PG&E stock plunged 32% after it disclosed a possible link to California’s fire
&quot;The legislation also didn’t change how California applies “inverse condemnation,” a legal doctrine under which the state’s utilities can be held liable for any economic damages tied to their equipment, even if they follow all of the state’s safety rules. That’s left the utilities exposed to open-ended liabilities.&quot;<p>This seems like a very inefficient way of allocating risk. California is naturally fire prone and has become more so over recent years due to drought. Anyone operating an electricity distribution network is therefore operating assets that are inherently fire and explosion prone - even if operated and maintained correctly - there is no way to move that much energy over those distances without it occasionally being released in an undesirable way - in a place where the consequences of that are severe.<p>Simple logic dictates that you only expose companies and individuals to economic risks that are within management control, otherwise you just end up with an economic role that is necessary but impossible to fill.<p>Even if state standards for safety were updated to reduce the chances of a transformer explosion, circuit breaker arc, or fault in forested areas you&#x27;d never get the risk down to zero nor would you remove all the other sources of ignition.