Nov 14, 2018

California utility stock collapses amid wildfire liability concerns

Data: FactSet; Chart: Naema Ahmed/Axios 

Shares of Pacific Gas and Electric, the parent company of utility PG&E which services Northern California, have lost half their value amid concerns that the company could be held liable for the state's deadliest wildfire on record.

What's going on: PG&E, whose power lines have been linked to 16 of last year's devastating fires, said in a regulatory filing on Tuesday that its insurance would not fully cover the cost of damages, and there would be a "material impact" on the company's financial health if it were found responsible for the Camp Fire, which destroyed the town of Paradise in Butte County, about 90 miles north of Sacramento. That fire killed at least 48 people, with more than 200 still missing.

The details: The cause of the fire has not been determined yet, but PG&E disclosed that it reported an outage on a transmission line in Butte County at 6:15 a.m. PST on November 8th, 18 minutes before Cal Fire said the blaze began.

  • The cost of the Camp Fire damage is projected to reach $15 billion or more, per Citi analyst Praful Mehta. The company is already on the hook for $17.3 billion in potential liabilities for last year's wildfires, according to J.P. Morgan.
  • Shares of Edison International, the parent company of utility Southern California Edison, have also dropped more than 20 percent on fears that its equipment could be responsible for causing the Woolsey Fire in Ventura County, which has killed 2 and destroyed more than 300 homes.

In an unprecedented move, PG&E started a program last month to cut power during high winds associated with elevated fire risk, potentially to limit its liability.

  • California is one of the few states that hold utilities liable for damages tied to their equipment, even if the companies were in compliance with the state's safety rules.
  • A controversial California law passed in September makes it easier for utilities to pass along the costs from fire-related liabilities to customers, but the legislation doesn't guarantee that companies could pass along costs stemming from 2018 fires.

Bottom line: There's serious concern about the fate of PG&E, especially as the risk of wildfires in California rises, and there's more potential for its equipment to be tied to any future damages.

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Photo: Mandel Ngan/AFP via Getty Images

President Trump on Monday acknowledged the existence of assembled lists of government officials that his administration plans to oust and replace with trusted pro-Trump people, which were first reported by Axios' Jonathan Swan.

What he's saying: “I don’t think it's a big problem. I don’t think it's very many people,” Trump said during a press conference in India, adding he wants “people who are good for the country, loyal to the country.”

Coronavirus only part of the story behind the Dow’s drop

Photo: Andrew Burton/Getty Images

As someone has certainly told you by now, the Dow fell by more than 1,000 points yesterday, its worst day in more than two years, erasing all of 2020's gains. Most news headlines assert that the stock market's momentum was finally broken by "coronavirus fears," but that's not the full story.

What's happening: The novel coronavirus has been infecting and killing scores of people for close to a month and, depending on the day, the market has sold off or risen to record highs.

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Illustration: Sarah Grillo/Axios

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The big picture: That's partly because we're all focusing on the implications of Democrats nominating a self-described democratic socialist. It's also because a candidate's religion no longer seems to matter as much to voters or the media, making the potential milestone of a Jewish nominee more of a non-event.