Pacific Gas and Electric Company Settled Suit Due to Environmental Issues, with the Scandal Unceasing Until Today
Pacific Gas and Electric Company(PG&E) is a household investor-owned utility company in the United States. However, PG&E has paid $333 Million to residents of the desert community of Hinckley, California, due to the environmental pollution problems leading to health damage around citizens in 1996. While PG&E’s competitors saw their shares double during the same period, the company faced significant financial losses.
Erin Brockovich, a key figure in this issue, discovered that PG&E’s anti-rust equipment contained hexavalent chromium, a highly harmful substance that led to a high incidence of cancer in the town. On the other hand, PG&E claimed that they added trivalent chromium, which is not harmful to humans.
The desert community of Hinckley filed 126 lawsuits with 411 plaintiffs, which eventually led to a settlement of $330 million from PG&E. This was the highest amount ever paid in a single compensation case for pollution-induced cancer in the United States. The success rate of individual lawsuits against corporations was initially low, but in the 1990s, environmental protection gained momentum in the US, leading to increased environmental awareness and attention from all sectors of society, which became important factors in winning such cases.
In the 21st century, PG&E has faced numerous scandals, including accusations of fraud in 2003 for manipulating natural gas and electricity markets, a deadly gas explosion in San Bruno in 2010, and a series of deadly wildfires and deliberate power outages. The company has been addressing these issues through bankruptcy proceedings, settlements with wildfire victims, and safety reforms. As a result, PG&E filed for bankruptcy in 2019 due to failure to invest in infrastructure upgrades and address safety and financial concerns.
As of July 2024, PG&E has a market capitalization of $44.92 billion, significantly lower than its competitors Wells Fargo and Duke Energy Corporation, with market capitalizations of $205.72 billion and $77.67 billion, respectively. However, when compared to 10 or 20 years ago, PG&E has shown better market value growth, increasing by 75% and 242%, respectively. Nonetheless, the company’s share price is lower than its competitors and has been trending downward, experiencing a significant drop of 91.2% after declaring bankruptcy.
Checked the latest Generally Accepted Accounting Principles (GAAP) reports PG&E Co.’s earnings to common shareholders for the first quarter of 2024 were $732 million, or $0.34 per share. This compares to $569 million, or $0.27 per share, available to common shareholders in the first quarter of 2023. It looks like the company’s positive earnings for the first quarter of 2024, however, it is worth noting that the company has more short-term liabilities than current assets.
However, considering the current trend of considering ESG factors in acquisitions and investments. Flammer, C., & Kacperczyk, A. (2016). finds evidence that companies with better sustainability performance are more likely to be targeted by acquirers. Therefore, PG&E is currently paying more and more attention to ESG performance as a strategy to attract investors.
PG&E is a public institution. The author’s review of data shows that the reasons for the bankruptcy of many public institutions are caused by environmental pollution or environmental pollution, although it is not the only reason. For instance, one of the reasons for the bankruptcy of Energy Future Holdings’ operation of coal-fired power plants, causes environmental pollution and harms health. These pollutants can adversely affect human health and the environment, causing respiratory problems, climate change, and ecosystem damage, among other issues.
Public institutions are not “guaranteed to make money” and they still need to pay attention to the damage caused by natural disasters. Public institutions like PG&E should be mindful of the potential financial impact of environmental pollution and natural disasters. Implementing ESG factors can be crucial in attracting more funds and ensuring the long-term financial health of such institutions.
Flammer, C., & Kacperczyk, A. (2016). The impact of environmental, social, and governance disclosure on firm value: The role of CEO power. Strategic Management Journal, 37(11), 2048–2068.
