More people, more fire hazards, more damage costs for utilities, at least for now CPUC says

by Steve Blum • , ,

San Diego Gas and Electric’s shareholders will have to pick up the tab for $379 million of the $2.4 billion worth of damage (and legal fees) caused by a series of wildfires in 2007. Yesterday, the California Public Utilities Commission unanimously approved a draft decision by an administrative law judge that assigned the blame to SDG&E because, as commissioner Carla Peterman put it, SDG&E “failed to meet its burden to prove it was a prudent manager”.

That means SDG&E can’t pass the cost on to ratepayers, via a proposed $1.67 per month add on to bills for six years.

There was some discomfort with the decision, though. Some commissioners believed they were put in a straightjacket by California law and court decisions, and suggested the legislature could, or should, act to give them more discretion. Commission president Michael Picker said that while yesterday’s decision was about a particular set of circumstances, the real problem is much larger…

The number of people who are choosing to live in areas that we now know to be elevated fire hazard or extreme fire hazard is growing. That area is actually growing as we get more information about the impact of climate change. The fuel area has grown from about 31 thousand square miles of California to 77 thousand square miles of California. That’s almost 42% of the state’s landmass. Add to that the fact that as people move into these areas which are growing in terms of the severity of the hazard and we see more and more severe wind storms and lightning storms, happening more frequently here in California, we also know that those people demand and have a right to have both electric and telecommunications as they move into those fire hazard areas. So this is becoming an increasingly complex area for us.

Here, the decision that we have to make is about whether the utility or the ratepayers should be responsible for the financial cost associated with these very specific fires. What we talk about here may or may not have any precedence on any future fire issues that come before us.

This fall’s wildfires were even more destructive and, particularly, have put PG&E in the crosshairs. No causes have been established or blame assigned yet, but there’s a clear possibility that PG&E will take the hit for billions of dollars in damages. Particularly if the same law, logic and court decisions that drove yesterday’s decision are applied.