JUDGES QUESTION SUIT ON FUND FOR WILDFIRES
Appeal looks to overturn a bill passed in 2019
A lawsuit aimed at turning back a recently created California wildfire fund ran into some skepticism from a panel of three judges in the U.S. Court of Appeals for the Ninth Circuit on Monday.
“In my opinion, you haven’t shown us why this belongs in federal court and that’s your burden,” Judge Ryan Nelson told Michael Aguirre, a San Diego attorney who argued that significant portions of Assembly Bill 1054 should be tossed out.
Passed by the Legislature, signed by Gov. Gavin Newsom and approved by the California Public Utilities Commission in 2019, AB 1054 created a $21 billion insurance fund the state’s big three investor-owned utilities can access should their
equipment ignite a wildfire.
“If you give us the chance to develop the facts, we will prove that this was done not at at the (utilities commission) but behind closed doors,” Aguirre said.
Half of the wildfire fund’s money is paid by the utilities; the other half comes via an extension of a bond through California’s Department of Water Resources that had been set to expire. Under AB 1054, an estimated $2.50 per month surcharge to every customer across the state was extended.
The lawsuit says the surcharge results in an “improper taking” under the U.S. Constitution because ratepayers did not have input.
“In this case, there was absolutely no due process,” Aguirre told the panel during the 40-minute hearing that was conducted remotely. “They had no discovery, they had no evidentiary hearing, they had no crossexamination.”
The suit, filed on behalf of ratepayers in the service territory of Pacific Gas & Electric, had been dismissed by a lower court judge.
At Monday’s appeals hearing, all three Ninth Circuit judges questioned whether the lawsuit can clear the Johnson Act, a 1936 federal law that prevents federal courts from interfering in issues connected to the right of a given state to set utility rates.
The lawsuit’s complaints with AB 1054 focus on the “creation of the wildfire fund and the imposition of a surcharge on ratepayers,” Judge Mary Murguia, an Obama administration appointee, said. “That seems to be a challenge to the rate” and may run counter to precedent.
Aguirre argued the case is not about rate-setting but about “corruption” in the form of $5.3 million in political contributions from PG&E to Newsom and state lawmakers in 2017 and 2018 that Aguirre said paved the way for AB 1054 to pass. “It was a sham,” he said.
Judge Nelson, a Trump administration appointee, asked why the plaintiffs don’t pursue their case in state, rather than federal, court.
“Your honor, there is no option in state court, OK,” Aguirre said. “We’re in a oneparty state. We’ve got the governor and everyone else down the line involved.”
Christofer Nolan, attorney for the utilities commission, argued that AB 1054 represented “the Legislature fashioning a response” to the deadly spate of wildfires that have burned through the state in recent years and “this is an area where federal intervention should be treaded very lightly.”
Nolan disputed charges of secrecy, saying there was a prehearing conference, oral arguments, and a commission meeting that provided “more than ample opportunity to interact with the commission and make your voices heard in this case.”
The panel did not indicate when it would issue its ruling.
Introduced as an urgency statute in July 2019 that required a two-thirds vote rather than a simple majority, AB 1054 passed both houses of the Legislature within a week. Three months later, the utilities commission in a 5-0 vote approved it, determining the charge to be “just and reasonable.”
As interpreted by California courts, utilities in the state can be held liable for damages if their equipment sparks a wildfire under the doctrine of “inverse condemnation,” even if the utilities have followed applicable safety rules.
The bill’s backers said the legislation helps utilities avoid credit downgrades that end up in higher borrowing costs that are passed on to customers and will get money into the hands of victims of recent wildfires more quickly. Critics say it was rushed through.
Under AB 1054, utilities must receive safety certifications from the state to access the wildfire fund. To qualify, the companies must tie executive compensation to safety performance, establish a wildfire safety committee on their respective boards and meet other financial and safety measures.