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Researching PG&E’s Wildfire Risk
Monday, December 17, 2018

Calcbench noticed last week that public utility Pacific Gas & Electric ($PCG) has proposed a rate hike of nearly $2 billion on California consumers, with more than half of that sum earmarked for PG&E to fight wildfires.

That’s a lot of money. It would increase the average California consumer’s electric bill by $10 per month. PG&E critics are already harping about the rate hike — a “shameless request,” according to the San Francisco Chronicle — and right now it remains unclear exactly how much of that rate hike state regulators will actually approve.

At Calcbench, however, we had a different question: What has PG&E already disclosed about its exposure to wildfire risk? After all, the scientific consensus is that climate change is drying out the California landscape, increasing the chance and severity of wildfires. And under SEC rules, firms are required to discuss risk from climate change.

So what has PG&E said about the issue? With our Interactive Disclosure database, you can see for yourself.

We simply pulled up PG&E’s risk factors and searched for “climate.” Lo and behold, there was wildfire risk right in the firm’s most recent 10-K—

In particular, the risk posed by wildfires has increased in the Utility’s service area (the Utility has approximately 82,000 distribution overhead circuit miles and 18,000 transmission overhead circuit miles) as a result of an extended period of drought, bark beetle infestations in the California forest and wildfire fuel increases due to record rainfall following the drought, among other environmental factors… Events or conditions caused by climate change could have a greater impact on the Utility’s operations than the Utility’s studies suggest and could result in lower revenues or increased expenses, or both.

The company mentions wildfires specifically, and warns that its response to climate change might lead to increased expenses. Increased expenses are exactly what PG&E’s requested rate hike are all about: to cover the costs of new utility poles, better weather forecasting software, and cameras to monitor for wildfires and damage.

In the firm’s most recent quarterly report, filed Nov. 5, PG&E had even more to say, including this line—

The combined effects of extreme weather and climate change also impact this risk. For example, in 2017, there were nearly double the number of wildfires than the annual average, including five of the most devastating wildfires in California’s history.

We could find other examples, but you get the picture. PG&E does treat climate change and its consequent effects as something important enough to discuss with investors. Maybe the ratepayers aren’t happy, but investors can’t say they were not warned.


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