The California Public Utilities Commission voted to require San Diego Gas & Electric ratepayers to cover SDG&E’s higher fire insurance premiums. The Dec. 16 vote was 3-2. “It’s unusual circumstances,” said commissioner Nancy Ryan, voting to grant the utility’s request. Commissioner John Bohn called the utility’s rationale to increase ratepayer responsibility for its fire insurance a “slippery slope.” The approved decision by commissioner Tim Simon allows SDG&E to recover $29 million in rates after concluding the utility’s insurance premiums after wildfires in 2007 were not within its control, nor part of the normal course of business. That satisfies the rate case mechanism’s requisite criteria--known as the “Z factor.” Insurance premium hikes post 2009-10, under Simon’s proposal, can be recovered without formal hearings via advice letter. That troubled commissioner Ryan, but not enough to vote against the decision. A decision by administrative law judge Maribeth Bushey that would have denied $29 million in recovery via the 2009 General Rate Case was turned down, with the commission preferring Simon’s alternate. Regulators conduct “general rate cases” every three years for the state’s utilities. The formal hearings delve into many line items in utility spending plans until the next rate case is vetted. In San Diego’s case, the general rate case included $4.5 million for liability insurance, but its actual costs were $47 million for 2009, according to SDG&E. In the 20 years the Z factor has been available in general rate cases, the CPUC has approved rate recovery under the factor only once. That was in a telecomm matter dealing with post-retirement benefits other than pensions. Ratepayer advocates protested SDG&E’s rate recovery request for the higher insurance premiums, noting the utility was found partly liable for the 2007 wildfires and could have better used its bargaining power with insurance firms. SDG&E has coverage for wildfire liability with 27 different firms and another 28 for general liability. Its deductible rose from $1 million to $5 million. Deductibles are charged to ratepayers. The fall 2007 blazes caused two deaths, dozens of injuries, the destruction of more than 1,300 homes and burned thousands of acres. Investigations into the fires ultimately blamed SDG&E wires for contributing to the blazes by violating transmission safety regulations.
