PG&E Corp. is finding it very costly to buy fire insurance after wildfires triggered by its power lines sent the company into bankruptcy and left it paying $25.5 billion for claims. It’s hoping customers will foot the bill.
The San Francisco-based company had to cough up about $750 million to secure $1.4 billion of liability coverage for the next 12 months, with only a little more than half of that dedicated to potential fire claims, Chief Financial Officer Jason Wells told investors Thursday during a second-quarter earnings call.
“That is a fancy way for saying nobody would sell them wildfire insurance,” said Andy DeVries, a utility analyst for research firm CreditSights.PG&E will seek to recover its insurance costs through customer rates, it said in a filing. However, the company noted that it remains unclear whether PG&E “will be able to obtain full recovery of its significantly increased insurance premiums,” or will be able to “obtain wildfire insurance at a reasonable cost in the future, or at all.”
If there is a silver lining, it’s that PG&E can now dip into a wildfire insurance fund to help pay for any future claims because it exited bankruptcy by a state deadline. However, it can only tap into the state funds if damages exceed $1 billion.
PG&E is required by state law to have “reasonable insurance coverage,” according to spokeswoman Lynsey Paulo. Insurance is considered a regular cost of doing business, which the utility is entitled to recover from customers, Paolo said.
PG&E isn’t the only California utility seeing skyrocketing insurance premiums. Earlier last week, Edison International’s Southern California Edison utility said it had pay about $450 million to secure $1 billion in fire insurance through June 2021. Edison’s power lines have been linked to two big Southern California fires in 2017 and 2018.