SDG&E takes $379 million wildfire dispute to California Supreme Court; complains about appeals court judge

Nov. 27--San Diego Gas & Electric is taking its fight to have ratepayers shoulder $379 million in costs related to 2007's deadly wildfires to the California Supreme Court, and the utility says a local appeals court judge who recently ruled against the utility should have recused herself from the case.

Writing for California's 4th District Court of Appeal in San Diego earlier this month, Associate Justice Patricia Benke denied SDG&E a hearing that would have had the appeals court review a decision by the California Public Utilities Commission that in a 5-0 vote rejected the utility's request to pass along the $379 million through rates.

In a 48-page filing before the state's high court, SDG&E attorneys not only argued that the appeals court denial and the commission ruling were incorrect but said Benke should not have taken part in the case because Benke and her husband sued SDG&E over a house lost in the Guejito Fire -- one of the three blazes that ripped through San Diego County in October 2007.

Benke's "failure to recuse was prejudicially unfair and should be reviewed," SDG&E's attorneys wrote.

Benke did not comment to an email from the Union-Tribune sent through the Judicial Council Public Affairs office, but a review of court data showed that Donald and Patricia Benke were among some 50 plaintiffs filing suit in October 2009 against SDG&E, Sempra (the utility's parent company), Cox Enterprises and CoxCom Inc.

According to Benke's brother, J.R. Jacobs, the home in Rancho Bernardo was originally owned by the siblings' father, Joseph Jacobs. After his death, the house was handed to J.R. Jacobs and Benke through the family's trust. Benke never lived in the house, which was destroyed in the Guejito Fire.

Cathal Conneely, spokesman for the judicial council, said justices are prohibited from commenting on pending cases or cases expected to be heard soon.

Conneely said no single justice can rule against a petitioner in case before the Court of Appeal and a majority is required to render a decision.

The SDG&E case that Benke delivered was "read and considered" by Benke, Terry B. O'Rourke and William Dato who came back with a unanimous decision.

"They (SDG&E) should not have attacked the judge," said Michael Aguirre, an attorney who represented ratepayer advocate Ruth Hendricks on behalf of ratepayers in a lawsuit dealing with the 2007 fires. "It's going to backfire on them because there are two other judges that ruled against them and that's all that matters ... That's why we have three-judge panels."

Aguirre said he will file a response to SDG&E's petition to the state Supreme Court.

The bulk of SDG&E's petition, filed Monday, reiterated arguments the utility made before the California Public Utilities Commission, or CPUC. A core issue revolves around the legal doctrine called "inverse condemnation."

If a public improvement leads to an individual suffering losses, the concept of inverse condemnation allows a government entity or publicly owned utility -- such as the Los Angeles Department of Water and Power -- to recoup those costs by raising taxes or increasing rates.

But California's three investor-owned utilities -- SDG&E, Pacific Gas & Electric and Southern California Edison -- do not have the power to raise taxes and must receive approval from the utilities commission to increase rates.

In its decision last year, the utilities commission said inverse condemnation did not apply to SDG&E in the 2007 wildfires. The commission used a "prudent manager" standard in denying the utility's request to recover $379 million through higher rates paid by its customers.

All five commissioners agreed with an administrative law judge who said SDG&E "did not reasonably manage and operate its facilities" leading up to the Witch, Guejito and Rice fires that killed two people, injured 40 firefighters and forced more than 10,000 to seek shelter at Qualcomm Stadium. The three fires combined to destroy more than 1,300 homes.

SDG&E wanted the CPUC to have a rehearing but was turned down in July. It then went to the court of appeals only to have Benke, et al., deny the utility a hearing. Now it will take another bite at the apple by asking the California Supreme Court to take the case.

"California courts have applied inverse condemnation to privately owned public utilities in past (court) decisions on the assumption that the CPUC will permit utilities to spead those costs through rates," SDG&E spokeswoman Allison Torres said in an email.

"However, since the court of appeals has upheld (the) CPUC's decision to deny cost recovery, it has created a conflict with past decisions that deserves clarification."

PG&E and Southern California Edison are closely watching the SDG&E case, especially as lawsuits pile up in the aftermath of the Camp Fire in Butte County that has killed at least 88 and the Woolsey Fire in Los Angeles and Ventura counties that destroyed about 1,500 structures.

The utilities say they risk bankruptcy but others, including April Maurath Sommer, executive director and lead counsel for the Protect Our Communities Foundation, an environmental group based in San Diego County, say the CPUC made the right call.

An attorney, Maurath Sommer called SDG&E's filing with the state Supreme Court a long shot.

"But I guess looking at the bigger context, looking at the huge amount of money that is involved with the utilities being held, appropriately, responsible for creating fire disasters, I think this is a sign of their desperation," she said.

SDG&E spent $2.4 billion to resolve more than 2,000 lawsuits related to the 2007 wildfires but the utility insists the blazes were ignited by factors beyond its control -- including extreme Santa Ana winds, a lashing wire owned by Cox Communications that hit an SDG&E power line and a tree limb that fell onto an SDG&E line due to high winds.

SDG&E officials have pointed out the Federal Energy Regulatory Commission, which regulates interstate transmission rates, granted SDG&E settlement payments through rates that eventually came to $80 million and found "the record indicates SDG&E behaved as a reasonable, prudent utility in the maintenance of its lines prior to the wildfires."

During the most recent legislative session in Sacramento, Gov. Jerry Brown supported changing inverse condemnation and implementing a "reasonableness test" for utilities but those efforts were rebuffed. Instead, a scaled-back bill passed that allows companies to borrow money for 2017 wildfire costs while using money collected from ratepayers to pay back the loan.

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