The ‘new normal’ on wildfires isn’t reason enough to give utilities a free pass

A firefighter walks near a burning house in Santa Rosa in October 2017. PG&E reported a $984 million loss because of wildfire losses.
A firefighter walks near a burning house in Santa Rosa in October 2017. PG&E reported a $984 million loss because of wildfire losses. AP

California is making some real strides adapting to wildfires as a year-round threat. So it makes no sense to backslide now by giving a free pass to utilities for fire damage.

Facing billions of dollars in potential costs, Pacific Gas & Electric Co. and other utilities are seeking relief at the state Capitol, lobbying hard for it to happen when legislators return in August.

A special committee of legislators, which meets for the first time July 25, is looking at ways to prevent or limit damage from wildfires – but also at revising the law on liability for wildfire damage. The Legislature and Gov. Jerry Brown should be very wary of any significant changes that shift the burden to homeowners and taxpayers.

Under a long-established legal doctrine called “inverse condemnation,” California’s regulated utilities are granted the same powers of “eminent domain” as governments to put up power lines and other infrastructure on private land. In return, utilities are responsible for paying damages if their equipment starts fires, even if they aren’t negligent.

But PG&E says this bargain no longer works in the “new normal” of more frequent and intense wildfires and climate change.

The balance has shifted in another way. Companies need permission from the California Public Utilities Commission to pass along damage costs to customers. But the commission appears to be taking a tougher line. In a closely watched case, the CPUC denied San Diego Gas & Electric Co.’s request to bill ratepayers for $379 million in costs of a 2007 Southern California wildfire after a court found it didn’t properly trim trees near transmission lines. On July 16, the CPUC denied an appeal for a new hearing.

PG&E, in particular, has a lot at stake.

The wine country fires that killed 44 last October had total property damage of nearly $10 billion. As a start, PG&E took a $2.5 billion charge against profits in the quarter that just ended June 30. That’s already much more than its $840 million in insurance coverage and is the equivalent of nearly two years of profits.

Cal Fire has already blamed PG&E power poles and other equipment and its failure to remove and trim back trees around power lines for several of the fires last October. Cal Fire is still investigating the cause of the Tubbs fire, which killed 24 people and destroyed 5,000 homes in and around Santa Rosa.

In fairness, as a public utility, it can’t simply cut off the power to fire-prone parts of California. Climate change has, in fact, set in and it’s looking expensive: The utility has issued dire warnings of potential bankruptcy if the liability law doesn’t get an update.

But PG&E also has a long, bitter history of distrust in Northern California. It was forced to pay $1.6 billion in fines, settlements and other costs from the 2010 natural gas explosion in San Bruno that killed eight people and injured dozens more, a tragedy caused in large measure by the company skimping on maintenance and oversight. PG&E also unsuccessfully pushed a misleading ballot measure in 2010 that would have reduced competition and hurt public utilities, including the Sacramento Municipal Utility District.

And PG&E hasn’t helped its cause by pushing proposals such as Assembly Bill 33, which would let the company issue state-authorized bonds to pay for settling more than 200 lawsuits from those fires and repay the bonds from customer bills. Also not reassuring? The son of the bill’s author, Assemblyman Bill Quirk, works for PG&E.

Limiting its compensation for fire damage would be great for PG&E executives and lucrative for its shareholders. But it would be unfair to homeowners, whose insurance payments would rise, and to local governments and taxpayers, who would have to pick up more of the bill for repairs. And as the California State Association of Counties points out, letting utilities off the hook would also reduce the incentive for them to prevent fires in the first place.

Local officials point to what happened after the deadly wine country fires. In March, PG&E said it will begin turning off the power during high winds and “extreme fire conditions.” It also plans to cut trees and vegetation next to transmission wires more aggressively, also a good move. That is a far fairer, more effective approach than seeking to drastically change the liability law.

Also in March, Congress fixed a major flaw that siphoned money from wildfire prevention programs. The new budget set aside $2 billion a year for battling wildfires, treating them like other natural disasters. In February, the Little Hoover Commission called for more thinning of forests and controlled burns; the governor has endorsed doubling the amount of state land under that forest management strategy. And in January, the CPUC adopted an updated fire threat map that puts more than 40 percent of the state into the category of elevated or extreme fire risk and could lead to stricter development rules.

This debate will only become more explosive as the fire season gets longer. In 2017, California endured the deadliest and costliest wildfires in its history. It’s already looking bad this year.

Historically, major fires don’t break out until August or later, and they usually happen first in Southern California. This year they started in early July, and in Northern California. Officials blame extreme weather – record rainfalls in early 2017 followed by two very hot summers have produced tinder-dry grass and other vegetation.

The state’s largest fire so far this year, the County Fire, started June 30 and burned through more than 90,000 acres in Yolo and Napa counties before being fully contained by July 14.

Just as fire crews brought that blaze under control, another major fire broke out in Mariposa County near Yosemite National Park. As of Friday morning, the Ferguson Fire was only 7 percent contained and had already burned nearly 23,000 acres, forced evacuations and claimed a life – firefighter Braden Varney, whose bulldozer rolled over while he was clearing a fire break on July 14.

If this is the new normal for wildfires, it’s perfectly fine to review the current liability rules. But there’s no compelling reason for a major shift in responsibility away from utilities and to local taxpayers and homeowners.