California Lawmakers, Utilities, & Legal Experts Reconsider Utility Liability for Wildfires

Michael Picker

In 2017, California was ravaged by a series of wildfires that ultimately killed 42 people, destroyed more than 14,700 homes and 700 businesses, and caused somewhere between $9-15 billion in damages.  Who should pay the bill for massive wildfires? With only one month left in the 2018 legislative session - and fires presently raging again, the California Legislature is seeking to address and alter the model of liability for electric utilities in the “new normal” of the changed climate and higher wildfire risks. To this end, the Legislature held a special Conference Committee on Senate Bill 901, authored by Sen. Bill Dodd of Sonoma, experts also weighed in on KPCC AirTalk with host Libby Denkmann to frame the issue. Below is first an excerpt of the AirTalk episode, featuring Sean Hecht of UCLA Law School’s Emmett Institute on Climate Change and the Environment, Matt Dorsey, spokesperson for the Building Resilient Infrastructure for Tomorrow’s Economy (BRITE) CA Coalition, and Tom Long, legal director of the consumer advocacy group The Utility Reform Network (TURN). Excerpts from the legislative hearing follow, featuring Michael Picker, President of California Public Utilities Commission. 

Libby Denkmann: Governor Brown wants to amend wildfire laws and protect utility companies from carrying so much of the liability burden. As fires get worse and worse, what are the legal protections that Governor Brown wants to add?

Sean Hecht, UCLA Law School: Governor Brown, among many state leaders and stakeholders, recognize that the financial burden of this is very high and risks the solvency of some electric utilities. That can have very harsh consequences for everyone. The current state of the legislation is that it would replace the strict liability regime that we currently have with a new multi-factor assessment. The assessment would look at how bad is the conduct of the utility, what type of measures did the utility take to prevent the fire, and would look to balance the good that the utility does against the harms it causes. That would be the new legal test, so it would make it more challenging for anyone to recover from a utility. There would need a lot more to be proved in order to recover.

In exchange, the utilities will need to change their regime of maintenance and upgrading their infrastructure to reduce fire risk. That would be overseen by the Public Utilities Commission, and there would be penalties for not complying with it.

Libby Denkmann: Help us understand how the issue of liability is decided with wildfires.

Sean Hecht: First, typically Cal Fire does an investigation over who is responsible for causing the fire. There are also insurance company investigations, but Cal Fire drives the conversation. Once that responsibility is assessed, it sets in motion a number of different legal disputes about how much needs to be paid. Multiple parties can be responsible for fire damage. Utilities are partially responsible in many cases because there are so many power lines, and many of them are so close to trees. Maintenance of those power lines in relation to the trees is not as good as you might hope. There are fires that are not caused by utilities at all, but many of the 2017 fires have been found to be caused, or partially caused, by utilities.

Libby Denkmann: What happens if a utility is not found negligent? What happens to their ability to pass on costs to consumers and other entities?

Sean Hecht: The CPUC takes this question case-by-case, and in previous proceedings has determined that utilities may not pass on those costs to their customers. That is irrespective of the negligence. One of the features of California law is that utilities are held responsible regardless. That is because they are seen as the entity most capable of responding to the problem. They maintain the power lines and the vegetation within a certain area. State courts have determined that the liability falls with the utilities, who then presumably will have incentives to do a better job.

Libby Denkmann: Matt Dorsey, PG&E is one of the members of the BRITE coalition. What are PG&E’s concerns as wildfires worsen?

Matt Dorsey, BRITE Coalition: BRITE is a coalition that represents more than a thousand companies that include labor unions and community organizations. The threat goes beyond just utilities. The level of uncertainty of inverse condemnation posed a threat to the stability of our grid in California. It discourages investment at a time where we need it. The climate is changing and our energy infrastructure needs to change with it. Laws also need to change. If you were to pick up an analysis by Moody’s or Standard and Poor’s of any energy company in California, you will see an indictment of the company. We need to invest in our utilities at this time.

Libby Denkmann: Although homeowners and ratepayers do not want to pay more, are people seeing the risks of utility insolvency?

Tom Long, The Utility Reform Network: For 45 years, TURN has been advocating for cost-effective, reliable energy. We are really struggling because although California’s economy is strong, we have more customers than ever that are struggling to keep the power on. We have disconnection rates in Southern California as high as 33%, which means that a third of people are struggling to keep on their electric service. They cannot afford to pay more for wildfire liability.

What concerns us about the utilities’ position is not necessarily who pays when utilities are not negligent, is it who pays where the utilities are negligent. What is troubling us is that it is good that the current law requires utilities and their shareholders to bear the costs of mismanagement when utilities are negligent.

The utilities are working hard in Sacramento, via SB 1088, to change that law and ease that liability standard so that they can pass costs on to their struggling customers. Even if they have mismanaged their operations, they want to be able to pass on the costs. They want a bailout from their customers when they have messed up their operations.

Below is an excerpt of CPUC President Michael Picker’s testimony at the Legislative hearing in Sacramento this past Wednesday:

Michael Picker, President of California Public Utilities Commission: These are always difficult conversations around safety. I take everything with extreme gravity—the fact that lives have been lost, property damage, and damage to the environment—these issues keep me up late at night. Fires are not something I thought I would deal with when first coming to the Public Utilities Commission. It is obvious that they are becoming a bigger and more dramatic issue here in the state of California.

