PG&E could go bankrupt in Februrary due to Calinfornia wildfire liabilities

[splin]

Big companies fail for many different reasons within or without their control. In this case $30B in liabilities if they are found guilty of starting the widfires through faulty equipment, including power lines.

Normally the assets will get sold on at knock down prices and often the business will continue under new ownership. But I wonder how many investors there are are who would be willing to take on such a business? Probably lots, but it seems to me that with the extent and duration of the Californian droughts, the risks of devastating wildfires are much higher than in decades past and may continue to get worse.

The consequences, if PG&E were found guilty of causing the fires through the use of power lines and equipment which were not sufficiently intrinsically safe in fire risk areas could be very expensive. Poor maintenance and other practices may have been a factor and that would likely be relatively easy to address.

But what if the state regulators, or public opinion, decided to demand that all power lines in sensitive areas had to be replaced with underground cables, transformers had to be built into fireproof bunkers, hugely expensive and much more extensive control and protection equipment had to installed to 'guarantee' that no failure or perceivable accident (eg. a truck driving into a transformer or power line) could cause a fire?

When lives are lost on any scale, especially influential ones, there is always a loud clamour to ensure that it can never happen again and the regulators, in a knee jerk reaction, impose very expensive (but frequently ill advised) regulations and controls, often with unintended consequences.

The company threatening risks that have hit PG&E may been there all along but are now very visible. The State clearly needs to ensure the continuing function of the company and I'm sure would have an interest in curbing excessive controls if they could but I'm sure various lawyers (this is California) may be able to prevent them doing so.

So could the cost of operating such a business potentially rise dramatically? If not now, in the future if the droughts persist or get worse? Even if the costs and risks are more imagined than real they must have some impact on the risk premium demanded by investors, pushing up power prices in a State where I believe they are already very high.

Or is the above all way overblown and business will carry on as usual? Will the lawyers manage to lay off the blame to State due to their failure to resource and enforce adequate fire defence and prevention schemes (eg. large, frequent and properly maintained firebreaks) and fire response services to contain outbreaks?

[CatalinaWOW]

Lawyers always pat themselves on the back and say that they are beneficial to society, that they are punishing the guilty and righting wrongs.

In this case, even if PG&E is found to be negligent, I don't see any problems being solved, at least not in ways that people will like.  Same thing is true about criminal charges that are being contemplated.

Utilities are highly regulated with rates usually set by public commissions.  Maintenance, or infrastructure updates can only be funded if rate increases are authorized.  Which will cause much wailing and gnashing of teeth.  Any fees the lawyers draw (which I am sure will be sizable even on a PG&E scale) will just be money not spent on maintenance.  At best this a horribly inefficient way to achieve the desired outcome.

[raptor1956]

Lawyers always pat themselves on the back and say that they are beneficial to society, that they are punishing the guilty and righting wrongs.

In this case, even if PG&E is found to be negligent, I don't see any problems being solved, at least not in ways that people will like.  Same thing is true about criminal charges that are being contemplated.

Utilities are highly regulated with rates usually set by public commissions.  Maintenance, or infrastructure updates can only be funded if rate increases are authorized.  Which will cause much wailing and gnashing of teeth.  Any fees the lawyers draw (which I am sure will be sizable even on a PG&E scale) will just be money not spent on maintenance.  At best this a horribly inefficient way to achieve the desired outcome.

Enron found a way to jack up rates now didn't they...


Brian