Some Say Negligence Should Be Determined Before SDG&E Recovers '07 Wildfire Costs
April 4, 2012 12:48 p.m.
San Diego County Supervisor Dianne Jacob
Diane Conklin, Mussey Grade Road Alliance in Ramona
CAVANAUGH: This is KPBS Midday Edition. I'm Maureen Cavanaugh. Tomorrow, the California public utilities commission will be holding public hearings in San Diego about who will pay for wildfires. San Diego gas and electric wants customers to pay for uninsured costs rather than share holders. Thursday's hearings are centered on the hundreds of millions of dollars over and above its $1 billion insurance fund that SDG&E owes in damages from the 2007 wildfires. This request has already provoked some outrage. Citizens groups and politicians lobbied the PUC to hold these public hearings. My guests are two of the notable opponents of SDG&E's request. San Diego County supervisor, Diane Jacob. Welcome to the show.
JACOB: Thank you, it's a pleasure to be here.
CAVANAUGH: And community activist Diane Conklin is here, of the mussy grade road alliance in Ramona. Welcome to the program.
CONKLIN: Thank you.
CAVANAUGH: Supervisor Jacob, in a letter you sent to the California public utilities commission, you argued that your constituents should have the right to address state regulators about having to pay the cost of the 2007 wildfires. Why?
JACOB: First of all, for the people that I represent in east county that have suffered, there have been lives lost, property damages. For the PUC to come down here so that my constituents can talk to the PUC face-to-face is very, very important. These people have suffered greatly, and they have been burned not once but twice. And this request by SDG&E about $450†million to pay for SDG&E's mistakes, in other words they caused three of the wildfires in 2007, now they're asking for rate payers to pay for that, and these ratepayers are the same people that suffered losses. This beyond outrageous. It is bad public policy, and there is another option. And the other option is pretty simple. Just take a look at SDG&E's managers and executives. They receive more than $76†million in bonuses since 2007. That doesn't include 2011. If you look at SDG&E's parent company, they gave top five executives $29†million bonuses in 2008. So anyway, and if you look at Sempra, they made profits of $1.1†billion last year. So I say if SDG&E and Sempra energy and the shareholders should pay for those costs. If you make a mistake, you should pay for it.
CAVANAUGH: How much was your district affect bide those wildfires?
JACOB: Oh, it was huge. There were lives lost, property damages. I don't have the numbers in front of me, Maureen. But huge losses. This basically is where the fire burned. Some of the damage was in the North County area too. But this is an insulate, and can I tell you one more thing about this particular proposal?
JACOB: The money is bad enough. But what SDG&E is asking also the PUC to do is to basically have their hands washed of any past liability and any future liability for any damage they cause because of their infrastructure. Now, they were negligent in the 2007 fire, and that's a fact.
CAVANAUGH: Now, let me get Diane Conklin into the conversation. I want to ask you, Diane what you specifically think people in San Diego can tell the PUC that perhaps they don't already know about the fire damage in 2007, and its effects on San Diego, and why they shouldn't have to pay for it.
CONKLIN: I think the people of San Diego should tell the California public utilities commission exactly what it's like to be in a catastrophic wildfire that is driven by Santa Ana winds and ignited by SDG&E's power lines. SDG&E in 2007 had three fires. All start with ignitions from their lines. This was a cat strove beyond measure, never happened before, potentially could happen again. Of and the idea that the people who were burned out in the fire, whole communities including Ramona, parts of Rancho Santa Fe, parts of Rancho Bernardo, and the back country suffered tremendously in these firings. They need to tell the people who are coming to hear them why it would be completely a miscarriage of justice to have to pay for the uninsured costs for these fires.
CAVANAUGH: I must say that SDG&E says that it has never been found guilty, never has been found guilty by any judicial entity for starting the blazes, but indeed as you say, two investigations have found that those power lines did spark that blaze. Your group has been working for quite some time to get a public hearing on this SDG&E request for this new wildfire expense balancing account. What do you feel is at stake if the new wildfire county measure is approved?
