Big utilities are desperately trying to stick customers for the bills from California wildfires
Does there exist anywhere a whinier, more petulant, more entitled gang of businesses than California’s big utility companies?
PGE Corp., Edison International, and Sempra — the parents of Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric— connived in the state’s misbegotten electricity deregulation program of 2000-2001, then complained bitterly about how much it cost them. PG&E tried to foist a stealth ballot measure on voters to hamstring competing public power agencies. The companies have mismanaged their nuclear power plants to the point that one of the two plants has been prematurely shut down and the other will soon be in mothballs.
And now the utilities, which earned a combined $3 billion in profits last year on nearly $41 billion in revenues, are moving on several fronts to limit their liability for wildfires sparked by their own lines or equipment. Their goal is to stick taxpayers or their customers — rather than their own shareholders — for the costs of damages resulting from those fires.
They’re concerned because under the strict liability doctrine prevailing in California in cases of fire damage related to utility facilities, owners of damaged homes or property don’t have to show that the fires were the result of negligence to collect from the utilities.
The causes of the most recent wildfires in California, which took 44 lives in the wine country and destroyed thousands of homes in Northern and Southern California, haven’t yet been fully established. But utility equipment, including downed and live power lines, is often implicated in such events.
According to state officials, power lines and electrical equipment are a leading cause of wildfires — linked to the scorching of 149,241 acres in 2015, the latest year for which figures are available. That’s more than twice the acreage burned by any other cause. Utilities are responsible for cutting back vegetation that could come into contact with electrical equipment and loose tree limbs that could bring down lines.
The utilities argue that climate change is making wildfires worse, in part by turning California’s woodlands hotter and drier. At a meeting in mid-January with state policymakers, the three major utilities argued that this is imposing “a disproportionate share of the risk” on their customers and shareholders, according to talking points they prepared for the meeting.
They warned that their very existence is under threat from what PG&E told me through a spokesman is their “essentially unlimited liability” for wildfire-related damages.
That exposure, the company says, “undermines the financial health of the state’s utilities, discourages investment in California and has the potential to materially impact the ability of utilities to access the capital markets.… All of these are bad for customers and bad for the state of California.”
Heightening the utilities’ fears, last November a California Public Utilities Commission administrative law judge rejected San Diego Gas & Electric’s bid to pass $379 million in expenses from three 2007 wildfires in San Diego County on to its ratepayers.
The judge ruled that the utility failed to “reasonably manage and operate its facilities” prior to the blazes. If the ruling stands, SDG&E’s shareholders will be on the hook. That’s a signal that the PUC may expect the utilities to do much more to reduce the chances that lines and equipment can spark fires in dry, forested areas.
Consumer advocates naturally are skeptical of the utilities’ poor-mouthing. “There is absolutely no evidence these companies would go bankrupt,” says Jamie Court, president of Consumer Watchdog. “They’re basically looking for a get-out-of-jail-free card.”
Yet there is wide agreement that California may need to reconsider how to apportion the costs of wildfire damage. “The fire costs are going to be increasing, and there’s probably a limit to what the utilities have the capacity to do,” says Sean Hecht, an environmental law expert at UCLA. “This is emblematic of a whole host of problems we’re going to see from climate change, where in the aggregate everybody loses and the question is how you allocate those costs.”