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Regulators Breaking Own Rules If SDG&E Bills Customers For `07 Fire Costs

Amita Sharma
More than 400 people attended a public hearing on April 5, 2012 to tell regulators what they think about San Diego Gas & Electric's plan to bill ratepayers for the 2007 fires.
Regulators Breaking Own Rules If SDG&E Bills Customers For `07 Fire Costs
Customers get the chance today to tell regulators what they think about San Diego Gas & Electric's pitch to bill ratepayers for uninsured costs from the 2007 fires started by the company's power lines.

More than 400 people attended a public hearing Thursday to tell regulators what they think about San Diego Gas & Electric's pitch to bill ratepayers for uninsured costs from the 2007 fires started by the company's power lines.

The total increase could cost between $350 and $700 per meter. Customer after customer stood up at the Al Bahr Shriners Memorial Auditorium in Kearny Mesa to blast SDG&E for what they called an outrageous request.


“Is management at SDG&E reaching into their pockets to pull out money to cover these costs?" asked ratepayer Jim Thomas. "I don’t think so. Don’t hold us prisoners to SDG&E’s lack of foresight and stupidity.”

A state inquiry found that SDG&E lines ignited the 2007 firestorms because the company did not properly design, build and maintain its equipment. In private discussions, SDG&E reached a $14 million settlement with state investigators for fires that caused as much as $2 billion in damages to San Diego County.

Hundreds of people whose homes were burned down in 2007 have sued SDG&E. It’s the uninsured costs of settling those lawsuits that the company wants to pass along to customers.

SDG&E spokeswoman Stephanie Donovan said the company has the right to do that because if damage is caused during the operation of a service that everyone benefits, then everyone must bear those costs instead of shareholders.

“We are a regulated utility and we are allowed to regulated rate of return that we have the opportunity to earn," she said. "There’s no guarantees.”


Meanwhile, ratepayer advocates have challenged the credibility of SDG&E’s regulators, the California Public Utilities Commission. They singled out Commissioner Timothy Alan Simon, who received $50,000 in gifts, meals and trips from trade groups supported by industries he regulates.

“The utilities appear to have unfettered access and the consumers have very little access to these commissioners,” said consumer advocate Charles Langley.

Now the state’s Consumer Protection and Safety Division says if state regulators allow SDG&E to bill customers for uninsured costs from the '07 fires, they will be “illegally” violating the terms of that settlement.

The settlement states that if SDG&E tries to recover costs from the '07 fires from customers, the state has the right to re-open its case against SDG&E for starting the fires -- including airing evidence publicly.

But SDG&E wants to take that right away both for 2007 and the future. SDG&E has asked that customers -- not its shareholders -- pay the uninsured costs, whether the company was negligent or not.

"The utility’s proposal does absolutely nothing to protect ratepayers or citizens," said CPSD lawyer Nicholas Sher in a filing to regulators. "Its only purpose is to shield shareholders.”

Sher said if regulators allow the company to recover uninsured expenses from wildfires, they will be relinquishing their legal duty to ensure that utilities provide safe, reliable service at reasonable rates.

Diane Conklin of the citizens watchdog group Mussey Grade Road Alliance says this time SDG&E may have gone too far.

SDG&E and its customers have clashed over several big issues in recent years. Some ratepayers challenged whether the Sunrise Powerlink transmission line, currently under construction, was needed. East County residents objected to SDG&E's plan to shut off electricity in the back country to avoid power line fires when it's hot and windy. And many ratepayers bristled over the company's desire to charge solar users extra fees.

“The people of San Diego County will rise up if they find out they’re going to be charged for past fires, future fires, negligent behavior or not," said Conklin. "They will be furious.”

Back in 2009, SDG&E told regulators it wanted to charge customers for its future uninsured wildfire expenses, arguing it was in the midst of an insurance crisis. Company spokeswoman Stephanie Donovan said that since the 2007 fires, it could not get enough coverage at good rates.

“And because we don’t know whether it’s going to continue to go up or continue to remain this high, it’s really hard to predict when we are determining what we need, the amount of funds to run our business."

Last December, the company added a key sentence to their request. SDG&E asked regulators for the right to pass on all uninsured costs from the '07 fires to customers.

Hundreds of homeowners and business have sued the company. SDG&E has settled many of those those lawsuits, but has gone over its $1 billion dollar liability limit. Uninsured costs for SDG&E could hit another billion. And those are the expenses the company wants customers to cover.

“What they did do is slip this in the way they did because they knew it would cause an absolute uproar in this county knowing that they burned almost 200,000 acres, more than 1,300 homes and killed two people in three fires all ignited by their equipment in one Santa Ana firestorm," said Conklin.

Conklin said regulators are putting the public at risk if they let SDG&E recover costs from customers.

"If SDG&E is bailed out on every fire and indemnified into the future, then how are we going to know that they're going to make the right decisions into the future?" Conklin said.

Regulators never held evidentiary hearings on whether SDG&E was reckless and negligent in causing those fires. Instead, they entered into settlement talks. That's a point the company uses to its advantage.

"To date, there has been no finding of fact that SDG&E’s actions did anything wrong," said Donovan at SDG&E.

But she is confident that the law backs the company’s position.

“What happened during the obligation to fulfill our delivery of service to all customers was part of the cost of doing business," she said. "That’s why the courts and the commission have found that they are appropriate costs to be picked up by customers.”

SDG&E has already told the Securities and Exchange Commission -- and thereby potential investors -- that it will likely be allowed to recover uninsured fire expenses from the '07 fires from customers.

Conklin said she is both incredulous and unfazed by what she calls SDG&E’s conceit.

“They are a monopoly," she said. "But when they make a mistake and they burn down the county and all the suffering and then tell shareholders don’t worry, we’re going to get the money. I mean it sounds like the Sopranos.”

State regulators held public hearings at 2 p.m. and 6 p.m. today at Al Bahr Shriners Memorial Auditorium in Kearny Mesa.