California’s Wildfire Liability Law Won’t Change This Year, Dealing Setback To Utilities Like PG&E

Pacific Gas and Electric has spent millions of dollars in hopes of saving billions as it battles to change California’s wildfire liability law.

But PG&E and other investor-owned utilities in California appear to have lost the battle, at least for this year. The Legislature adjourns on August 31.

“I think it’s safe to say that ‘inverse condemnation’ is off the table,” Sen. Bill Dodd (D-Napa) told CapRadio Friday evening, referring to the state’s current liability law that the utilities have been fighting so hard to change. Dodd co-chairs the joint Senate-Assembly conference committee tasked with crafting wildfire preparedness and liability legislation.

Dodd’s declaration comes days after word began circling around the Capitol that lobbyists for the utilities had begun informing legislative staff and opposing lobbyists of the same thing.

Instead, Dodd says, there are “a number of other components” that lawmakers, the governor’s office, utilities and opponents of changing California’s wildfire liability law are “actively discussing.”

“Hopefully we’ll have a hearing soon — perhaps even as close as Tuesday — on a term sheet that we can go over and really present to the public and to the media what the potential points are that will be in the conference report,” he said.

Those negotiations are now focused on other ways to address utilities’ financial stability, along with efforts to reduce the risk of wildfires and improve forest management.

Under current law, the utilities are liable for damages from wildfires caused by their equipment — even when they weren’t negligent.

Billions of dollars a year are at stake as California’s recent drought, its sharp increase in dead trees and its changing climate combine to create massive wildfires every year. PG&E has raised the prospect of bankruptcy if it’s forced to continue paying for wildfire damages under the current system.

So PG&E has run millions of dollars of TV and radio ads intended to boost its public image. In addition, utilities are backing a coalition that includes utility workers’ unions that are running TV ads asking lawmakers to address wildfire liability laws. It and the other investor-owned utilities — Southern California Edison and San Diego Gas & Electric’s parent company, Sempra Energy — also spent millions of dollars on lobbyists.

Opponents include insurers, trial lawyers, cities, counties and ratepayer groups — as well as the agriculture, manufacturing and oil industries.

PG&E has been losing key support both inside the state Capitol and outside in recent days.

“We believe it is in the best interest of the public for the Legislature to defer discussion of inverse condemnation to a later time,” Senate Republican Leader Pat Bates (R-Laguna Niguel) and GOP caucus chair Jim Nielsen (R-Tehama) said in a statement Tuesday afternoon, suggesting lawmakers should instead focus on more immediate goals such as wildfire risk mitigation and improving the safety of the electrical grid.

“We stand ready to negotiate” with the insurance industry and local governments “to try and reach some agreement that will protect our customers from the harsh reality of further direct cost increases,” SDG&E lobbyist Eugene “Mitch” Mitchell wrote to the chairs of a joint Senate-Assembly conference committee last week. The letter was widely seen as an effort to put some distance between SDG&E and PG&E.

Inverse condemnation is based on the tenet that, because utilities are allowed to build and place equipment wherever they see fit — even if they need to seize property from a private landowner for public use through eminent domain — they must also take responsibility for damages.

If a utility is found to have been negligent, its shareholders must foot the bill. Otherwise, it can pass the costs on to its ratepayers.

Gov. Jerry Brown released a proposal last month that sided with the utilities. He wants to require a court to weigh in as to whether a utility’s actions were reasonable and to “to balance the public benefit of the electrical infrastructure with the harm caused to private property.”

It would also require the court to take into account a utility’s “proportionate fault” in causing a fire. Currently, because utilities must pay even if not at fault, they bear the entire liability burden whenever its equipment was involved in a fire’s cause.

PG&E said even that proposal — labeled by opponents as a “utility bailout” — did not go far enough.