A battle between California politicians and PG&E, the state's largest utility, is being waged over who should have to pay the price of wildfire damage, Axios' Courtenay Brown and Andrew Freedman write.
Why it matters: Companies are being forced to face the consequences of a changing climate, which is leading to more frequent and destructive wildfires and other natural disasters. PG&E's situation is a warning to other power companies and businesses around the country.
The big picture: The Camp fire, which destroyed the town of Paradise, was the costliest catastrophe worldwide, with $16.5 billion in damages, per reinsurance company Munich Re.
"Market participants have woken up to the reality that [wildfires] can happen again and probably will. The expected value of future wildfire liabilities is so much bigger [thanks to climate change]," Michael Wara, a research fellow at Stanford University's Energy and Policy program, tells Axios.
PG&E could be on the hook for billions of dollars in liability costs related to last year and the prior year's wildfires, far more than its insurance would cover.
Driving the news: 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.
Why you will hear about this again: The rest of the U.S. is increasingly feeling the effects of climate change.
- Utilities in hard-hit states could be increasingly cash strapped, and some will likely face stark questions about their liability in contributing to particular disasters.
- The National Climate Assessment (NCA) found that a sea level rise of 1 meter, or 3.3 feet, by 2100 "would put an additional cumulative total of 25 gigawatts (GW) of operating or proposed power capacities at risk" of flooding.
The bottom line: PG&E's predicament could be repeated elsewhere as the impacts of climate change hit increasingly hard.