2018 has already set a record pace for new wildfires and the conditions remain prime for more. We appear to have a never-ending wildfire season in much of the west, caused by drought, dry soil, high winds, and other extreme climate events that have not been the meteorological record in the past. They continue to endanger the state.

The CPUC has taken a stronger role in vegetation management and we continue to work on wildfire prevention. We have put forward consistent rules across the state for de-energizing distribution before and during windstorms. Additionally, we are going to require that when a fire occurs, utilities respond quickly and responsibly. That response includes water and telecommunications, to make that services are available. We are also going to require that consumer protections be in place. We are about to adopt those measures in a proposed decision. The proposed decision is now out for public comment.

Under existing law, we are tasked with reviewing wildfire prevention plans submitted by the utilities. We are also working much more closely with other state agencies. While under the state Constitution we are deemed an independent agency, it just does not work unless we work with the other agencies in the same fields. So we have agreements with the Office of Emergency Services and Cal Fire. One of the primary focuses of our work with Cal Fire has been the effort to target stringent tree and vegetation management, which requires transforming earlier state fire maps and modeling general fire hazards into a state-of-the-art model that focuses on ignition risk due to utility infrastructure, drought, and extreme fire/wind events.

Beyond that, we think that it is very important to develop a single database of the 4.2 million wooden poles that carry critical infrastructure. We need to know who owns them, their conditions, and what is attached to them. It is very important to know what else is attached to these poles, such as telecommunication technology, in the case of wind events—as every piece of technology attached to a pole acts like a sail and can make them susceptible to overtopping and breakage. How a pole is loaded with weight also impacts the potential for failures in public safety.

We are also refining new rules for enforcement, which have been lacking with telecom equipment that is attached. The upgrading and upkeep has not kept up, and they have not been replaced in a timely fashion. When an electric utility places a pole, the telecommunications equipment is often dangling or just attached with ropes. That is a hazard.

More and more people are moving into areas of elevated and severe fire risks, what we call the urban-wildland interface. In the north part of the state, it is frequently the Sierra and Siskiyou forests, but in Southern California it is frequently chaparral. These landscapes have different characteristics and present different types of challenges. We are not fire scientists or botanists. We are economic regulators. That is why I highlighted our growing relationship with Cal Fire, because of their knowledge of fire behavior and scientists. One thing we have learned from them is the size of the fire risk area has grown dramatically. The old interim fire map covered about 31,000 square miles of California. The new map more than doubles that to 70,000 square miles. That’s 44% percent of California’s landmass. The new map also includes tree mortality high hazard zones, which encompass about 9 million acres and 129 million trees that have died due to drought and bark beetles. That is principally in the Sierra and Siskiyou forests, but we also have problems of advancing temperatures impacting other forests.

When people move further out from dense, urban concentrations, their needs and demands for electric and telecommunication infrastructure continue. We do not tell them to move there. We tell the utilities that they have an obligation to provide them with that infrastructure, which puts more strain on our resources such as fire agencies and utility providers. We currently require utilities to connect virtually every home, every building, and every business in these growing fire risk areas. There are about 1.4 million housing units within these fire threat zones, and about 1 million wooden poles and 200,000 miles of overhead electric distribution lines crossing through and spanning fire hazard zones. This is just to serve these growing populations.

We need real strong central management of the grid, more vegetation management, and more detailed wildfire maps. We need to continue wildfire mitigation plans, ensure that utilities are implementing the plans, and updating the safety culture of our utilities. This is a challenge for us. We started to audit one utility—top-to-bottom—to begin to understand how everyone is conscious and active on these issues. We wanted to know about tactics, strategies, and who they hold accountable. We are also interested in working with other agencies to establish best practices for zoning and building codes. I also mention in a concurrence in a CPUC wildfire decision that we need to refine the legal framework for wildfire liability to take account of these changes.

Managing and operating the grid cannot be parceled out easily. Just like the interstate highway system, the wires and poles need to have consistent management. The architecture of the grid has to be designed so power goes where it is supposed to go. The role of the utility is not to buy contracts from independent generators and then wield the power. It is to provide a reliable and safe delivery service on a very complex machine. People see wires and poles, but the system is very dynamic and the network is not easy to provide.

I cannot offer you false assurances. While our new fire rules are the toughest in the country, they will also be expensive to implement. We probably could have gone further, but our ratepayer advocates reminded us that there is a cost to safety. They opposed the new fire and vegetation management programs. We need to constantly evaluate those costs and ensure that the rates are just and reasonable. But, just because we have a plan does not let the utilities off the hook. They ultimately have an obligation to operate their systems safely and based on the standards.

We have gotten better in adopting new standards. We have adapted to changing and unexpected conditions. The new vegetation maps will require, in part, cutting back vegetation in certain parts of the state. Not everywhere, but places that we have currently identified. My suspicion is that with advancing temperatures, ongoing droughts, and continued movements of populations to fire hazard areas, we will continue to adapt and update these maps. They are incredibly granular. We are going to be constantly working on advancing past practices.

People need to know that these changes to the climate causing more ferocious extreme weather events will mean that there will be risks no matter how hard we work. As Governor Brown said in his State of the State, “We cannot fight nature. We must learn how to get along with her.”

“We cannot fight nature. We must learn how to get along with her.” - Governor Brown