Wildfires illustrate PG&E’s call for action on liability

The Mercury News editorial on July 28 references Gov. Jerry Brown’s proposal to deal with the liability from the growing threat of catastrophic wildfires in California, and suggests that now might not be the time to address these important questions.

The events of the past few days illustrate why urgent action is needed.

More than 15 active fires are currently burning over an area covering more than 300,000 acres. Lives — including those of four firefighters — have been lost and more than 1,000 structures have been destroyed. One fire reportedly burned so hot, it created its own violent weather system and spun off “firenados.”

The blazes burning over the past few weeks are only the latest in a long trend of unprecedented climate-driven disasters.

In 2017 alone, California confronted 7,117 wildfires, compared to an average of 4,835 during the preceding five years. Five of the 20 most destructive wildfires in the state’s history burned between October and December 2017.

Under the current application of inverse condemnation, utilities will continue to face massive, essentially uninsurable risks, even when they have followed established safety and compliance rules. Expecting California’s electric customers to bear these costs when the utility was not negligent, but its equipment was involved, is unsustainable.

Similarly, suggesting, as the editorial does, that utilities should maintain a level of insurance coverage to fully account for such massive potential liabilities ignores reality. Ultimately, there is no economic commercially available insurance product that could have reasonably covered the massive amount of damage that occurred. And that challenge is only increasing.

Without a change to the strict liability standard under inverse condemnation, customers could potentially see $2 billion in rate increases associated with higher financing and insurance costs.

Our state must update its thinking, and its laws, to deal with these new threats.

PG&E views the governor’s proposal as a constructive first step, and we continue to believe that more comprehensive solutions are needed to address the challenges our state is facing.

First, we believe that the state must address the devastating impacts of the 2017 wildfires. Assembly Bill 33 is a commonsense solution to make victims whole, reduce customer bill impacts and ensure utility accountability.

AB 33 would utilize low-cost bonds, secured by a charge on customer bills, to pay the costs of the North Bay fires. It’s not a free pass for utilities, as it clearly provides for the California Public Utilities Commission to review and reject any costs that are not reasonable.

With respect to the governor’s proposal on inverse condemnation, we believe it should incorporate the same standard the courts have used in flood control district cases, which provides clear guidance on reasonable conduct and would hold utilities accountable if they did not meet those standards.

This reform would not absolve utilities from responsibility for wildfires moving forward. If utilities failed to meet the state’s high safety standards, victims could seek compensation under a reformed inverse condemnation standard and negligence standard, just as they do today. The CPUC still would have the authority to investigate a utility’s actions and, if found unreasonable, could disallow costs being passed to customers, and issue fines and penalties.

Reform is needed to make the 2017 victims whole, protect utility customers from higher bills and hold utilities accountable. And it’s needed urgently.

As one Cal Fire official stated from the front lines, “There’s no normal anymore.” Sadly, this means there’s no place for the status quo, either.