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SDG&E Expects Customers Will Pay Pending ‘07 Wildfire Claims

Firefighters battle the Witch fire on Oct. 23, 2007, in Escondido.

Photo by Sandy Huffaker / Getty Images

Above: Firefighters battle the Witch fire on Oct. 23, 2007, in Escondido.

The deadly and highly destructive 2007 wildfires in San Diego County resulted in damages that exhausted San Diego Gas & Electric's $1 billion insurance policy.

The 2007 wildfires claimed two lives and destroyed 1,300 homes in San Diego County. The fires were largely caused by downed San Diego Gas & Electric power lines.

Damage claims and lawsuit settlements have exhausted SDG&E’s $1 billion dollar insurance policy. The question now is who is going to pay the hundreds of millions in damage claims still pending?

Will it be SDG&E stockholders, who just got a 25 percent increase in their dividends, or its customers, who already have some of the highest electricity rates in the country?

According to documents the utility has filed with the California Public Utilities Commission, SDG&E is confident that customers will ultimately foot the bill.

The company told the federal Securities and Exchange Commission last June that it’s “probable” the CPUC will let it bill customers for the costs of settling remaining lawsuits.

Sempra – SDG&E’s parent company – went on to list the recovery from customers as an asset in its quarterly filing last June.

But the company had not yet even formally asked the commission for approval to bill customers for the pending claims, which could total hundreds of millions of dollars.

“Now that sounds like maybe we already assumed we had that money in the bank,” said SDG&E Spokeswoman Stephanie Donovan. Yet she insists that’s not the case.

“I don’t think that people should read something into that as if it is a fait accompli.”

Former CPUC commissioner Loretta Lynch said regulatory rules bar a power company from recording an asset before it has been approved by the commission.

”They are basically saying we have money in the bank, without yet even asking to have the money put in the bank," Lynch said. "And certainly the rules are clear: no utility can count as received money it has yet to receive.”

Donovan said SDG&E recorded its uninsured wildfire settlement costs as an asset to the SEC in order to comply with the federal agency’s requirements.

“Customers should not assume that we assume anything ... ," Donovan said. "We know that we are going to have to make an application to the commission and they will have to decide based on the evidence that’s presented whether the costs we have asked to recover are reasonable and fair.”

In December, the company did propose getting customers to cover all uninsured costs from the '07 fires. The request was contained in one sentence in a filing related to a separate, but related, case -- the company’s quest for future uninsured wildfire costs to be paid by customers.

Local energy engineer Bill Powers said SDG&E’s "slipping in a line" for reimbursement on the uninsured wildfire costs for '07 shows the company has little confidence its request will withstand public scrutiny.

“There’s no way that if that proposal were introduced in the formal proceeding in a normal manner that there would not be a tsunami of opposition because it’s ridiculous," Powers said. "Why should any customer pick up the tab for excess costs beyond what insurance will cover for SDG&E when it’s their negligence that caused the huge, catastrophic firestorm?”

SDG&E does not concede it was negligent; and it's not a term the PUC uses in the matter of the '07 wildfires.

Yet SDG&E was so certain the PUC would grant approval of the '07 uninsured wildfire costs that it told investors in a prospectus last August that customers would ultimately pay those costs. The prospectus supported a $350 million bond issuance.

And the commissioner assigned to write the initial opinion on SDG&E’s efforts to get customers to foot the bill for future uninsured wildfire costs is actually quoted in an SDG&E press release on the bond sale.

Commissioner Timothy Simon praises SDG&E for using a minority-owned investment bank to issue the bonds.

Simon’s quote in a bond sale that in part relies on an issue he must actually vote on has raised questions about his ability to be impartial.

“It gives the appearance that the fix is in,” said San Diego County Supervisor Dianne Jacob. She said Simon should recuse himself from voting on the matter.

“The public has to have faith in those who are responsible and accountable for regulating the utilities. And the faith has been broken unless Commissioner Simon recuses himself from any participation in this matter. This is unbelievable,” Jacob said.

Commissioner Simon did not respond to requests for comment.

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