Plan eases wildfire liability
Utilities’ financial responsibility could potentially decrease under proposal by Gov. Brown
Gov. Jerry Brown on Tuesday proposed a plan that could dramatically ease the potential wildfire-related financial burden on large utilities such as PG&E by potentially shoveling more costs onto ratepayers’ shoulders.
A growing threat from destructive wildfires is driving efforts by the governor and some state lawmakers to improve firefighting techniques and forest management — and to craft a fresh legal approach to the enormous potential liabilities confronting power giants in California. The moves follow the deadly wildfires that scorched the North Bay Wine Country and nearby regions in October 2017, many of which were sparked by downed power lines and malfunctioning equipment.
In a letter to legislators, Brown argued that he
does not intend to absolve the utilities of their responsibility to operate safely and protect the public. But, he insisted, the current legal framework — which confronts utilities with liabilities they claim threatens them with bankruptcy — is unsustainable.
“Now more than ever, Californians depend on reliable electrical power to heat and cool homes, run hospitals and fire stations and so much more,” Brown told the state Senate and Assembly co-chairs of a legislative conference committee on wildfire preparedness and response. “Yet, the increasingly destructive and costly wildfires and natural disasters have the potential to undermine the system, leaving our energy sector in a state of weakness at a time when it should be making even greater investments in safety.”
The governor’s plan — if it were considered alone — wouldn’t free PG&E of its financial responsibilities in connection with last fall’s Northern California wildfires, estimated to have caused more than $9 billion in damages.
“Nothing in this proposal changes any liability for the 2017 wildfires,” Brown wrote to the lawmakers on Tuesday.
However, the proposed legislation would deliver a victory for PG&E and other utilities by shifting the future cost burden of strict liabilities that power companies now face under a legal theory known as inverse condemnation. That legal approach currently holds utilities and their shareholders liable if their equipment was a factor in causing a wildfire or other disaster, even if the utility properly conducted maintenance and facilities upgrades.
“For victims, the governor’s plan is a non-starter,” said Patrick McCallum, cochair of Up From the Ashes, a coalition of North Bay wildfire victims. “It sacrifices the rights of property owners to protect the utilities from any responsibility for future damages they may cause, and removes any real incentives for them to take safety and fire prevention seriously.”
The governor’s proposal would require courts to take a variety of factors into account when attempting to determine liability for a wildfire. The proposal used wording that would appear to dramatically dilute the
impact of inverse condemnation rules.
A key section of Brown’s proposed legislation states, “The court shall balance the public benefit of the electrical infrastructure with the harm caused to private property and determine whether the utility acted reasonably in that instance.” That language appears to make it much more likely than under current law that utilities could be absolved of part or all of the financial responsibility for wildfires — and in such cases, the only place for costs to fall would be on ratepayers or taxpayers.
“Utilities don’t like the courts to make them pay for fires that they start, so the utilities are trying to change the rules,” said state Sen. Jerry Hill, a frequent critic of PG&E’s blunders, such as the shoddy maintenance and flawed record keeping that were deemed to have been key causes of a fatal 2010 explosion in San Bruno.
“PG&E just wants to change the laws that they keep breaking,” Hill said.
Even in advance of Brown’s plan, San Francisco-based PG&E has unleashed an intense lobbying effort, led by the company’s CEO Geisha Williams, as part of its effort to escape some of the financial liabilities arising from wildfires.
Now, PG&E hopes that the governor’s proposal becomes part of a trio of proposals backed by PG&E to ease its past, present and future financial liabilities, according to experts and lawmakers seeking to shield California ratepayers, fire victims and residents from having to shoulder a considerable segment of the utility’s liabilities.
“We look forward to reviewing the Governor’s statement and the upcoming work of the joint conference committee,” PG&E spokeswoman Lynsey Paulo said.
Although the governor’s plan wouldn’t absolve PG&E of exposures to past fires, a separate measure, AB 33 — fashioned by Assemblyman Bill Quirk of Hayward, whose son works at PG&E — would use state-backed bond measures to finance, up front, billions of dollars in costs for the wildfires so victims could be paid rapidly. Hill and The Utility Reform Network have characterized this approach as giving utilities such as PG&E a taxpayer-backed mega credit card account.
If Quirk’s bill becomes law, the financed amount could then be paid back by PG&E ratepayers at a relatively low interest expense.
The third bill, SB 1088,
crafted by Sen. Bill Dodd, whose district includes parts of Contra Costa, Napa, Sonoma, Solano, Yolo and Sacramento counties, would ease current laws by allowing PG&E and other power giants to simply be “substantially compliant” with fire-safety plans, including vegetation management and equipment upgrades and maintenance.
On June 8, PG&E was deemed to bear a measure of responsibility for blazes in Sonoma, Napa, Mendocino, Humboldt, Butte and Lake counties because its equipment and facilities were involved in 12 of the fires, according to the state Department of Forestry and Fire Protection, known as Cal Fire. In eight instances, Cal Fire determined, PG&E violated state regulations.
In late May, Cal Fire determined PG&E was responsible for four blazes in Nevada and Butte counties that occurred in October.
“Existing law and legal precedent are fine and protect Californians,” Hill said. “The utilities are trying to relax the rules through SB 1088, get a bailout with AB 33, and change inverse condemnation with the governor’s proposal.”