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Subsequent Events
9 Months Ended
Sep. 30, 2017
Subsequent Events [Text Block]

NOTE 10: SUBSEQUENT EVENTS

 

Investigation of Recent Northern California wildfires

 

Beginning on October 8, 2017, multiple wildfires spread through Northern California, including Napa, Sonoma, Butte, Humboldt, Mendocino, Del Norte, Lake, Nevada, and Yuba Counties, as well as in the area surrounding Yuba City.  According to the Cal Fire California Statewide Fire Summary dated October 30, 2017, at the peak of the wildfires, there were 21 major wildfires in California that, in total, burned over 245,000 acres, resulted in 43 fatalities, and destroyed an estimated 8,900 structures.

 

The causes of these fires are being investigated by Cal Fire and the CPUC, including the possible role of the Utility’s power lines and other facilities.  The Utility expects that Cal Fire will issue a report or reports stating its conclusions as to the sources of ignition of the fires and the way that they progressed.  The CPUC’s SED is conducting investigations to assess the compliance of electric and communication companies’ facilities with applicable rules and regulations in fire impacted areas.  According to information made available by the CPUC, investigation topics include, but are not limited to, maintenance of facilities, vegetation management, and emergency preparedness and response.  It is uncertain when the investigations will be complete and whether Cal Fire will release preliminary findings before its investigation is complete. 

 

As of October 31, 2017, the Utility had submitted 20 electric incident reports to the CPUC involving the Utility’s facilities in and around the areas impacted by the Northern California wildfires.  Electric utilities must report to the CPUC incidents that are attributable or allegedly attributable to utility-owned facilities and (1) result in fatality or personal injury rising to the level of in-patient hospitalization; or (2) are the subject of significant public attention or media coverage; or (3) involve damage to property of the Utility or others estimated to exceed $50,000.  The information contained in these reports is factual and does not include a determination of the causes of the fires.  The investigations into the causes of the fires are ongoing.

 

The Utility estimates that it will incur costs in the range of $160 million to $200 million for service restoration and repairs to the Utility’s facilities (including an estimated $60 million to $80 million in capital expenditures) in connection with these fires.  While the Utility believes that such costs are recoverable through CEMA, its CEMA requests are subject to CPUC approval.   The Utility’s financial condition, results of operations, liquidity and cash flows could be materially adversely affected if the Utility were unable to recover such costs.

 

If the Utility’s facilities, such as its electric distribution and transmission lines, are determined to be the cause of one or more fires, and the theory of inverse condemnation applies, the Utility could be liable for property damages, interest, and attorneys’ fees without having been found negligent, which liability, in the aggregate, could be substantial.  Courts have imposed liability under inverse condemnation policy to actions by property holders against utilities on the grounds that losses borne by the person whose property was damaged through a public use undertaking should be spread across the community that benefitted from such undertaking and based on the assumption that utilities have the ability to recover these costs from their customers.  In addition to such claims for property damage, interest and attorneys’ fees, as well as claims under other theories of liability, the Utility could be liable for fire suppression costs, personal injury damages, and other damages if the Utility were found to have been negligent, which liability, in the aggregate, could be substantial.  The Utility also could be subject to material fines or penalties if the CPUC or any other law enforcement agency brought an enforcement action and determined that the Utility failed to comply with applicable laws and regulations.  PG&E Corporation and the Utility are unable to reasonably estimate the amount of possible losses (or range of amounts) given the preliminary stages of the investigations and uncertainty as to the causes of the fires and the extent and magnitude of damages. 

 

As of October 31, 2017, the Utility is aware of nine lawsuits, one of which seeks to be designated as a class action, that have been filed against PG&E Corporation and the Utility in Sonoma, Napa and San Francisco Counties' Superior Courts. The lawsuits allege, among other things, negligence, inverse condemnation, trespass, and private nuisance.  They principally assert that PG&E Corporation and the Utility’s alleged failure to maintain and repair their distribution and transmission lines and failure to properly maintain the vegetation surrounding such lines were the cause of the fires.  The plaintiffs seek damages that include personal injury, property damage, evacuation costs, medical expenses, and other damages.  PG&E Corporation and the Utility may be subject of additional lawsuits in connection with the Northern California wildfires.

 

The Utility has approximately $800 million in liability insurance for potential losses that may result from the Northern California wildfires.  If the Utility were held liable for one or more fires and the Utility’s insurance were insufficient to cover that liability or the Utility were unable to recover costs in excess of insurance through regulatory mechanisms, either of which could take a number of years to resolve, PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity and cash flows could be materially adversely affected. 

 

Following the Northern California wildfires, PG&E Corporation reinstated its liability insurance in the amount of $630 million for any potential future event.