California Wildfire Panel Urges Utility Liability, Cost Recovery Relief

Eliminating California’s strict liability for utilities and streamlining cost recovery for victims and utilities were recommended Wednesday in a preliminary report by the state’s wildfire commission.

final report is due July 1 to the commission, aka the Commission on Catastrophic Wildfire Cost and Recovery. Gov. Gavin Newsom and elected leaders have committed to developing a legislative remedy to provide “certainty and accountability” by addressing the state’s inverse condemnation and the cost recovery conundrum under so-called “prudent manager” standards.

While recognizing the issue of the utilities’ financial viability, they referred to bankruptcy-bound Pacific Gas and Electric Co. (PG&E) as a “bad actor” that must be “held accountable.”

PG&E spokesperson James Noonan said the San Francisco-based combination utility is reviewing the commission’s draft report, calling it “important work” and said PG&E shares the commission’s goal of developing “workable policy solutions.”

The strike force is recommending that the legislature “immediately revise” the California Public Utility Commission’s “prudent manager standard” and the current application of the inverse condemnation standard. A Wildfire Victims Fund also was recommended.

A coalition of public safety, emergency responders, business and labor organizations, Action for Wildfire Resiliency, supported the commission draft and the need for a new approach by the state. It urged the legislature to “acknowledge the crisis and to begin immediately translating report recommendations into state policy.”

Assemblymember Chris Holden, who last year helped pass the wildfire law, Senate Bill (SB) 901, said that he will work closely with the legislature’s leadership to “seek an equitable resolution of the prudent manager standard, bridge financing, and allowing cost recovery for electricity providers who act responsibly.”

The wildfire commission was created under SB 901, mandating recommendations to the governor and lawmakers. Holden, who chairs the Utilities and Energy Committee, has scheduled a hearing for Wednesday (June 5) on the draft report.

Meanwhile, the CPUC on Thursday approved various utility wildfire mitigation plans and communications/notification requirements for the investor-owned utilities. The five-member commission said the catastrophic wildfire liability situation is “severe” with “many different contributors,” and underscores the need to “provide cost recovery for those with serious damages without bankrupting utilities.”

The CPUC added a mandate for utilities to work closely with the state Office of Emergency Services to integrate fire preparedness programs with government jurisdictions. CPUC also is requiring utilities to improve customer education and notification on what to do to prepare for power grid shut offs.

“While these steps will both make communities safer and help prepare for the impacts of planned outages, many outages will still occur due to unforeseen damage to electric lines from a variety of sources,” said CPUC President Michael Picker.

Separately, a federal bankruptcy judge in San Francisco has sided with PG&E in establishing creditor panels in its reorganization. PG&E’s Noonan said the Chapter 11 process is designed to support an “orderly, fair and expeditious resolution of potential liabilities resulting from the wildfires,” and customers are well represented in the federal legal process by the CPUC.

The state’s Utility Reform Network disagreed. Executive Director  Mark Toney claimed PG&E was using the Chapter 11 process to “circumvent laws that protect consumers from paying billions of dollars in wildfire damages” because of utility negligence.