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Does PG&E Have Enough Money to Pay Dixie Fire Claims?

August 18, 2021 Posted In

PG&E admits that it’s facilities likely started the Dixie Fire.  In its July 18 report to state regulators, it explains that after a power outage, one of its workers went to figure out what was wrong, and saw a Douglas fir tree leaning against one of its hi-voltage line, two blown fuses nearby, and a fire starting near the base of the tree. That fire became the Dixie Fire.  Seems fairly clear-cut.

“The responding PG&E troubleman observed from a distance what he thought was a blown fuse on the PG&E Bucks Creek 1101 12kV Overhead Distribution Circuit uphill from his location. Due to the challenging terrain and road work resulting in a bridge closure, he was not able to reach the pole with the fuse until approximately 1640 hours. There he observed two of three fuses blown and what appeared to him to be a healthy green tree leaning into the Bucks Creek 1101 12 kV conductor, which was still intact and suspended on the poles. He also observed a fire on the ground near the base of the tree. The troubleman manually removed the third fuse and reported the fire, his supervisor called 9-1-1, and the 9-1-1 operator replied they were aware of the fire and responding. CAL FIRE air support arrived on scene by approximately 1730 hours and began dropping fire retardant and water.”

The law requires all utilities to keep trees trimmed at least 4 feet from its electrical lines.  And in fact, PG&E raises money from ratepayers to do this work.  Historically, however, PG&E has found ways to not spend the money raised from the ratepayers and to not keep trees trimmed as they are supposed to.  That seems to be exactly what happened here.  Because PG&E failed to comply with the tree trimming law, PG&E can be held accountable and be required to pay for all the damage it caused.

But the damage is massive.  Does PG&E have enough money to pay?

First, PG&E is now out of bankruptcy.   It is solvent and making money.  And PG&E told the Securities and exchange commission in a recent filing that it has approximately $300 million in insurance coverage for the Dixie Fire. (Fires that PG&E ignites after August 1 are covered by an additional $600 million in insurance.)

Is $300 million enough?  Probably not. The Dixie Fire is now the second largest wildfire in California history, at more than 600,000 acres burned and 1000 structures destroyed, including the entire town of Greenville. Though its hard to estimate what PG&E’s total liability will be, it looks like it will exceed $1 billion.  That leaves a shortfall of at least $700 million.  Can PG&E cover it?

Probably, because PG&E has access to a state-sponsored wildfire insurance fund that the legislature set up during PG&E’s bankruptcy to keep PG&E from going belly up again. Currently, there is $10 billion available in the state-sponsored wildfire fund to reimburse PG&E for Dixie Fire pay-outs.  That ought to be enough to cover all Dixie fire claims under most reasonable projections. (For purposes of comparison, PG&E’s total liability for the Camp and North Bay Fires — which burned more than 25,000 structures was close to $3o billion.)

Note, though, that the money in the state-sponsored fund is available only to PG&E.  Wildfire survivors cannot make direct claims against it.