CONKLIN: Thank you for that question, it's a very good one. Fundamentally, what SDG&E is asking for is they are asking to be indemnified for their uninsured wildfire costs. Why would they do that? Because they claim that they haven't been able to purchase enough purchase at a reasonable price since 2007. Well, question No.†1 is what insurance problem did they have in 2006 or early 2007 before the wildfires occurred? They had their own problem. They didn't buy enough insurance. So fundamentally, they got caught. And it's now $594†million. It's groaned over $100†million since the last quarterly report to the security and exchange commissions. Sempra 10 K says that will be collected from customers. Going forward, it could be billions of dollars. We're talking about if you have children and then you have grandchildren and then you have great grandchildren, according to this application, generation after generation of customers would have to pay the uninsured wildfire costs that SDG&E says it will have.
CAVANAUGH: We had a caller on the line. We cant broadcast the phone call, but I think you just answered his question. He wanted to know if SDG&E has insurance to cover these costs, and these are costs over and above the insurance that they purchased. I'm wondering, Diane, how much might San Diego ratepayers have to pay if the PUC approves this plan specific to the 2007 wildfires?
CONKLIN: Well, we've estimated that the cost -- say it's $594 million, we're not sure what it will be, it could be more, it could be less. There's about 1.3 million meters in San Diego's service territory. So somewhere between 300 to $350 per meter. But SDG&E isn't going to dump this cost on everybody. Like you put the frog in the hot water and boil it slowly, they're going to do this over time. They may want to change interest. So fundamentally, it could be a lot more than that. And that's just the past fires. That wouldn't be the future fires.
CAVANAUGH: Supervisor Jacob, in your letter to the commissioner, one of your major concerns is that if SDG&E can shift the cost of the wildfire, they may not work hard to prevent wildfires. Can you explain that?
JACOB: Correct. Because what they're asking for is basically to wash their hands of any future liability. And let's go back to those 2007 fires just for a moment. It's a fact SDG&E did cause three of the 2007 wildfires. The consumer protection and safety division of the California public utilities commission found that SDG&E failed to proper lie design, construct, and maintain their lines. These are existing rules by the PUC that SDG&E flaunted in 2007. Now, what's important to remember about this finding is what they're asking for, not just the amount of money and the cost to ratepayers, which is bad enough, what's even worse is they're asking to not have any responsibility for any negligence that they may cause in the future. So the cost to ratepayers if this goes through is unknown for any future failures of SDG&E. They have a responsibility to maintain their line, their poles, their entire infrastructure in a proper manner. They have not done that. And they didn't have enough insurance, which is obvious.
CAVANAUGH: Now, I want to tell our listeners that we invited a spokes person from SDG&E to take part in this discussion. Our offer was declined. But recently, we did have SDG&E's Stephanie Donovan on talking about this request. This request for wildfire expense balancing account. I'd like to get both of your responses to some of the things she said. First she claims SDG&E needs the new wildfire expense formula because of the cost of insurance.
NEW SPEAKER: And because we don't know whether it's going to continue to go up or continue to remain as high. It's really hard to predict when we're talking about what we think we need in terms of funds to run our business.
CAVANAUGH: There from Stephanie Donovan. I think it was last month. And so supervisor Jacob, your response to that? Are you with us? Well, let me go to you, Diane Conklin.
CONKLIN: Well, we've been interveners in this process for over 2.5 years, SDG&E moved the goal post many times. Southern California Edison and Pacific gas and electric dropped out of it because it's a nonstarter, I think. And the basic issue has been insurance. We have insurance problems. Well the problem is that like SDG&E is like the 16 year-old that had a couple of accidents, and now the insurance company doesn't want to insure them at the rates they insured them before. Well, big surprise. That happens every day. When we say is if SDG&E claimed up to its act, became a model company for safety, they could show to the insurance people that they are a better company, and they're going to help us not to have these wildfires on the ground, they could get the insurance they need. But if they can't, SDG&E's been pumping up Sempra's earnings for a very long time. We are the cash cow, they are making a lot of money off of us, hey, they can pay the price for the 2007 fires and the fires going forward if they aren't running a safe system.
