Shares of electric utility company PG&E plunged 7.7 percent Friday on concerns its power lines may have started the massive wildfires that have ravaged California recently.
The stock was also on track for its worst day since September 2010.
The California Public Utilities Commission sent a letter on Thursday to PG&E — California’s largest electrical utility company — reminding them to preserve “all evidence with respect to the Northern California wildfires in Napa, Sonoma and Solano Counties,” according to multiple reports.
The commission was investigating whether electrical lines that were knocked down by a windstorm on Sunday played a role in sparking the most lethal wildfire event in the state’s history.
“Safety is our top priority,” said Donald Cutler, a spokesperson for PG&E. “Our customers are our neighbors and friends and we’re doing everything we can to help out.”
Unfortunately, California has a history of power company lines becoming the sources of fires. It is still not clear if PG&E was to blame for the fires, but it has been found guilty before of negligence in fires.
Past fires where PG&E was faulted include the deadly Butte Fire in California’s Amador County in 2015. Cal Fire investigated the fire, which destroyed 549 homes, and ended up sending a bill to PG&E for about $90 million to cover firefighting expenses.
In 2007, the Malibu fires that burned more than a dozen structures were caused by Southern California Edison utility poles that fell during heavy winds; they paid $63.5 million in fines. Also, San Diego Gas & Electric power lines started three major fires the same year and paid nearly $700 million to insurers to settle claims.
PG&E shares are down 13 percent this week.
The drop in the stock “reflects the following assumptions: 1) the fire was caused by PCG’s negligence, 2) insurance coverage for 3rd party liabilities will be very limited, 3) damage costs per acre far larger than those for the 2015 Butte fire and 4) material fines and penalties will be assessed,” Christopher Turnure, an analyst at JPMorgan, said in a note Thursday. “We appreciate the severity of the fires and the legal challenges of operating in California, but estimate this loss of value as approaching a worst-case scenario for PCG shares.”
PCG is the stock ticker for PG&E.
Turnure is maintaining his overweight rating on the stock on the notion these fears are overblown.
The wildfire has killed at least 31 people in Northern California and has left hundreds missing in the heart of wine country. The toll from the more than 20 fires raging across eight counties could climb, with more than 400 people in Sonoma County alone still listed as missing.
— CNBC’s Jeff Daniels and Reuters contributed to this report.