of dollars in potential liability following massive wildfires that devastated parts of the state over the last two years," reports the Washington Post.
Calling it "a climate change casualty," one Forbes contributor notes that PG&E's stock has now lost 90% of its mid-October value after a giant November wildfire, adding that "Future investors will look back on these three months as a turning point, and wonder why the effects of climate change on the economic underpinnings to our society were not more widely recognized at the time." Climate scientists may equivocate about the degree to which Global Warming is contributing to these fires until more detailed research is complete, but for an investor who is used to making decisions based on incomplete or ambiguous information, the warning signs are flashing red... there is no doubt in my mind that Global Warming's thumb rests on the scale of PG&E's decision to declare bankruptcy.
And the Wall Street Journal is already describing it as "the first climate-change bankruptcy, probably not the last," noting that it was a prolonged drought that "dried out much of the state and decimated forests, dramatically increasing the risk of fire." "This is a fairly new development," said Bruce Usher, a professor at Columbia University's business school who teaches a course on climate and finance. "If you are not already considering extreme weather and other climatic events as one of many risk factors affecting business today, you are not doing your job"...
In less than a decade, PG&E, which serves 16 million customers, saw the risk of catastrophic wildfires multiply greatly in its vast service area, which stretches from the Oregon border south to Bakersfield. Weather patterns that had been typical for Southern California -- such as the hot, dry Santa Ana winds that sweep across the region in autumn, stoking fires -- were now appearing hundreds of miles to the north. "The Santa Ana fire condition is now a Northern California fire reality, " said Ken Pimlott, who retired last month as director of the California Department of Forestry and Fire Protection, or Cal Fire. "In a perfect world, we would like to see all [of PG&E's] equipment upgraded, all of the vegetation removed from their lines. But I don't know anybody overnight who is going to catch up." PG&E scrambled to reduce fire risks by shoring up power lines and trimming millions of trees. But the company's equipment kept setting fires -- about 1,550 between mid-2014 through 2017, or more than one a day, according to data it filed with the state.
The global business community is recognizing the risks it faces from climate change. This week, a World Economic Forum survey of global business and thought leaders found extreme weather and other climate-related issues as top risks both by likelihood and impact.
Other factors besides climate change may also have pushed PG&E towards bankruptcy, according to the article. They're required by California state regulations to provide electrical service to the thousands of people moving into the state's forested areas, yet "an unusual California state law, known as 'inverse condemnation,' made PG&E liable if its equipment started a fire, regardless of whether it was negligent."
In declaring bankruptcy, PG&E cited an estimated $30 billion in liabilities -- plus 750 lawsuits from wildfires potentially caused by its power lines.
Calling it "a climate change casualty," one Forbes contributor notes that PG&E's stock has now lost 90% of its mid-October value after a giant November wildfire, adding that "Future investors will look back on these three months as a turning point, and wonder why the effects of climate change on the economic underpinnings to our society were not more widely recognized at the time." Climate scientists may equivocate about the degree to which Global Warming is contributing to these fires until more detailed research is complete, but for an investor who is used to making decisions based on incomplete or ambiguous information, the warning signs are flashing red... there is no doubt in my mind that Global Warming's thumb rests on the scale of PG&E's decision to declare bankruptcy.
And the Wall Street Journal is already describing it as "the first climate-change bankruptcy, probably not the last," noting that it was a prolonged drought that "dried out much of the state and decimated forests, dramatically increasing the risk of fire." "This is a fairly new development," said Bruce Usher, a professor at Columbia University's business school who teaches a course on climate and finance. "If you are not already considering extreme weather and other climatic events as one of many risk factors affecting business today, you are not doing your job"...
In less than a decade, PG&E, which serves 16 million customers, saw the risk of catastrophic wildfires multiply greatly in its vast service area, which stretches from the Oregon border south to Bakersfield. Weather patterns that had been typical for Southern California -- such as the hot, dry Santa Ana winds that sweep across the region in autumn, stoking fires -- were now appearing hundreds of miles to the north. "The Santa Ana fire condition is now a Northern California fire reality, " said Ken Pimlott, who retired last month as director of the California Department of Forestry and Fire Protection, or Cal Fire. "In a perfect world, we would like to see all [of PG&E's] equipment upgraded, all of the vegetation removed from their lines. But I don't know anybody overnight who is going to catch up." PG&E scrambled to reduce fire risks by shoring up power lines and trimming millions of trees. But the company's equipment kept setting fires -- about 1,550 between mid-2014 through 2017, or more than one a day, according to data it filed with the state.
The global business community is recognizing the risks it faces from climate change. This week, a World Economic Forum survey of global business and thought leaders found extreme weather and other climate-related issues as top risks both by likelihood and impact.
Other factors besides climate change may also have pushed PG&E towards bankruptcy, according to the article. They're required by California state regulations to provide electrical service to the thousands of people moving into the state's forested areas, yet "an unusual California state law, known as 'inverse condemnation,' made PG&E liable if its equipment started a fire, regardless of whether it was negligent."
In declaring bankruptcy, PG&E cited an estimated $30 billion in liabilities -- plus 750 lawsuits from wildfires potentially caused by its power lines.
They neglected their infrastructure in a known fireprone area.. Now they are being fined/sued out of existance. Uh huh, yeah its climate change.
PG&E would not be liable for "Global Warming", the fact they are liable for damages is because they were the ones you irresponsibly cared for equipment and other things.
Nothing like using some mystical bogeyman to cast blame on and shift away from your own poor judgment and ability.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Of California's fucked-in-the-head regulatory environment.
