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Regulators Vote SDG&E, Not Ratepayers, Must Pay For 2007 San Diego Wildfire Costs

A sign on SDG&E's headquarters appears in this undated photo.

Photo by Nicholas McVicker

Above: A sign on SDG&E's headquarters appears in this undated photo.

Regulators Vote SDG&E, Not Ratepayers, Pay For 2007 San Diego Wildfire Costs


Amitha Sharma, investigative reporter, KPBS News


California regulators rejected a request Thursday from a San Diego utility to force customers to shoulder $379 million in costs from deadly blazes ignited by power lines in 2007 — a decision seen as possibly precedent-setting for cases in which devastating wildfires tore through wine country this fall.

The California Public Utilities Commission voted unanimously to uphold an August decision by two administrative law judges, who said San Diego Gas & Electric did not act reasonably in managing its equipment and could not pass along costs from the three fires to ratepayers. State law allows utilities to recover costs from customers only if they act in a "prudent" manner.

California Public Utilities Commissioner Carla Peterson praised the work of the judges before her vote.

"I am also appreciative of the additional detail the judges provided in the revisions to the proposed decision which I think serve to further substantiate the original findings that SDG&E failed to meet its burden to prove that it was a prudent manager in the lead-up to all three fires," Peterson said.

Pacific Gas and Electric Co. and Southern California Edison had pushed regulators to rule in the utility's favor. They said the case highlighted a need to fairly distribute costs from wildfires, which are proving to be more destructive due to drought conditions and home construction in backcountry areas. But CPUC Commissioner Cliff Rechtschaffen rejected the argument.

"We can’t apply a standard that provides an incentive for a utility to act imprudently or unreasonably. That would send precisely the wrong signals to the utility," said Rechtschaffen. "We want to encourage and incentivize careful, prudent management."

RELATED: San Diego Business Owner Suing CPUC Over Its Handling Of SDG&E’s Request To Bill Ratepayers

Environmental and consumer groups and some elected officials also said ruling for the San Diego company could set a precedent for other utilities to pass along the costs of wildfires ignited by power lines and discourage them from properly maintaining their infrastructure.

In the San Diego case, the California Department of Forestry and Fire Protection and utility commission investigators concluded that three blazes from 2007 were caused by San Diego Gas & Electric's electrified wires.

"There is no dispute that each of the fires were caused by SDG&E facilities and in each instance we find that SDG&E did not meet its burden to show that it acted as a prudent manager," Commissioner Laine Randolph said.

Lee Schavrien, San Diego Gas & Electric's senior vice president and chief regulatory officer, said the decision is not consistent with findings made by the Federal Energy Regulatory Commission, which determined the utility "acted reasonably" and approved the portion of the wildfire cost request it had jurisdiction over.

"We find it difficult to understand how federal regulators understood the law and applied it appropriately, while the CPUC adopted a flawed interpretation," he said.

Schavrien said SDG&E "will vigorously pursue all available avenues to overturn this decision."

RELATED: SDG&E Lobbies Regulators To Reject Judges’ Decision On 2007 Wildfire Reimbursement

The blazes destroyed more than 1,300 homes, killed two people and injured 40 firefighters. The utility faced 2,500 lawsuits from people with fire damage and settled most of them for $2.4 billion.

The $379 million it wanted to charge ratepayers remained after court proceedings, settlements and insurance payouts.

"If the commission had sided with the utility companies, it could have set a dangerous precedent for the future of disaster cost recovery, or at the very least, created a perception of a precedent," Democratic state Sen. Jerry Hill said. "Today's decision concludes a decade long process to rightly assign the costs of the tragic fires to the company responsible for causing them."

Hill pointed out that Pacific Gas and Electric Co. has said if it is found liable in last month's devastating Northern California wildfires, which killed 44 people and destroyed 8,900 homes and other buildings, it also will seek regulators' permission to pass along the costs.

Hill and other legislators have said they will introduce a bill in January to prevent electrical utilities found responsible in wildfires from passing their uninsured liabilities along to customers.

SDG&E issued the following statement:

SDG&E strongly disagrees with today’s decision. The CPUC got it wrong. The 2007 wildfires were a natural disaster fueled by extreme conditions including the worst Santa Ana wind event this region has ever seen, combined with high heat, low humidity and hurricane-force winds as high as 92 mph.

Experts from Cal Fire and the County Office of Emergency Services described the weather as ‘unprecedented [in] magnitude,’ and ‘wind conditions being the worst they had ever seen in recent memory.’

This decision is not supported by the evidence and is not consistent with the determination made by the Federal Energy Regulatory Commission (FERC). FERC conducted its own inquiry and found SDG&E acted reasonably and approved the FERC-jurisdictional portion of the wildfire cost request. We find it difficult to understand how federal regulators understood the law and applied it appropriately, while the CPUC adopted a flawed interpretation.

The decision wrongly concludes that the applicability of inverse condemnation by California courts to privately owned public utilities is irrelevant. Under inverse condemnation, a utility is strictly liable, regardless of fault or foreseeability, if its facilities are involved in an ignition. Courts apply inverse condemnation to utilities on the grounds that utilities can spread the costs through rates, but this decision has failed to recognize or acknowledge the role inverse condemnation played in the incurrence of the costs and has failed to allow SDG&E to spread the costs as the courts envisioned.

We will vigorously pursue all available avenues to overturn this decision.


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