California Utilities Want Customers to Help Pay Wildfire Damages. Will Politicians Oblige?

By CALmatters | Daily News (Los Angeles, CA), March 26, 2018 | Go to article overview

California Utilities Want Customers to Help Pay Wildfire Damages. Will Politicians Oblige?


CALmatters, Daily News (Los Angeles, CA)


Minutes before President Donald Trump landed in California earlier this month, the most powerful politicians in the state sent out a public statement that had nothing to do with him and would garner little attention. The announcementfrom Gov. Jerry Brown and legislative leaders said that due to recent devastating fires and mudslides, they would work together this year to “make California more resilient against the impacts of natural disasters and climate change.” Among the issues they promised to address: updating liability laws for utility companies.

The innocuous-sounding statement belies a controversial idea: that Californians could eventually have to pay more for electricity because of last year’s wildfires.

With the state’s gaze trained on Trump visiting the prototypes of his border wall, the announcement went largely unnoticed in California. But it landed with a splash on Wall Street. Pacific Gas & Electric’s stock price, which had been falling since October’s wine country fires, immediately shot up. By the time trading closed, Barron’s declaredit the day’s “hot stock.”

“PG&E was helped by news that California may update its liability rules and regulations for utility services,” said Barron’s, a publication for investors.

The politicians’ announcement that triggered the stock price increase was the product of months of lobbying by California’s three investor-owned utility companies. The businesses are worried about possibly being held liable for billions of dollars in damages stemming from last year’s catastrophic fires in northern and southern California. Investigations to determine the causes of the fires are still under way, and at this point no blame has officially been assigned to the power companies.

But recent rulings in court and at the state Public Utilities Commission have set precedents that make the big utilities—and their investors—nervous. Under the legal doctrine known as “inverse condemnation,” courts have ruled that private utilities are responsible for any damages traceable to their equipment—even if they were not negligent in maintaining it. Late last year, regulators decided that the San Diego Gas & Electric company could not pass that cost on to their customers, after the utility asked if it could raise rates to cover liability from wildfires in 2007.

Financial markets see the potential risk. Stock prices dropped for Southern California Edison after the December wildfires in Santa Barbara and Ventura counties, as they did for PG&E following the autumn blazes in Napa and Sonoma counties. Credit agencies have been lowering PG&E’s bond ratings.

So the power companies’ lobbyists have been pounding the hallways of the state Capitol, asking legislators to change the “inverse condemnation” law. They argue that it shouldn’t apply to them—or if it does, they should be allowed to raise rates to cover their costs. That raises an expensive and emotional question: Who should pay for wildfire damages if the power companies are liable, their stockholders or their customers?

The utilities are big political donors and have a lot of sway in a Capitol dominated by Democrats. The three companies have given at least $12.5 million to California political campaigns since 2013, including more than $2. …

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