Capitol Alert

‘Bailout in sheep’s clothing’ for PG&E? Advocates slam California wildfire plan

California lawmakers end efforts to reduce PG&E’s liability for wildfires

California lawmakers had the chance to reduce PG&E's liability for wildfires, but chose not to continue with the efforts.
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California lawmakers had the chance to reduce PG&E's liability for wildfires, but chose not to continue with the efforts.

Advocates for utility ratepayers say the California Legislature’s solution for wildfires includes a “bailout in sheep’s clothing” for PG&E that could for the first time leave customers picking up the bill for the utility giant’s negligence.

The Utility Reform Network criticized a sweeping proposal crafted and hastily adopted by a panel of lawmakers on Tuesday evening. The full Legislature is expected to vote on the plan Friday night, hours before the end of this year’s session.

Pacific Gas and Electric Co. spent millions of dollars this year imploring state legislators to change wildfire law and reduce the San Francisco energy company’s financial obligations for property damages. By late Tuesday night, a panel of lawmakers had voted to make it easier for utilities to recover payments for property damages from customers, including the devastating blazes in 2017.

“There’s no question that consumers will see drastically higher bills,” said Mindy Spatt, a spokeswoman for the ratepayer advocacy group TURN. “Everyone is wringing their hands about where PG&E is supposed to get the money, but nobody is wringing their hands about where customers are going to get the money.”

The governor and legislative leaders established a two-house wildfire conference committee in July charged with developing high-stakes wildfire legislation that would protect ratepayers and homeowners, preserve the health of the state’s largest public utility and win support from a jittery Legislature in an election year. The proposal sets new standards for fire prevention, forest management and utility liability damages that can be recovered from ratepayers, among other major changes.

Newly released footage from California officials shows what they called a “fire tornado” burning in Redding as the Carr Fire entered the city on July 26, resulting in the death of one firefighter.

After weeks of negotiations and public hearings, the committee hurried against an impending deadline to submit the final language 72 hours before the legislative session concludes Friday. Some lawmakers on the committee and outside groups complained that they were not given adequate time to review the report before the hearing began Tuesday.

“Without any transparency, the conference committee decided to give a massive bailout to PG&E that would force ratepayers to pay for their negligence,” said Becky Warren, a spokeswoman the Ratepayer Protection Network, a coalition of agricultural, manufacturing and consumer groups.

Assemblyman Chris Holden, co-chair of the wildfire conference committee, said he takes concerns and frustrations from the ratepayer groups seriously.

“But I believe this conference report in total is the right way for this Legislature to move to address the various issues before us,” Holden said at the committee hearing Tuesday night.

Drone video shows the town Keswick and a nearby neighborhood that were destroyed by the Carr Fire in late July, and a young family gazes over what used to be their home.

Under state law, a California utility company is responsible in court for compensating a homeowner for property damage if its power lines or other equipment cause a fire, regardless of whether investigators prove the company behaved negligently. The California Public Utilities Commission typically allows utilities to raise rates on customers to recover those property damage costs if the company didn’t do anything wrong.

But last November the CPUC rejected a request by San Diego Gas and Electric to raise rates to offset nearly $380 million in costs from a fire a decade earlier. The utility claimed it operated its system responsibly and blamed extreme conditions for fueling the blaze. Regulators disagreed and advised the Legislature to address the law, known as “strict liability” and “inverse condemnation.”

The decision set off a lobbying frenzy at the Capitol led by PG&E, which Wall Street analysts estimate could face up to $15 billion in property damage liability for the 2017 wildfires that destroyed parts of Northern California’s wine country. PG&E claims it cannot afford to pay the damages and would see its stock tank if the law remained unchanged. Some legislators are afraid that PG&E may be forced to file for bankruptcy, which would stifle investments in the state’s gas and electrical infrastructure.

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Sen. Bill Dodd, D-Napa, announced earlier this month that the Legislature backed off requests by PG&E and Gov. Jerry Brown to alter the inverse condemnation law in the courts that dominated conversations at the Capitol this year. Instead, the wildfire committee, which Dodd co-chairs, elected to instruct the utilities commission to evaluate a new set of standards and conduct a reasonableness review to determine if utility companies can increase customer rates to recover costs from future wildfire claims.

The commission would be required to determine whether a utility company behaved responsibly, complied with new plans to prevent fires or if extreme conditions exacerbated the extent of the damages, among other factors. Utility companies would be allowed to seek bonds paid off by ratepayers to finance recovery costs for future fires under certain conditions.

Under the committee’s bill, the utilities commission would also have to consider PG&E’s “financial status” and limit costs from the 2017 wildfires that ultimately fall on shareholders to the maximum amount the utility can pay without harming customers or affecting its ability to provide service.

Any excess costs that the commission determines utility shareholders cannot afford from the 2017 wildfires could be tied into bonds that are paid by ratepayers over time.

Consumer groups say the language means ratepayers for the first time would be required to absorb costs that result from a utility company’s negligent behavior. And while the proposal limits the costs ultimately placed on utility shareholders, it places no caps on the financial burden for customers.

Dodd has argued the increased charges on consumers would be small and cited a figure from PG&E that suggests ratepayers would see a $5 increase on their bill per year for every $1 B placed into “ratepayer protection bonds.” Dodd and others say the bonds would otherwise help protect ratepayers from sudden spikes in their bills.

But the AARP said utility customers could be hit twice under the new bill. Ratepayers would have to pay the cost of “hardening,” or strengthening the utility’s infrastructure to prevent fires, and then pick up the tab again after fires destroy homes and property.

“We’re asking the Legislature just to pause,” said Blanca E. Castro-Paszinski, advocacy director for AARP in California. “To take a step back and make sure that before they make changes to laws that were put in place to protect ratepayers, that they rethink what we can really accomplish in the next three days that will not be a rushed bailout.”

The Carr Fire near Redding started on Monday, July 23, 2018. On the July 26 it transformed into a fire tornado, hopping the Sacramento River and engulfing Redding neighborhoods. It has grown to 130,000 acres and has destroyed over 1,500 structures.

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