Tony Earley, the PG&E Chairman and Chief Executive Officer, who’s name could be the start of a hip-hop song that goes “Tony Earley. Tony Earley. Tony Earley” is totally wrong when he says that the San Bruno CPUC Penalty for the damage caused by the San Bruno Fire would require PG&E shareholders to sell billions in additional stock and, if shares failed to sell, could land PG&E in bankruptcy.
Tony Earley told that to Bloomberg News on Tuesday, and it seems they bought it hook-line-and-sinker.
The San Bruno Fire killed eight, destroyed 38 homes and damaged the community of San Bruno. PG&E tried to get away with engineering the development of a fine that would cause it to pay nothing, while the City Of San Bruno is forced to pay for problems the California utility giant caused.
Now, in an effort to escape the responsibility of paying for the San Bruno Fire, Tony Earley’s trying to sir-up fears of PG&E fiscal ruin.
San Bruno city officials said Tony Earley’s comments contradict the findings of multiple experts, including PG&E’s own paid finance consultant.
“Mr. Earley’s comments are inconsistent with the company’s own sworn testimony made before the CPUC on March 5 this year,” said San Bruno Mayor Jim Ruane. “PG&E’s own expert said the company has the financial capability to withstand a penalty of this magnitude. We are deeply concerned that these comments could mislead the market, shareholders, and the public, and we hope these were not made in a deliberate attempt to influence the outcome of the ongoing penalty process.”
Earlier this year, PG&E’s paid expert, Eric O. Fornell of Wells Fargo Securities, said during a penalty proceeding under oath that it was “doable” for PG&E to issue equity or raise enough capital to cover a $2 billion penalty. His statements followed a separate, impartial report by Overland Consulting, independently commissioned by the CPUC in 2012, which similarly found that PG&E would be able to afford a $2.25 billion penalty without hurting its creditworthiness.
Meanwhile, PG&E stock prices remain strong. PG&E Corp.’s second-quarter earnings rose 39 percent as the utility reported stronger revenue and lower charges related to its natural-gas pipeline efforts, among other items.
The PG&E’s solid financial footing and multiple expert findings are partly what guided the $2.25 billion recommendation of the CPUC’s safety division, which issued its revised penalty proposal in July. The proposed $2.25 billion penalty would fund ongoing safety improvements and include a $300 million fine to PG&E shareholders, which is not tax deductible and would be paid directly to the State of California’s general fund. In addition, the proposal also curtails PG&E’s ability to deduct “credits” for safety repairs made since the 2010 explosion and fire – a provision San Bruno has advocated strongly for.
San Bruno officials said they support elements of the CPUC’s proposed penalty, but given the scope and magnitude of PG&E’s misconduct, they are pushing for a penalty of $3.8 billion, which would amount to $2.45 billion in after-tax dollars. This penalty would also fund ongoing safety improvements and give no credits for past expenses. San Bruno based its recommendation on the Overland report, which determined that PG&E could bear a maximum financial consequence of $2.45 billion and remain solvent.
San Bruno said it will also continue pushing the CPUC to direct PG&E to adopt and fund a series of remedial measures that will ensure systemic regulatory change in the future. These include $5 million per year for a “California Pipeline Safety Trust,” an Independent Monitor to make sure PG&E follows its own safety plan in the face of possible lax enforcement and the installation of lifesaving Automated Shutoff Valves.
The CPUC’s five-member commission is expected to issue its final recommendation in coming months.
“As we approach the three-year anniversary of this devastating tragedy, we remain firm in our belief that the only way to prevent future accidents is by penalizing PG&E to the maximum,” Mayor Ruane said. “The independent experts – even PG&E’s – have agreed that PG&E is financially able to weather a penalty of this magnitude—and then some. We are now looking to the CPUC to do the right thing and penalize PG&E in order to send a strong message that public safety cannot be compromised by the bottom line.”