‘Business as usual.’ PG&E’s big penalty for California wildfires could create tax write-off
The record $1.675 billion penalty PG&E Corp. has agreed to pay for the deadly 2017 and 2018 wildfires could generate a big tax deduction for the beleaguered California utility.
A hearing officer at the California Public Utilities Commission has told PG&E to spell out how much of the penalty it believes it can deduct from its federal or state taxes, and “what would be the corresponding tax savings” by reducing the company’s taxable income.
PG&E has until Friday to answer. A utility spokeswoman declined to say Thursday what the response will be.
For some, allowing a tax reduction would allow PG&E to sidestep financial consequences that would shock the company into adequately addressing its problems. Outraged state lawmakers tried to enact legislation in 2015 that would have prevented a similar deduction, but a bill came up two votes short.
The bill’s author, state Sen. Jerry Hill, D-San Mateo, said at the time PG&E “is getting away with murder.” In an interview Thursday, Hill was alarmed the utility could again benefit from yet another write-off.
“People should care because the whole point of the dollar amount that PG&E is required to pay is that it’s supposed to be a penalty,” Hill said. “If they don’t feel it — if there’s no consequence — it will be business as usual, and they will continue to do what they’ve done: Destroying California.”
Hill said he would introduce legislation again this year to block tax deductions from such penalties.
A tax deduction for PG&E following a disaster would not be unprecedented. In 2015 the company was allowed to take a write-off on the $1.6 billion penalty it paid the PUC for the lethal 2010 San Bruno natural gas pipeline explosion that killed eight people. That penalty was the largest ever levied by utility regulators, until now.
On Dec. 17, PG&E and the staff of the PUC agreed to the $1.675 billion penalty as punishment for the wine country fires of October 2017 and the November 2018 Camp Fire, which killed 85 people and destroyed much of Paradise. The billions in damages drove PG&E into bankruptcy.
The $1.675 billion penalty isn’t technically a fine; instead, PG&E is eating $1.625 billion in “wildfire-related costs” and agreeing to spend $50 million on safety enhancements, on top of the hundreds of millions it’s already spending. Shareholders, not ratepayers, will absorb the total amount of the penalty.
The penalty hasn’t been finalized. First, it must be vetted by the hearing officer, Administrative Law Judge Sophia Park. It was Park who raised the question of the tax savings in a Dec. 30 directive to the company. Once she’s signed off on the settlement, the five-member utilities commission must approve it.
This story was originally published January 9, 2020 at 10:18 AM with the headline "‘Business as usual.’ PG&E’s big penalty for California wildfires could create tax write-off."