As wildfires increasingly scorch California year-after-year, state lawmakers and Gov. Jerry Brown are debating who should be liable for the billions of dollars of damages.
This epic battle, pitting some of the Capitol’s most influential interest groups against each other, begins Wednesday with the first meeting of the Legislature’s Conference Committee on Wildfire Prevention and Response.
And the resulting actions, or lack thereof, could lead to sharp increases in utility ratepayers’ electrical bills, property owners’ insurance premiums — or both.
“This is a huge issue for everyone in California,” said Michael Wara, a Stanford University researcher who specializes in climate and energy policy and is among those scheduled to testify at Wednesday’s hearing.
He says that anyone who pays a utility bill could end up paying higher rates. “And anyone who lives in wildfire country is potentially exposed to the risks,” he added.
The big question at the heart of this debate is how the state should respond to a “new normal” where wildfires show no sign of abating.
“How do we manage this new risk that we confront in California, and how do we hopefully allocate that risk — spread it around — so that lots of people have incentives to make it smaller, to help us keep people safe in their communities and homes intact, if possible?” Wara asked.
On one side of the debate: utilities like PG&E and Southern California Edison, along with the unions that represent the companies’ employees. They argue California’s liability rules are woefully outdated and unfairly force shareholders and ratepayers to pay for wildfire damages even when the utilities are not negligent.
“We believe comprehensive public policy reforms are urgently needed to address the challenges brought about by more frequent and more intense wildfires,” PG&E wrote in a statement on Tuesday.
On the other side: insurers, trial attorneys, advocates for ratepayers and fire victims, and the statewide associations that represent cities and counties. They warn that reducing the utilities’ liability would transfer the costs to property owners and fire victims, who could face lengthy and expensive legal battles to recover damages.
“We are urging policymakers to prioritize safety, accountability and affordability and not give investor-owned utilities a blank check paid for by customers,” a coalition representing both residential and industrial ratepayers’ groups wrote in a statement.
Under current law, whenever a utility’s equipment contributes to the cause of a wildfire, it is liable for the damages — even if the utility did nothing wrong.
That standard is known as “inverse condemnation.” It’s based on the tenet that, because utilities are allowed to build and place equipment wherever they see fit — even if they need to seize property from a private landowner for public use through eminent domain — they must also take responsibility for damages.
If a utility is negligent, its shareholders must foot the bill. Otherwise, it can pass the costs on to its ratepayers.
For example, Wara pointed to last year’s Tubbs Fire, which burned nearly 37,000 acres in Napa, Sonoma and Lake counties and destroyed more than 5,600 structures — including some 2,800 homes in Santa Rosa.
If the California Department of Forestry and Fire Protection, or Cal Fire, finds that PG&E equipment or infrastructure caused the blaze — but the utility complied with regulations such as tree-trimming near its power lines — “then PG&E’s ratepayers are potentially on the hook for something like $5-7 billion of liability,” Wara said.
That would amount to a monthly rate increase for PG&E customers of $20 to $30, he added.
Cal Fire has already found that 12 other Northern California wildfires in the same month as the Tubbs Fire “were caused by electric power and distribution lines, conductors and the failure of power poles.”
The governor released his own proposal Tuesday, on the eve of the conference committee hearing. It would give utilities such as PG&E the change in liability law they covet, paired with new requirements for utilities to maintain their systems and harsher penalties when they fall short.
A bill crafted by Brown’s office would require a court to weigh in as to whether a utility’s actions were reasonable and to “to balance the public benefit of the electrical infrastructure with the harm caused to private property.”
It would also require the court to take into account a utility’s “proportionate fault” in causing a fire. Currently, because utilities must pay even if not at fault, they bear the entire liability burden whenever its equipment was involved in a fire’s cause.
“Just as our firefighting techniques and forest management must adapt” to the state’s growing wildfire threat amid its changing climate, “so must California’s laws,” Brown wrote in a letter to the conference committee co-chairpersons on Tuesday. “The law must establish powerful incentives for utilities to deliver power safely and must hold those who are at fault responsible for the damage they cause.”
Brown’s maximum fine, however, would be just $100,000 — double the current $50,000 but a mere speck of the billions of dollars in wildfire damages
The governor’s proposal would not affect the 2017 fires; only blazes that sparked after January 1, 2018, would fall under the new liability rules.
The California Coalition of Utility Employees praised the governor’s “bold leadership” on the issue, “particularly his recognition of the need to harden utility infrastructure and his call to reform the State’s process for determining wildfire liability,” it wrote in a statement.
Opponents, meanwhile, were not amused.
“This proposal’s weakening of well-established liability standards is nothing more than a bailout of public utilities, shifting their financial liability onto the backs of wildfire survivors, homeowners, communities and businesses,” a coalition of homeowners insurance companies said in a statement.
Michael Kelly, a San Francisco lawyer representing victims from the October 2017 wildfires, said the governor’s proposal “fundamentally creates a disincentive to be safe. It seeks really to do what PG&E has told our court it wants to do, which is eliminate ‘inverse condemnation.’”
And a spokesman for a group of fire victims called Brown’s language a “non-starter.”
“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,” reads a statement from the group that calls itself Up From the Ashes.
It’s not yet clear how much support Brown’s proposal will have among lawmakers. It’s widely believed that the conference committee must wrap up its work at least a week before the Legislature adjourns for the year, on August 31, in order to beat deadlines.
Lawmakers generally kept quiet ahead of Wednesday’s hearing. One who did speak up was Asm. Chad Mayes (R-Yucca Valley), who praised the governor’s “robust framework” but tweeted that any final deal “must also protect California ratepayers from increasing energy costs related to these ‘new normal’ natural disasters.”
The Governor provided a robust framework for the #Caleg to shield Californians from the threat of wildfires and hold energy companies accountable. Our work must also protect California ratepayers from increasing energy costs related to these “new normal” natural disasters.— Asm. Chad Mayes (@ChadMayesCA) July 24, 2018
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