PG&E reels as investors assess its role in California wildfire

Only minutes before the first report a week ago of the "Camp Fire" that has killed at least 56 people in California, a power line owned by Pacific Gas & Electric suddenly stopped working. Before the day was out, there was talk the utility's equipment had sparked another wildfire. 

Such speculation was anything but idle. California state investigators in June faulted PG&E-owned power lines for sparking a dozen blazes in Northern California in the fall of 2017 that killed 46 and incinerated nearly 9,000 homes and other structures. 

PG&E's potential liability for the deaths and massive property loss in the Camp Fire is slamming the company financially. Shares of the utility plunged as much as 32 percent on Thursday and are down nearly 63 percent since Nov. 8. 

That was the date PG&E notified the California Public Utilities Commission that a transmission line in Northern California's Butte County, just north of Sacramento, had failed at 6:15 a.m. Pacific time. The fire was reported at roughly 6:30 a.m.

Billions in potential liabilities

The plunge in PG&E's stock price has lopped nearly $15 billion off its value as a public company and raised questions about its viability. 

PG&E said in a regulatory filing on Tuesday that it could face "significant liability in excess of insurance coverage" if its equipment is found to have caused the Camp Fire, while noting that the blaze remains under investigation. 

The company has $3.4 billion in cash and cash equivalents after drawing down all of its revolving credit facility, and it has an additional $1.4 billion in wildfire insurance coverage, according to the filing. In statement to CBS MoneyWatch, PG&E said it tapped its credit facility "to provide greater financial flexibility, including to pay down upcoming debt maturities and for general business purposes."

Investors estimate PG&E could be on the hook for $12 billion in liabilities, said Tim Hynes, head of North American research for Debtwire. That total exceeds the company's market capitalization of $9.7 billion. 

Another Wall Street analyst pegged the estimated cost of the 2018 fire at $15 billion, noting it's still only partially contained. "Liabilities are going to be significant," Citigroup analyst Praful Mehta said. 

About two dozen lawsuits have already been filed against PG&E for allegedly failing to maintain its power lines.

Law protects utilities from fire losses

California lawmakers in August passed a wildfire measure that provided utilities some relief from wildfire-related liabilities. But the law, which covered damages only in 2017, was criticized as favoring companies over survivors. A new legislative session is set to begin in January, and incoming Governor Gavin Newsom has not yet weighed in on any plan to help the utility. 

"The only real solution is to go back to Sacramento and get some form of recovery for 2018 damages," Mehta said of the newly enacted law, which doesn't address any potential financial toll from this year's infernos.

The pummeling of PG&E shares reflects that the market views the odds of a legislative fix to be low, he said.

Debtwire's Hynes said the utility has enough cash to get through the next year, and he believes the state will step in to keep the company operating. 

"It's the bondholders and the equity holders that will bear the costs," he said. "If you're a utility customer, you're fine."