PG&E Corp. can pay employees up to $350 million in bonuses this year to spur them to help meet the bankrupt California power provider’s safety goals to prevent wildfires, a judge said yesterday, Reuters reported. PG&E’s management has said the company needs to implement the bonus plan to carry out tasks such as clearing trees and branches around power lines to avert contact that triggers wildfires. While the maximum cost of the plan is $350 million, PG&E has said it expects the likely cost will be around $235 million. Bankruptcy Judge Dennis Montali said at yesterday's hearing he was persuaded to approve the bonus plan, which provides for quarterly payments, after hearing testimony from John Lowe, who is responsible for PG&E’s compensation programs. Lowe said that performance targets would be challenging to achieve and that targets for clearing trees and branches could be raised if PG&E’s state regulator requires it. Read more.
In related news, Pacific Gas & Electric is asking state officials for permission to raise electricity rates to pay for safety improvements and to offset the financial risk of more wildfires, the New York Times reported. PG&E, working its way through its second bankruptcy in two decades, isn’t alone in its request. The state’s two other investor-owned utilities — Southern California Edison and San Diego Gas and Electric Company — are seeking similar rate increases, saying they need bigger profits to attract investment given their exposure to liability from fire-related damage claims. A California legal principle holds utilities responsible for damage from wildfires started by their equipment even when the companies were not negligent. In recent years, courts have ordered the state’s power companies to pay billions of dollars in damage to homeowners and businesses. PG&E, the state’s largest utility, estimates that it could be liable for an estimated $30 billion in damage for fires in 2017 and 2018. But consumer groups say the utilities are trying to shift the cost of their mistakes onto ratepayers. These groups point out that PG&E in particular has been cited by state investigators for not doing enough to trim trees and properly maintain its equipment. PG&E asked regulators to let it earn a 16 percent return on equity starting next year. If the regulators approve that request, the company’s return would be significantly higher than the national average for utilities. That change and a second request to raise rates to pay for equipment upgrades would together increase a $100 monthly electric bill by $22 to $23. Read more.