SDG&E takes its $379M wildfires case to appeals court

San Diego Union-Tribune (CA)

Aug. 17--San Diego Gas & Electric is not giving up its fight to pass onto ratepayers $379 million in costs related to the deadly wildfires that scorched the San Diego area 11 years ago.

The utility has filed an appeal with the state's Fourth Appellate District in San Diego, calling on the court to review a decision by the California Public Utilities Commission that rejected SDG&E's request last November. The commission also denied the utility a rehearing on the case last month.

SDG&E's attorneys said last year's decision "will have severe adverse practical consequences for privately owned utilities" in California and, by extension, threatens to have "ripple effects throughout the state's economy."

The CPUC has put utilities in a "whipsaw," the 84-page filing argued. SDG&E wants the appeals court to vacate the commission's 5-0 vote and "rule that SDG&E is entitled to recover payments" from the 2007 San Diego wildfires.

San Diego attorney Michael Aguirre, who represented ratepayer advocate Ruth Henricks on behalf of utility customers in a lawsuit dealing with the 2007 fires and a sharp critic of SDG&E, doubted the appeals court would take the case.

"They defer to the agency (in this case the CPUC) unless the agency did something gravely wrong," Aguirre said. "SDG&E received very fair treatment by the CPUC and there's really no basis for this. This is really an act of desperation."

As for what happens next, Aguirre said parties to the case and the CPUC will respond to SDG&E's filing and eventually the appeals court will decide whether to hear the case or not.

Terrie Prosper, director of the News and Outreach Office at the CPUC, said in an email to the Union-Tribune the commission will "respond in due course" to SDGE's court filing.

What happened in 2007

SDG&E spent $2.4 billion to resolve more than 2,000 lawsuits related to the Witch, Guejito and Rice 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.

"The CPUC committed numerous legal errors including a failure to follow its own legal standards for assessing the reasonableness and prudence of utility management decisions and the application of a perfection standard that depends on hindsight bias," said SDGE spokeswoman Allison Torres in part of a statement.

Click here to read the entire 84-page appeal

But the CPUC saw it differently.

Acting on a proposed decision reached by a CPUC administrative law judge, all five commissioners turned down SDG&E's request, saying the utility failed to meet the commission's "prudent manager" standard.

The CPUC concluded the winds in October 2007 were not unprecedented and SDG&E should have foreseen the impact of the gusts that spread the wildfires that destroyed more than 1,300 homes, killed two people, injured 40 firefighters and forced more than 10,000 to seek shelter at Qualcomm Stadium.

The SDG&E filing argued there is "substantial evidence" the power company acted responsibly and the CPUC's application of the prudent manager standard was "legally erroneous."

The utility pointed out that 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."

A large part of SDG&E's case turns on the legal doctrine known as "inverse condemnation." As interpreted by courts in California, inverse condemnation holds that utilities can be held liable for damages related to a wildfire ignited by a power company's equipment -- such as a downed power line -- even if the utility followed accepted safety procedures.

Virtually no other state applies inverse condemnation the way California does and utilities say such an interpretation, combined with the requirement that power companies provide electricity in areas at risk to wildfires, may lead them to bankruptcy.

Defenders of inverse condemnation say the way it's applied in California gives power companies extra incentive to reduce wildfire risks in their respective service territories and take extra precautions their equipment and procedures don't spark conflagrations.

Although CPUC president Michael Picker and commissioner Martha Guzman Aceves joined in the 5-0 vote against SDG&E last November, they expressed concern about inverse condemnation and said the Legislature and/or the courts should address it.

Debate in Sacramento

The SDG&E appeal comes as wildfires rip through the Golden State. Five of the 20 most destructive fires recorded in California occurred in 2017 and this year's Mendocino Complex Fire was recently pronounced the largest wildfire in state history

Lawmakers in the final two weeks of the legislative session in Sacramento are considering laws dealing with wildfires and Gov. Jerry Brown has introduced draft legislation that would alter the way inverse condemnation is applied.

Utilities are lobbying for change and according to a report from CALmatters, Pacific Gas & Electric spent $1.1 million between April and June on wildfire legislation.

PG&E and the other investor-owned utility in the state, Southern California Edison, joined SDG&E late last year in its fight to get the CPUC to OK the $379 million request.

Aguirre said he was interested to see if the filing to the appeals court on Aug. 3 came from SDG&E alone -- and not with PG&E and Southern California Edison joining as co-parties.

"The fact that SCE and PG&E did not join in the appeal I think underscores the weakness of the appeal," Aguirre said. "They basically abandoned their case ... I don't think it's a good sign for SDG&E."

However, Edison's director of corporate communications Gloria Quinn said SCE chose not to file on its own in order to avoid petitions being filed in more than one district of the court of appeals.

"We we will be filing an amicus in support of SDG&E's petition," Quinn said in an email.

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