As California burns, governor decides whether legislature’s utility liability solution is good enough

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A plan to reduce both the risk of catastrophic wildfires happening and the risk that such fires will bankrupt privately owned electric utilities is on California governor Jerry Brown’s desk. He has to decide if the deal reached by legislative leaders as the clock ran out on this year’s session is good enough.

Senate bill 901 would, among other things, allows the California Public Utilities Commission more flexibility in deciding whether liability costs can be passed on to electric customers. Under a principle in California law known as strict liability, if a utility is partially – even slightly – at fault, then it’s responsible for paying for the full cost of wildfire damage. The bill also includes measures to reduce woodland fuel loads and increase fire prevention efforts.

The original idea was to change the strict liability doctrine and figure out some way of spreading liability for wildfire damages amongst all those responsible. Despite nearly two months of negotiations the various sides – electric companies liked the idea, insurers didn’t, for example – couldn’t come to an agreement. So the legislative sausage machine ground out the current compromise that leaves it up to the CPUC to decide how the tab will be split between an electric company’s shareholders and ratepayers.

It’s also an issue for telecoms companies, particularly the incumbent telephone companies – large and small – that serve rural California. They also benefit from access to utility pole routes and bear the same kind of responsibility that goes along with it. The big difference is that the major incumbents – particularly AT&T and Frontier – are unregulated. It’s up to them to decide for themselves whether to cut dividends, raise rates or, in some circumstances, replace wireline infrastructure with wireless facilities, or walk away completely.

In this case, Brown has three viable options. He can accept the compromise and allow the bill to become law, or he can veto it and leave it to the next governor and legislature to solve, or he can veto it and call the legislature back into a special session, until they come up a solution that suits him. He has until the end of September to decide.