Utility Blocked From Paying Dividends After Probation Violation

Pacific Gas & Electric vehicles are parked at the PG&E service center in Oakland, Calif., on Jan. 14, 2019. (AP Photo/Ben Margot, File)

SAN FRANCISCO (CN) – After finding Pacific Gas & Electric violated its probation, a federal judge on Tuesday barred the embattled utility from paying dividends to shareholders until it complies with strict new requirements for preventing future wildfires.

In a hearing in downtown San Francisco, U.S. District Judge William Alsup rejected PG&E’s contention that it can’t fund all its infrastructure investments without paying dividends – which it argues will encourage equity investment in the utility – chalking up its financial shortfall to “a problem of your own making.”

PG&E, currently in the heat of Chapter 11 bankruptcy proceedings, hasn’t issued dividends since 2017 and won’t be doing so until it emerges from bankruptcy at the earliest. But according to Alsup, the utility issued billions of dollars in dividends in 2016 and 2017 while “knowingly” failing to trim or remove thousands of trees it had identified as posing a wildfire risk.

That failure was a major contributor to the wildfires that ravaged California during the 2017 and 2018 wildfire seasons, which burned 3% of the state’s nearly 164,000 square miles.

“PG&E pumped out $4.5 billion last year in dividends and let the tree budget wither, so a lot of trees that should have been taken down were not,” Alsup told PG&E lawyer Reid Schar, of Jenner & Block in Chicago, on Tuesday. “You’ve got to get square with the people of the state of California, who depend on you to do your job safely.”

The prohibition on dividends is one of five new probation conditions Alsup adopted during Tuesday’s hearing. In January, Alsup found PG&E violated its probation in a criminal case over the fatal 2010 San Bruno pipeline explosion when it failed to notify a probation officer of a prosecution and settlement with the Butte County District Attorney’s Office over the 150-acre Honey Fire in October 2017.

Alsup ordered PG&E to comply with “all applicable laws concerning vegetation management and clearance requirements,” and with specific targets and metrics set forth in its amended 2019 wildfire mitigation plan. The requirements include trimming millions of trees that could come in contact with its power lines and spark wildfires.

“At least that bare minimum should be honored by PG&E,” Alsup said Tuesday.

PG&E’s Shar did not object to Alsup’s new requirements, which were adopted from the bench. The attorney did, however, say the block on dividends was something PG&E “could be concerned about down the road.”

In a statement issued after Tuesday’s hearing, PG&E said it “share[s]” the court’s commitment to safety.”

We “understand that we must play a leading role in reducing the risk of wildfire throughout Northern and Central California,” the statement said. “As we informed the court, we remain committed to complying with all rules and regulations and working hard to keep our customers and communities safe.”

Before closing Tuesday’s hearing, Alsup also addressed PG&E’s acting chief executive John Simon, who was observing the proceedings from the gallery.

“I know I’ve been tough on your company, but the truth is, I want to see you succeed; I want to see the people of California safe in their homes,” Alsup told Simon. “We have a fire season coming up quick, and by December, we’ll be back here and we will know how many fires your company started. And I’m hoping the answer is zero. That’s what I want and that’s what the people of California want.

“PG&E shouldn’t be starting these fires, so that’s where I hope this is headed – in a good direction.”

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