The San Francisco-based utility became one of the few U.S. corporations to be convicted of homicide-related charges in a dramatic scene that unfolded Tuesday in Superior Court in California’s Butte County, where the 2018 Camp Fire razed the town of Paradise.
PG&E Chief Executive Bill Johnson entered the guilty pleas for each of the felony counts of involuntary manslaughter, looking at the images of the 84 victims on a screen as Judge Michael Deems recited the counts in alphabetical order.
“Guilty, your honor,” Mr. Johnson replied, again and again over a half-hour span.
Mr. Johnson, who joined PG&E last year and is set to step down as its CEO this month, also pleaded guilty on its behalf to one count of unlawfully causing a fire. The company, which has agreed to pay the statutory maximum penalty of $3.48 million, is expected to be sentenced later this week.
“No words from me can ever reduce the magnitude of that devastation or do anything to repair the damage, but I sincerely hope that the actions we’re taking today will help bring some measure of peace,” Mr. Johnson told the court.
Meanwhile in a separate hearing in the U.S. Bankruptcy Court in San Francisco, Judge Dennis Montali said he intends to approve PG&E’s $59 billion reorganization plan, which involves issuing huge amounts of new debt and equity to help pay liability claims related to wildfires. Formal signing could take a few more days, as remaining issues are resolved and the documents are finalized, the judge said.
The proceedings bring PG&E closer to closing a dark chapter in its history, after fires sparked by company equipment killed more than 100 people and burned more than 15,000 homes in Northern California in 2017 and 2018.
The company, which provides gas and electric services to 16 million people, or nearly one in 20 Americans, filed for chapter 11 protection in January 2019, citing more than $30 billion in potential fire-related liability claims.
Around the same time, Butte County District Attorney Mike Ramsey launched an investigation into the company’s role in igniting the Camp Fire in late 2018, the deadliest wildfire in California history.
The fire started after a worn piece of metal known as a “C-hook” broke free from a PG&E transmission tower, dropping a high-voltage power line that sent molten embers onto the dry brush below. A grand jury concluded that there was enough evidence to indict PG&E on a criminal negligence charge.
Prosecutors released evidence from their investigation Tuesday showing that PG&E decreased the frequency and thoroughness of transmission-line inspections over several decades, sometimes in the interest of saving money and boosting corporate profits.
The company capped the amount of time allotted for inspecting each line, employed inspectors with improper training and used methods that limited inspectors’ ability to catch problems with hooks and other hardware, the probe concluded.
The investigation also determined that the company knew for years that many of its transmission lines posed serious risks due to age and wear, yet did little to assess or address those hazards. Some of the company’s oldest transmission lines, including the one that started the Camp Fire, were built in the 1910s and 1920s by Great Western Power Company, which PG&E acquired in 1930.
“In essence, in 1930 PG&E blindly bought a used car,” the investigation report said. “PG&E drove that car until it fell apart.”
An indictment issued earlier this year charged PG&E itself but didn’t implicate any individual employees or executives. Mr. Ramsey said his probe concluded that the company’s neglect went back decades, making it difficult to blame any particular executives.
It is unusual for U.S. corporations to face homicide charges, and the 84 counts PG&E faces are among the most ever for a major publicly traded company.
PG&E is expected to exit bankruptcy later this year, more leveraged than ever after settling liability claims totaling $25.5 billion. Hedge funds and others who bet on the company’s recovery are now set to make billions of dollars from the resulting plan, a complex compromise between shareholders and debtholders.
Victims of fires sparked by PG&E equipment come out of the bankruptcy with uncertainty over when they can cash out the stock they will receive as compensation for lost loved ones, homes and businesses. Half of the $13.5 billion settlement awarded to victims will be paid in company shares through a trust.
Fire victims are the only class of claimants that will receive PG&E shares as part of their compensation. The company agreed to all-cash settlements with insurers and local governments prior to settling with victims, reducing the amount of cash available for them. Some victims and their lawyers pushed for months to renegotiate the deal, arguing that it exposes them to greater risks than other creditors.
PG&E’s conviction may do little to ease the anger and distrust many Paradise residents still harbor toward the company, which has been working for months to catch up after years of deferring necessary maintenance and repairs of its electric grid.
“I don’t think that there’s any real resolution happening,” said Tova Love, who lost her home during the Camp Fire. “The people who live in our town are still in danger from this company.”
PG&E will emerge with as much as $38 billion in debt, up from $22 billion when it sought bankruptcy protection at the start of last year. It was the company’s second trip through chapter 11 in as many decades; PG&E sought bankruptcy protection after wholesale electricity prices skyrocketed in California at the turn of the century, emerging in 2004.
Critics of PG&E’s latest reorganization plan have expressed concern that the debt levels will hinder its ability to invest heavily to prevent its power lines and transmission towers from starting fires—and may set the stage for a third foray into chapter 11 if future fires stretch the company’s balance sheet.
California Gov. Gavin Newsom, who had earlier threatened a state takeover of the company, ultimately supported the reorganization plan. But state regulators left open the possibility of revoking the company’s license in the future if it continues to lapse on safety.