PUC: Utility can’t pass fire costs to customers
Setting stage for PG& E claims, San Diego power company, stockholders liable for $379M
In a closely watched decision that could impact whether PG&E customers are on the hook for billions in costs related to the Napa-Sonoma fires if the utility is found at fault, the California Public Utilities Commission on Thursday denied a request from San Diego Gas & Electric to charge its ratepayers $ 379 million after investigators found its power lines sparked three huge fires in 2007.
By a 5- 0 vote, the commissioners said that the San Diego utility had not operated its electrical system in a “reasonable and prudent” manner when the fires began, as state law requires.
As a result, the commissioners ruled, San Diego Gas & Electric’s shareholders, not its customers, must absorb the costs.
“There’s no dispute that each of the fires was caused by SDG&E facilities,” said Commissioner Liane Randolph. “And in each instance we find
“There’s no dispute that each of the fires was caused by SDG&E facilities.” — Commissioner Liane Randolph
that SDG& E did not meet its burden to show that it acted as a prudent manager.”
Over the past three months, California’s three largest utilities — PG& E, San Diego Gas & Electric and Southern California Edison — have lobbied the commission furiously to allow the San Diego utility to pass along the costs to its customers. With climate change and more people moving into fire-prone areas, the utilities say, it’s becoming more difficult for them to find enough insurance to cover the risk.
They have also noted that courts have found that utilities can be held liable if their power lines, transformers or other equipment cause wildfires that can burn thousands of homes and kill dozens of people, even if they were not negligent, a legal concept known as “inverse condemnation.”
On Thursday, San Diego Gas & Electric said the fires weren’t its fault.
“SDG& E strongly disagrees with today’s decision. The CPUC got it wrong,” said Lee Schavrien, the utility’s senior vice president and chief regulatory officer. “The 2007 wildfires were a natural disaster fu- eled by extreme conditions, including the worst Santa Ana wind event this region has ever seen.”
But consumer groups and some elected officials have argued that letting utilities pass along the costs of wildfires caused by power lines to their customers increases the likelihood of wildfires because the monopolies would be less likely to spend money to improve safety, to properly maintain their lines and to shut off electricity during extreme conditions.
“I am relieved that the CPUC made the right decision to shield ratepayers from being burdened with the costs of the 2007 San Diego wildfires that were caused because San Diego Gas & Electric didn’t reasonably manage its power lines,” said state Sen. Jerry Hill, D-San Mateo.
Hill, chairman of a key state Senate subcommittee on gas, electricity and transportation safety, said Thursday’s decision is important in the wake of October’s devastating Napa and Sonoma County wildfires.
“If the commission had sided with the utility companies, it could have set a dangerous precedent for the future of disaster cost recovery,” Hill said.
In one of the worst disasters in modern California history, a series of fires that began Oct. 8 in Napa, Sonoma, Mendocino and other Northern California counties burned more than 245,000 acres, destroyed 8,900 homes and killed 44 people.
Cal Fire has not yet determined how the blazes started, but agency investigators are looking at whether power lines owned by PG& E were at fault for some of the fires, which were spread by windy conditions. The utility has told investors it faces massive liabilities if it is found to have caused the fires.
According to a review of emergency radio traffic by the Bay Area News Group, dispatchers sent fire crews to at least 10 different locations across Sonoma County over a 90-minute period starting at 9:22 pm on Oct. 8 — the time the first fires were reported — to respond to 911 calls and other reports of sparking wires, exploding transformers and problems with the county’s electrical system amid high winds.
“Extreme weather and catastrophic wildf ires pose real risks to our entire state,” PG& E said in a statement Thursday after the PUC’s decision. “To address these growing risks and those posed by the impacts of climate change, we must work together to find the right solutions. Wildfires and the way they are treated currently have realworld and potentially longterm impacts on the operations, risk management and financial standing of every energy company in the state.”
PG& E’s share price has fallen 22 percent since the October fires. It has $800 million in liability insurance to cover the fires, but on Monday in a regulatory filing it noted that state Insurance Commissioner Dave Jones estimated four weeks ago that the insured losses from the California wildfires so far total $3 billion.
“The estimate does not account for uninsured losses, interest, attorneys’ fees, fire suppression costs, evacuation costs, medical expenses, personal injury and wrongful death damages or other costs,” PG&E said in the documents filed with the Securities and Exchange Commission.
The San Diego fires a decade ago were massive.
The Witch and Guejito fires in October 2007 combined to burn 197,000 acres. They killed two people, injured 40firefighters and destroyed 1,141 homes and 239 vehicles. The Rice fire that same month burned 9,472 acres and destroyed 206 homes. It was caused by a dead tree limb falling on power lines.
The PUC ruled that San Diego Gas & Electric didnot trim back trees as required by state law in the Rice fire — and that the utility was at fault in the other two. In the Witch fire, the power line that caused the fire shorted three times in three hours, investigators found, creating sparks, and it took the utility more than six hours to turn off its electricity.
After the fires, the utility faced $5.6 billion in legal claims. It settled approximately 2,500 lawsuits from people who suffered damages, bringing its costs down to $2.4 billion. The $379 million it sought to charge ratepayers are costs not covered by its insurance.
In August, two PUC administrative law judges disagreed with the utility’s claim that the fires were beyond its control. The judges, S. Pat Tsen and Sasha Goldberg, concluded that the utility “did not reasonably manage and operate its facilities” and thus could not pass along costs to ratepayers.
PUC commissioners agreed Thursday, upholding their ruling, although PUC President Michael Picker called it “a close call” and said the state Legislature should pass a law to allow the commission to divide up liability when there are multiple causes in fires sparked by power lines.
“The result here is quite clear. We can’t apply a standard that provides an incentive for a utility to act imprudently or unreasonably,” said Commissioner Cliff Rechtschaffen. “That would send precisely the wrong signals to the utilities.”