Devastating Wildfires Force California's Largest Utility To Plan Sale Of Gas Assets Senior officials at Pacific Gas & Electric are working on a plan to sell off the company's natural gas division to avert bankruptcy and raise funds to cover huge projected liability costs.
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Devastating Wildfires Force California's Largest Utility To Plan Sale Of Gas Assets

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Devastating Wildfires Force California's Largest Utility To Plan Sale Of Gas Assets

Devastating Wildfires Force California's Largest Utility To Plan Sale Of Gas Assets

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AUDIE CORNISH, HOST:

California's largest utility could be on the hook for billions of dollars in liability damages from deadly wildfires these last two years. The fires left more than 130 people dead, wiped out thousands of homes and businesses and destroyed much of the town of Paradise. Pacific Gas and Electric already faces ongoing sanctions following felony convictions for deadly errors and safety violations in its gas division. NPR has learned that utility's parent company has plans to sell off its gas division this spring and use the proceeds to set up a settlement fund for wildfire victims.

NPR's Eric Westervelt broke this story. And, Eric, to start, this seems like the company's internal plan to survive, right? Tell us more about this gas proposal.

ERIC WESTERVELT, BYLINE: Hi, Audie. Yeah, it is what a company source calls the company's only major play to survive. Executives have dubbed this gas sale plan and internal strategy Project Falcon. And the company sources, including senior officials involved in the project and planning and backed up by internal documents, as well as a former employee, show that the plan has been in the works, Audie, for more than a year since after the 2017 wine country fires. But planning was restarted again intensively, we're told, after November's deadly Camp Fire.

And under the current plan, Audie, proceeds from the sale would go into a kind of escrow account, a settlement fund to pay down billions of dollars in potential claims for these wildfires, both the 2017 fires and the Camp Fire which killed at least 86 people, did billions in damage and destroyed most of the town of Paradise.

CORNISH: But PG&E has not been found liable for starting the Camp Fire, right? The investigation is ongoing. What have you learned?

WESTERVELT: That's correct - no cause pinpointed yet. The state is investigating. Cal Fire is investigating. PG&E is fully cooperating. The company did report damage to two transmission lines, one just before the fire was reported and another malfunction a half-hour later in a nearby area. That's seen as a second possible ignition source.

And just today it was announced that several major insurance companies, Audie, have sued PG&E, blaming the company for the Camp Fire. That comes on top of at least 10 major lawsuits representing hundreds of victims that allege PG&E failed to properly maintain, inspect and upgrade all of its equipment. One estimate from Citigroup said the company could be liable for up to 15 billion in fire damages from the last two years. And the company hopes to get, we are told from the sources, between 10 and 15 billion for its gas assets.

CORNISH: Well, what's the company reaction?

WESTERVELT: Well, a spokesman declined to make any executives available to comment on Project Falcon. In a statement, Andy Castagnola said, quote, "PG&E doesn't comment on market rumors or speculations," but he added, "the company is reviewing its structural options to best position the company to meet customer and operational needs and improve safety."

And the company today also said it would be searching for new directors for the boards of both its parent company and the utility. And we know this gas sale isn't some market rumor. As the inside the company source told us, quote, "the only play they see now is sever and sell."

CORNISH: The utility is under no legal obligation, though, to talk about its plans to stave off possible bankruptcy. At the same time, does it seem like lack of transparency is part of the problem?

WESTERVELT: Well, public watchdog groups I've talked with say it's a big problem. I mean, they want more openness. They want a bigger, more substantive focus on safety, not just talk. Remember; this company is already a felon on probation for convictions related to this gas explosion, as you mentioned, in 2010 that killed eight people. Here's Michael Wara, an energy scholar at Stanford. He calls the company's lack of openness extremely disappointing.

MICHAEL WARA: Especially in the current context where there's a lack of trust and so many people that have been harmed by PG&E's infrastructure, they need to be thinking very hard about how to create safety for Californians rather than how to make money for shareholders.

WESTERVELT: And, Audie, some lawmakers and the incoming governor, Gavin Newsom, are likely - very likely to have big questions about any potential gas sale as they look at the future of PG&E.

CORNISH: That's NPR's Eric Westervelt. Thanks for your reporting.

WESTERVELT: Thanks, Audie.

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