Bloomberg reported that PG&E is now concerned about the company's financial viability because of substantial fines expected from state regulators for the 2010 San Bruno pipeline explosion.
In a call with analysts last week, PG&E Corp. CEO Anthony Earley said the company took a charge of $200 million in the fourth quarter and set aside another $200 million for pending fines that are expected for explosion, according to the Wall Street Journal.
But in an interview with Bloomberg, Earley said it appears those fines could reach more than $1 billion, an amount he called exorbitant and too harsh.
Earley went on to say the following in the Bloomberg interview:
A penalty of $1 billion would be a “challenge” to the utility and “totally out of proportion to any fine that has ever been given for airplane crashes or any disaster,” Earley said. The company would have to sell additional stock to pay for a fine of that sum, he said.
“I understand it is a tragedy, but right now the size of the fine isn’t going to change how we are reacting,” Earley said. “We know we need to change the business and we are doing everything humanly possible to change the business,” he said.
In all, the costs related to the explosion, including fines, could be as much as $1.7 billion through 2013, PG&E's Chief Financial Officer Kent Harvey said, according to Bloomberg.
The Bloomberg story continued:
That amount is “basically the whole net worth of our gas transmission and storage business,” Earley said.
“I know politically there has to be a large fine, but at some point, people need to step back and say, it doesn’t serve any purpose,” he said, adding that the company will need to also pay for massive infrastructure investments.
“I’ve got to go out and sell new stock after this is over,” Earley said. “And if this company isn’t considered a good investment in a good regulatory environment, that is going to be very, very challenging,” he said.
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