SMUD doesn’t have shareholders, so customers will get hit by wildfire costs

Jerry Brown: Fires becoming ‘more a part of our ordinary experience’

California Gov. Jerry Brown, appearing with Cal Fire and Office of Emergency Services officials, provided updates on California's wildfires, Wednesday, Aug. 1, 2018.
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California Gov. Jerry Brown, appearing with Cal Fire and Office of Emergency Services officials, provided updates on California's wildfires, Wednesday, Aug. 1, 2018.

The unprecedented scourge of wildfires makes it increasingly clear that this is the new normal in California.

Gov. Jerry Brown and legislative leaders have called for a comprehensive set of solutions, including a reform of the liability rules surrounding wildfires. SMUD supports these common-sense efforts to protect all Californians from undue risk.


The interpretation of current law holds utilities strictly liable for all damages, even when the utility is not at fault. For example, the Sacramento Municipal Utility District could be held liable for a fire caused by a tree limb from outside our right-of-way blowing into a power line, even if we had met all safety and maintenance standards.

Due to this extreme potential liability, SMUD’s wildfire insurance costs for the coming year are four times higher than a year ago. Unlike investor-owned utilities, we don’t have shareholders to bear the costs of the damages inflicted by a catastrophic fire. All SMUD customers – the poor, the elderly and renters – would pay the price.

A major wildfire similar to recent ones elsewhere in California could cause SMUD’s electric rates to jump by 25 percent.

Arlen Orchard
Arlen Orchard

The governor’s draft legislation recognizes the inequity of putting all financial responsibility for wildfires on electric utilities when the utility acted properly in the installation, maintenance and operation of its equipment. It does not relieve the utility’s liability when it is negligent. Rather, it appropriately allocates liability in proportion to the utility’s fault.

As the not-for-profit, community-owned utility serving the state capital, SMUD is doing everything in its power to ensure the continued safe delivery of electricity to the 1.5 million residents who depend on it. We’re fully committed to fighting the impacts of climate change and reducing the risk of wildfires.

SMUD’s long history of environmental stewardship includes strong forest management practices in El Dorado County, where infrastructure for the Upper American River hydroelectric project is located in heavily wooded areas near Placerville and other communities.

As Brown recently pointed out, Californians depend more than ever on reliable electricity to heat and cool their homes, power their businesses and serve fire stations and hospitals. The spread of wildfires could undermine this system, weakening the ability of SMUD and other utilities to make investments in safety and to continue meeting our aggressive renewable energy and greenhouse gas reduction goals. Small utilities would be particularly at risk.

It’s important to reiterate that SMUD and other utilities should and will remain liable for wildfire costs when we’re at fault. That’s fair.

The challenge of fighting climate change and reducing the risk of wildfires requires a comprehensive, concerted effort from a broad range of stakeholders. SMUD encourages the state and federal governments to implement more robust fire management practices. We also support a solution that requires utilities to adopt more expansive wildfire prevent plans and strengthen the construction, maintenance and operation of electrical lines and equipment. The proposed legislation is in the best interests of all our customers.

Arlen Orchard is CEO and general manager of SMUD. He can be contacted at