PG&E is hit with $1.9-billion penalty over California wildfires

California regulators approved a $1.9-billion penalty against PG&E Corp. for its role in sparking some of the worst wildfires in state history.

The penalty approved Thursday is the largest ever assessed by the California Public Utilities Commission, whose investigators determined that PG&E failed to properly maintain and operate power lines, resulting in blazes that destroyed thousands of homes and killed more than 100 people in 2017 and 2018. The fires led to an estimated $30 billion in claims against PG&E, pushing the company into bankruptcy.

PG&E is racing to gain regulatory and Bankruptcy Court approval of its Chapter 11 plan before a June 30 state deadline so it can participate in a state insurance fund to help cover any future fire liabilities. As part of its reorganization, PG&E has already agreed to pay more than $25 billion to resolve claims from fire victims, insurers and local government agencies.

In its ruling Thursday, the commission backed off plans for the penalty to include a $200-million cash fine after PG&E said that could threaten agreements it had reached with investors to buy $9 billion in shares of the reorganized company. The Utility Reform Network, a consumer advocacy group, said the agency was letting PG&E off the hook by suspending the cash fine.

The commission’s penalty is higher than the $1.7 billion PG&E agreed to pay last year through a settlement with parties including the commission’s safety division. But it’s lower than the $2.1 billion recommended by an administrative law judge in February. Under the terms, PG&E shareholders will pay for about $1.8 billion in fire-related safety work and $114 million for corrective actions and other measures. PG&E is barred from realizing any tax benefits from operational expenses related to the penalty, the commission said.

In March, PG&E agreed to plead guilty to 84 counts of involuntary manslaughter in connection with the Camp fire, the deadliest wildfire in California history, which destroyed the town of Paradise. The utility said it will also pay $4 million in fines for its role in that blaze.

This month, the utility said it would replace most of its board as part of a broad overhaul of its governance structure.

PG&E said last week that only three of the 14 current directors will remain after the company exits Chapter 11. Its chair, Nora Mead Brownell, will be among the departing directors, the company confirmed in an email.

PG&E had promised to shake up its leadership and bring in new safety experts as part of several reforms that it pledged so Gov. Gavin Newsom would approve its reorganization plan.

Last month, PG&E said Chief Executive Bill Johnson would retire at the end of June. The company will appoint William Smith, a former AT&T executive and one of the three PG&E board members who will remain, as interim CEO until a replacement is found.