In Deadly Tubbs Fire Investigation, California Officials Clear PG&E
By J.D. Morris
Fifteen and a half months after one of the most destructive wildfires California has ever seen wreaked historic havoc on Wine Country, Pacific Gas and Electric Co. no longer has to wonder whether the state will blame it for the blaze.
State investigators on Thursday cleared PG&E equipment of starting the Tubbs Fire, which incinerated more than 5,600 buildings and killed about two dozen people after it ignited late Oct. 8, 2017, and raced from Calistoga into Santa Rosa. The fire was caused by "a private electrical system adjacent to a residential structure," according to the California Department of Forestry and Fire Protection, or Cal Fire.
The announcement provides a long-awaited measure of clarity for beleaguered PG&E, which was hit with hundreds of legal claims from fire survivors blaming it for causing the massive October 2017 firestorm. Those claims have contributed to an increasingly existential threat for the San Francisco company, especially after fire investigators determined the utility's equipment caused 17 of the wildfires that burned through Northern California that month.
Investors reacted strongly, sending shares of the utility's parent company, PG&E Corp., up nearly 75 percent to close at $13.95, its highest level since before the company notified employees on Jan. 14 it would file for bankruptcy near the end of the month. Trading in the company's shares was temporarily halted after the report was released.
But the findings do not fully clear the uncertainty hanging over PG&E, in large part due to the fallout from an even worse conflagration last year.
The Camp Fire, which killed 86 people and destroyed nearly 19,000 buildings after it started in Butte County Nov. 8, far surpassed the Tubbs Fire's record as the most destructive wildfire in state history.
While Cal Fire is still investigating the cause of the Camp Fire, PG&E has said some of its equipment malfunctioned in the area just before and after the wildfire started. In the wake of that wildfire, PG&E's stock price plummeted as details of its equipment problems in the area emerged and lawsuits mounted.
The Camp Fire aftermath largely fueled PG&E's decision to file for bankruptcy protection next week -- but the utility's liability from the 2017 infernos was a key factor, too.
In explaining its decision to soon seek protection under Chapter 11 of the U.S. bankruptcy code, PG&E said its liability from fires in 2017 and 2018 could exceed $30 billion. It's not immediately clear how much Thursday's announcement will affect that figure or the utility's decision to seek bankruptcy protection.
PG&E said the company "still faces extensive litigation, significant potential liabilities and a deteriorating financial situation." The company said its finances were "further impaired" by recent credit-agency downgrades.
PG&E's statement did not directly address the question of whether it still plans to file for bankruptcy, and a spokeswoman declined to comment further. The company previously said it would file on or about Tuesday.
"Resolving the legal liabilities and financial challenges stemming from the 2017 and 2018 wildfires will be enormously complex and will require us to address multiple stakeholder interests, including thousands of wildfire victims and others who have already made claims and likely thousands of others we expect to make claims," PG&E said.
Cal Fire's conclusions "certainly help" PG&E but have likely not pulled the company back from the brink of bankruptcy, said Travis Miller, a utilities analyst for Morningstar Research Services.
The devastation from the Camp Fire was so great that "liabilities from it alone could be enough to make it challenging for PG&E" to survive in its current financial form, Miller said.
Jeff Cassella, vice president and senior credit officer for Moody's Investors Service, said in a statement that while the announcement could reduce PG&E's total wildfire liability, "the company continues to face additional litigation and extensive legal responsibilities for other wildfires."
Moody's, one of the agencies that downgraded PG&E, still expects the company to file for bankruptcy, Cassella said.
At a news conference outside his Capitol office Thursday, Gov. Gavin Newsom said it was not his place to weigh in on whether PG&E should continue to pursue bankruptcy.
"That's a question for PG&E," he said. "They will make that determination. The state of California cannot make that determination for them."
But Mike Danko, one of the attorneys suing PG&E over the Tubbs Fire and the Camp Fire, questioned whether the utility now needed to file for bankruptcy.
"If it was marginally insolvent before, and there was a question about that ... it's certainly clear now that they are solvent," Danko said. "So they are grossly, grossly overestimating their potential liability, which is their stated reason for filing for bankruptcy."
Steven Weissman, a former administrative law judge for the California Public Utilities Commission, called the Cal Fire announcement about the Tubbs Fire a "remarkable new development" that naturally raises the question of why PG&E would "rush into bankruptcy."
At the same time, Weissman said, fire victims could still argue in court that PG&E's negligence played a role in the ignition or intensification of the fire.
"It's a stunning new event, but it far from ends the controversy about PG&E's liability related to that fire," said Weissman, now an emeritus lecturer at UC Berkeley's Goldman School of Public Policy.
Though PG&E won't face criminal charges because of the Tubbs Fire, the civil case against PG&E centers on the utility's negligence and can still proceed, according to Frank Pitre, co-lead counsel in the 2017 North Bay fire litigation.
"Most importantly, what the (Cal Fire) report never gets to is whether PG&E acted reasonably in not shutting off the power" despite high fire danger, Pitre said.
The announcement will also probably not derail efforts from a group of lawyers who are exploring a last-minute deal that could prevent a bankruptcy filing, said Patrick McCallum, a lobbyist involved in the talks.
McCallum lost his Santa Rosa home in the Tubbs Fire and leads a group called Up from the Ashes that advocates for fire victims.
"I would imagine we're going to continue to move forward with the ideas that we have," McCallum said.
The Tubbs Fire had long proven to be a uniquely tricky blaze to sort out, as PG&E insisted since the weeks after the fire erupted that it could have been started by a power line installed and owned by someone else. The utility hasn't made that argument with any other fires from 2017.
The company repeated that line of argument in a court filing three weeks ago, telling a federal judge overseeing its probation from the 2010 San Bruno pipeline explosion that equipment on private property near the origin point outside Calistoga was not its responsibility and suggesting that poor maintenance was to blame.
Blame for the Tubbs Fire would have carried a big price. The California Department of Insurance has said insured losses from a series of 2017 North Bay fires, including Tubbs, were $8.2 billion. The department did not have a separate tally for the Tubbs Fire alone.
More than 700 complaints -- involving about 3,600 plaintiffs, by PG&E's own count -- have been filed against the utility over the October fires, with many of the suits involving the Tubbs Fire. The attorneys may continue trying to pin blame for the Tubbs Fire on PG&E, regardless of the Cal Fire report.
Danko said Cal Fire's conclusions are inadmissible in court -- attorneys have to prove the cause of the fire to a jury's satisfaction on their own if the case goes to trial. But the announcement will probably make the case more difficult, he said.
"This is telling the Tubbs Fire victims this is going to be a very, very difficult case for them," Danko said.
McCallum said his first thought after hearing of the Cal Fire news was about underinsured Santa Rosa fire victims, particularly in the Coffey Park neighborhood, which was ravaged by the Tubbs Fire. Then he realized they can still try to recover something from PG&E in court and "it's not over yet."
Tubbs Fire victims like McCallum have been longing for closure about how the disaster started, he said. Because of the lingering questions raised by Cal Fire's findings, he's not sure they have that yet.
"I don't think there's closure now," McCallum said. "I think it's added confusion."
San Francisco Chronicle staff writers Alexei Koseff and David R. Baker contributed to this report.
(c)2019 the San Francisco Chronicle