PG&E Moves to Get Wildfire Lawsuits Dismissed

Pacific Gas & Electric wants a state court to dismiss wildfire liability lawsuits against it on the basis that it cannot, as claimed, spread out the massive cost of last October’s fires in Northern California to all of its ratepayers.

In lawsuits filed last year, plaintiffs argue that PG&E is on the hook for damage and destruction from utility sparked fires under an “inverse condemnation” theory. In a mid-March filing in the Superior Court of San Francisco, the utility argues that the asserted liability claim “is wholly inapplicable” because it is a privately owned utility, not a public entity.

Under California law, according to the utility, “the entire basis for inverse condemnation is to permit loss spreading, [thus] the doctrine is facially inapplicable to private entities such as PG&E who cannot engage in such automatic loss spreading.” It adds that if liability is found under inverse condemnation, and it “exceeds insurable amounts” that aren’t recoverable through the regulatory rate recovery process, there are “grave consequences for the economic health of privately owned utilities such as PG&E, as it may potentially increase the cost of insurance, decrease rates of return and discourage investors in the capital markets.”

PGE also asserts that the legal claim would constitute an illegal taking of its property under the Fifth Amendment of the U. S. Constitution.

The wildfires on Oct. 8 and 9, 2017, were exacerbated by a five-year drought, a huge number of dead and dying trees, and vegetation growth from heavy rains in 2016-17.

In a related case impacting PG&E, the California Public Utilities Commission voted last November to not allow San Diego Gas & Electric to recover $379 million in wildfire recovery costs for the 2007 wildfires sparked by utility equipment because it failed to act as a “prudent manager.” During that meeting, regulators raised concerns about conflicting court rulings on the applicability of inverse condemnation to private utility liability.

The CPUC ruling has been heavily criticized, including because PG&E suspended dividends at the end of last year in the face of potentially huge liability claims. Utility liability for the recent wildfires in Northern and Southern California is a major concern for credit rating agencies and state lawmakers.

Earlier this month, political leaders vowed to act to protect the utilities, including from threatened bankruptcy, because of wildlife liability. Action at the state level includes likely legislation to allow utilities full recovery of the costs of wildfires exacerbated by a changing climate.

A May 18 hearing has been set in the Superior Court on PG&E’s demurrer asserting that plaintiffs have failed to make a valid legal claim against the utility. — Elizabeth McCarthy

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PG&E Moves to Get Wildfire Lawsuits Dismissed

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