SAN FRANCISCO (CN) – Financial woes for one of the nation’s largest utility companies appeared to worsen after a shareholder class action filed in federal court accused Pacific Gas and Electric of causing the deadliest wildfire in California history.
The lawsuit claims PG&E artificially inflated its stock price by failing to warn investors that its lax compliance with safety regulations could make it liable for billions of dollars in destruction caused by the Camp Fire, which started in the Sierra Foothills on Nov. 8 and continued blazing for 17 days.
The fire, which was fully contained as of Sunday morning, charred 153,000 acres in Butte County, destroyed more than 1,200 homes and buildings and killed 85 people. Nearly 300 people are still missing, according to the Butte County Sheriff’s Office.
“As evidenced by the estimated $17 billion in damages caused by the wildfires, damages from the Camp Fire will likely exceed the company’s $1.4 billion insurance policy,” lead plaintiff Ron Williams states in his 108-page complaint.
According to news reports cited in the lawsuit, PG&E informed state regulators just before the Camp Fire started about a problem with one of its high-power voltage lines in the area where the flames originated.
The Mercury News reported that homeowner Betsy Ann Crowley, who lives close to where the fire started, received an email from PG&E on Nov. 7 stating that the utility would arrive to work on a nearby tower that was “having problems with sparks.”
PG&E said it reviewed its emails with Crowley and saw no references to “sparks” and PG&E infrastructure. It further stressed that the power line referred to in those emails was not the same one with problems that it notified state regulators about.
Facing scrutiny over its role in a separate spate of October 2017 wildfires, PG&E announced in March that it would start periodically disabling devices that keep electricity flowing, despite disruptions in transmission and power lines.
PG&E said it did not shut off power in the area where the Camp Fire started because the conditions did not meet its criteria for a “public safety power shutoff.” Those conditions include strong winds, low humidity, dry vegetation and on-the-ground observation, according to PG&E spokeswoman Tamar Sarkissian.
“The safety of our customers and the communities we serve is our highest priority,” Sarkissian said in an emailed statement. “It’s important to remember that the cause has yet to be determined.”
The lawsuit further contends that five PG&E corporate officers and board members obtained more than $3 million in illicit gains through insider trading between August 2015 and June 2018.
According to the complaint, the inside traders include PG&E CEO and President Geisha Williams, Vice President and Chief Ethics and Compliance Officer Julie Kane, President of Human Resources Dinyar Mistry, Vice President and Controller David Thomason and former board member and Chief Operating Officer Nickolas Stavropoulos.
The shareholder class action also includes allegations relating to PG&E’s reported role in causing a separate spate of destructive Northern California wildfires in October 2017.
On June 8, the California Department of Forestry and Fire Protection, or CalFire, concluded that 12 wildfires that sparked in October 2017 “were caused by electric power and distribution lines, conductors and the failure of power poles” owned by PG&E.
Allegations relating to the October 2017 fires overlap with a separate class action that was filed in June. On Monday, U.S. District Judge Richard Seeborg granted the plaintiffs’ request to add new allegations relating to the Camp Fire to that lawsuit.
The class action filed by Williams on Wednesday also blames PG&E for causing the 2015 Butte Fire, which burned 70,000 acres in Amador and Calveras Counties. CalFire determined in April 2016 that the fire started when a PG&E power line made contact with a tree. The state filed a $90 million still-pending lawsuit against PG&E for causing the Butte Fire.
In September, the state passed a new law that limits utility companies’ liability for wildfire damage and updates maintenance requirements aimed at preventing fires.
PG&E’s stock price dropped over 60 percent earlier this month amid news of the company’s alleged role in starting the Camp Fire. The utility’s share price bounced back on Nov. 16 after California Public Utilities Commission President Michael Picker told Bloomberg News that it was “not good policy” to let utility companies go bankrupt.
This won’t be PG&E’s first time fighting an investor suit claiming it failed to disclose corporate mismanagement that led to a deadly tragedy.
Last year, PG&E settled a shareholder suit for $90 million alleging “gross mismanagement” by corporate leaders caused the San Bruno pipeline disaster in 2010 that killed eight people, destroyed 38 homes and cost the company $2.2 billion in fines.
PG&E said in a statement that its attention right now remains on dealing with aftermath of the Camp Fire, despite litigation that could cost the company billions of dollars in the future.
“We are aware of lawsuits regarding the Camp Fire,” PG&E said in its statement. “Right now, our primary focus is on supporting first responders and positioning our employees to assess damage, restore service and rebuild infrastructure, and helping our communities.”