CAVANAUGH: Let me play another clip from that discussion we had with Stephanie Donovan. She also said SDG&E is arguing that they can't choose not to put up power lines in high fire risk areas. So fire damage should be considered a cost of business.
NEW SPEAKER: Obligation to fulfill our delivery of service to all customers was part of doing business. That is why the Courts and the commission have found that these are appropriate costs to be picked up by the customer.
CAVANAUGH: Supervisor Jacob, are you back with us?
JACOB: I've always been here. Something happened with the connection I think on your end.
CAVANAUGH: I'm sure it was us.
JACOB: I would just say that yes, they have a responsibility with those lines. But the problem has been that the arcing, remember the arcing where the lines swing in a high-wind situation and they start a fire? Well, the solution to that would be to make sure that those lines are far enough apart and they're thick enough. And with the poles in which they've just begun, by the way, to change out the poles, the wooden poles. All of these, what they call the hardening of their infrastructure, to make their poles their wires and everything safer to fire, they did not do. They were negligent and they were found so as I stated earlier. If I could respond to the previous comment.
CAVANAUGH: Yes, yes.
JACOB: I would just say on the insurance and SDG&E and the fact they couldn't get it, what about the individual? What about the businesses that were burned out that were not able to get fire insurance because of the fires that SDG&E caused? Or that their fire rates went up? They're no different. But the difference here is that the individuals in the businesses had to pay one way or the other. Now SDG&E is trying to get somebody else to pay, and that's not right.
CAVANAUGH: Diane, what about the argument that SDG&E has to provide power to these customers, and therefore that's the cost of doing business? Especially in the high fire prone areas?
CONKLIN: First of all, SDG&E talks about the regulatory compact in terms of putting electricity everywhere in their service territory. But fundamentally, SDG&E has been running the system for a long time. They should have known about these problems upon it's amazing that they'll say oh, we can't provide safe electricity to people in the back country because -- well, why exactly is that? It seems to me that they should be able to provide reliability and safe electricity at a reasonable cost. And the commission is there to show -- to make them do that. We believe that the commission will not approve this application. We believe it will be denied because fundamentally, whatever argument SDG&E is making, this has never been done before. This is a huge difference from what has been done before. We do pay for their insurance. This is saying pay for the outcome of not having insurance. It's quite a different matter.
CAVANAUGH: And yet you are concerned from reading some of your op-eds that if there is not a real outpouring of comment against this proposal that it could actually get through.
CONKLIN: Well, we're always concerned below what's going to happen at the CPUC. Right now, we have an appointee from governor Schwarzenegger, Michael peevy, he's the president of the CPUC, and he is a former CEO of Southern California Edison. So back in the day, people used to say it's the fox is watching the chickens. I'm a little worried about that. Also people don't know what the CPUC is. So we're of course and asking them to come out tomorrow at 6:00 and tell the CPUC, hell no we don't want to pay for this.
CAVANAUGH: And are there rulings and regulations people need to know?
JACOB: Yes, they will probably be limited if there's lots of people. You could have one minute, you could have 30 seconds. I will not be able to speak because I'm a party. And fundamentally, the ruling that commissioner Simon, who's the assigned commissioner, on this proceeding put out said it would be about the 2007 fires. But the postcard that was sent out by SDG&E talks about the entire issue, 2007, future fires, I don't think anyone should feel limited.
CAVANAUGH: We have to end it there. The California public utilities hearings will be held tomorrow at 2:00 PM, again at 6:00 PM at the Shriner's memorial auditorium. Thank you both very much for speaking with us.
CONKLIN: Thank you.
JACOB: You're welcome, thank you.