Dividends and California utility bankruptcy filing is a warning about hidden climate-change financial risk

In mid January, California’s largest power utility PG&E Corp (Pacific Gas and Electric) filed for bankruptcy protection. The company is facing tens of billions of dollars of lawsuits in potential liability over the massive wild fires over the past 2 years.

The company did not purposely set the fires but the transmission lines are suspected of sparking as many as 1,500 forest fires. What has changed over the past couple of years is climate change has brought hotter and drier conditions which translate into dead trees and very dry brush.

In California and Alabama, there is a legal doctrine called inverse condemnation, utilities in the state must cover insurance claims for damages from fires caused by their equipment, even if they have not broken any safety laws. (It is thought the lawmakers saw the utility as cash cows, except for investors who likes utilities and essentially made PG&E as the default fire insurer for the state.

Geisha Williams who resigned as CEO had long complained about the law and while the company has some blame, they are not to blame for climate changes or the new normal. In his column Barrie McKenna noted PG&E is one of the environmental good guys. It has a smaller carbon footprint than most US utilities. It was spending close to $1 billion a year on wind, solar, and electric vehicle infrastructure.

Linking to dividend paying stocks, most people who own these stocks will have a utility or two in the group because of the reliable and safe dividends. When an utility is seen as the bad guy and has to pay for the sins of the country, it is not good. As climate changes continues to increase, who should pay and who does pay will all be questions to be answered.

There are more questions than answers, till the next time – to raising questions.

 

 

 

Linking to dividend paying stocks, utilities are some of the best go to investments for dividen

estors. While PG&E is an exception, climate change is happening and people will look at their utilities – how do they generate the electricity needed to fulfill the demands the same people have?

 

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