This has NOTHING to do with climate change.
They're basically required to service areas that will never be profitable, below their costs of delivery, can't spin off unprofitable business segments, they're not allowed to charge more to cover their costs, etc.
Meanwhile, state and federal regulations basically conspire against them. Changes in land management dramatically increase the chances of fire in any given area. And they're made liable for any fires in the area of their equipment, whether it was actually their equipment or not...meanwhile industry regulation basically prevents them from charging true cost of the power they deliver and actually making it MORE profitable to sell the power out of state and then re-import it...
Meanwhile, California's idiot density is going up year over year as people with an actual functional brain flee the state. They've had wildfires in California for HOW LONG? Yet, every year we've got idiots starting fires and moving into areas that abut to the aforementioned badly managed forested land and building WOOD HOUSES, while ignoring sensible rules for building in fire-prone areas. Then, after they've burned down for the umpteenth time, they go back and rebuild in exactly the same fashion!
It's just the intellectually retarded leading the intellectually retarded out there.
It's like going into a boxing match and finding out the other guy is bringing a knife, guns, artillery, grenades and a group of friends to kick your ass.
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Exactly, PG&E has been proven mismanged for decades. San Bruno wasn't a one-off, they covered up their lies intentionally. This company is shit and needs to die.
https://www.mercurynews.com/2019/01/17/pge-uninsulated-power-conductors-were-factors-in-fatal-wildfires-federal-judge/
The premise that climate change was even a 50% factor is retarded. Climate change doesn't cause mismanagement of trees along power lines while the company pockets the money for their bottom line, as they provably did.
This. PG&E does bare minimum maintenance. Our power goes out about once a year for the better part of a day, entirely at random, along with an area that is a couple of miles on each side, containing several thousand homes. That's not in the mountains or in some hard-to-reach place. It's in the heart of the Silicon Valley.
PG&E is grossly incompetent. Even if you ignore their equipment malfunctions causing wildfires in 2017 AND 2018 and somehow blame that on global warming, there's also the San Bruno pipeline explosion that killed 8 people and destroyed 38 homes. There's certainly no global warming involved there. They simply don't maintain their equipment until something breaks. And this means things break. A lot.
Basically, PG&E is what happens when governments try to allow a regulated monopoly to provide critical utilities instead of a municipal electric company or a regional nonprofit. Every dollar that went to PG&E's sharedholders is a dollar that should have been used for routine maintenance and upgrades. If that money had been used that way, close to a hundred people would likely still be alive today, just from those two incidents alone. The problem is, the primary goal of any for-profit corporation, no matter how highly regulated, is and always will be profit, and their concern for public safety will always be limited to doing the bare minimum necessary to avoid getting sued out of existence.
This is their second bankruptcy this century. The first, though largely caused by the California energy crisis, was certainly not helped by a $2 million judgement against them in 1997 for failing to trim trees near power lines, resulting in a devastating wildfire in Nevada back in 1994. For them to have pretty much the same situation in 2017 is almost unconscionable. Yet judging from the frequent power outages in mountainous parts of the Bay Area, IMO, there's no reason to believe that they have learned their lesson and are maintaining trees adequately even to this day. The 2018 Camp Fire was just the additional straw thrown down on top of the camel posthumously.
Clearly, this company has failed. We should let it fail. Deny them Chapter 11. Cancel the stock. Make them file Chapter 7 and sell off the pieces. That's the only way things get better. Or at a bare minimum, order a complete replacement of all the company's leadership as part of the bankruptcy proceedings. If we keep letting the same people make the same bad decisions, how can we possibly expect different results?
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They think that they can blame this on global warming? I call bullshit. Global warming and it's effects on humanity has been something people in the USA have been beaten over the head with for at least 30 years now. They knew that global warming would mean greater demand for electricity for air conditioning, that this meant greater threats of storms and wild fires, this is not news. What have they been doing for the last 30 years to stop this from happening?
I will say that PG&E might not have all the blame here, they are in a business that is highly regulated by government. The government of California is likely the most to blame here, and some of this might land on the shoulders of the federal government too.
Even before global warming was in the common vocabulary we had threats of acid rain and other environmental disaster. What did California do about this? They declared the state a "nuclear free zone" meaning that they denied themselves access to the safest and cleanest source of energy available. This was true then and now. Nuclear power is far cheaper and far more reliable than wind or solar power. If they were paying attention to the science on global warming then they should also have been paying attention to the best science could tell them on how to combat it.
This is why I believe that so many politicians are anti-science, they've legislated themselves into a global warming corner. If you want to convince me that the "science is settled" on global warming then why are you ignoring the science on the safest and lowest CO2 energy source we have? Which is the greater threat to California, America, and the world? Is it global warming or nuclear power? If you say global warming then you are fools for shutting down the nuclear power plants you had and not building more. If you say global warming then you are fools for not planning on the effects and costs they will entail decades ago.
Nope, you can't blame this on global warming you fools. This is just bad management from the top to the bottom. I hope you enjoy freezing in the dark.
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Standard issue with electrical reticulation is that the general public are so uninformed as to be living in a land of comic book physics.
The industry is full of really responsible people invested in their business going well and delivering a service. The OP beautifully points out how a couple of inflexible limits: a requirement to provide power into dangerous places - uneconomically, liability through perverse legislation and the impact of climate change has come around to ... severely bite the legislators in the ass, and the voting public and consumers.
While it may be fun to win over in some legal match its a zero sum game and hugely wasteful.