Even supporters concede that the last-minute compromise on paying for California wildfires is far from perfect. Indeed, there’s a huge flaw that is unfair to ratepayers. If the Legislature approves this deal on Friday, the last day of its session, it must find a way to fix it later.
Under the deal, crafted by a special joint committee of Assembly members and senators, Pacific Gas &Electric Co. would be allowed to charge its customers to finance long-term bonds to cover the damages from the devastating wine country fires last year.
It’s even possible that ratepayers could be on the hook for damages for which PG&E is found at fault. Cal Fire has already blamed the utility for several of the October 2017 blazes, which killed 44 people.
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The office of state Sen. Bill Dodd, D-Napa, a co-chairman of the joint legislative committee, says that without helping PG&E finance these costs, residents and businesses would not be able to settle all of their damage claims. But many of those survivors are ratepayers, too, so they would still be paying for PG&E’s negligence.
The utility estimates that, for every $1 billion in bonds issued, its average residential customer would pay $5 a year more. And executives have warned that PG&E might face bankruptcy if it is forced to cover the estimated $15 billion in damages from the wine country fires entirely out of its own accounts.
SB 901 does include one safeguard for ratepayers: It would require an independent “stress test” of PG&E’s finances to figure out how much the utility can afford to pay before costs would be passed on to customers. That makes sense.
Also, the liability rules would be different for wildfires that started after Jan. 1, 2018, although utilities could still issue bonds to finance damage claims.
The deal calls for PG&E and other utilities to pay for damages based on their level of negligence – a concept along the lines of what Gov. Jerry Brown has proposed. Determining how much utilities can recover from customers would be up to the California Public Utilities Commission, which also would come up with new standards of what is reasonable to expect of utilities.
So whether this deal is ultimately fair to ratepayers depends on the CPUC. Unfortunately, the commission has a spotty track record of overseeing PG&E, which was found guilty and fined for egregious failures in maintenance leading up to the 2010 San Bruno natural gas explosion that killed eight people.
Legislators should give clear direction to the CPUC that ratepayers should be favored in any close calls.
PG&E and other utilities did not get everything they wanted. They lobbied hard to completely overturn what’s known as inverse condemnation, under which they are responsible for paying damages if their equipment starts a fire, even if they are not negligent.
The California State Association of Counties and other groups that vehemently opposed that sweeping change in liability law are now on board with SB 901.
There’s far more consensus on the other major piece of SB 901 – $200 million a year for five years from the sale of greenhouse gas emission credits under the state’s cap-and-trade program to improve forest management and prevent wildfires. That includes clearing dead trees and brush, and conducting more planned burns.
The bill also includes provisions to streamline government permits to remove some trees in overgrown forests and allow exceptions to rules on the size of trees that can be cut down. As long as the money is focused on logging dead trees and large, healthy trees are spared, thinning of forests will be hugely beneficial.
With climate change, wildfires are an increasing threat to California that must be addressed. Still, it was not a pretty process to come up with this compromise. Ideally, legislators would have taken more time and been more open about it. “Make no mistake about it, it’s not perfect,” Dodd said after unveiling the deal Tuesday. “Little that we do here ever is.”
True. But this bill should be better for ratepayers.