San Diego Gas & Electric customers to avoid paying wildfire costs -- for now

CPUC revokes proposal

SAN DIEGO - San Diego Gas & Electric customers will not have to pay for the cost of the 2007 wildfires -- for now.

The California Public Utility Commission was scheduled to vote Thursday on a proposal that would have allowed SDG&E to pass on the billion-dollar cost of the wildfires to its ratepayers.

On Wednesday, CPUC Commissioner Timothy Simon, who initially supported the decision to have SG&E shareholders pay to settle the cases, changed his mind. Several consumer advocate groups called Simon's decision a "bait and switch."

Early Thursday afternoon, however, the proposal was revoked and no clear decision was made.

The proposal could go before the CPUC in the future.

In a news release, the Utility Consumers' Action Network (UCAN) called Thursday's decision "a major victory" and described the possible rate increase as "deception."

Nina Suetake, an attorney with advocacy group The Utility Reform Network (TURN), said, "Fire victims should not be further victimized with higher rates, and the CPUC should require utility companies to put safety first, not give them incentives to cut back on safety measures."

In October 2007, strong winds roared through San Diego County and snapped power lines and utility poles, causing an extensive wildfire.

SDG&E was ruled at fault, and the utility was ordered to pay $400 million to settle numerous wildfire cases.

In response to the CPUC's decision, SDG&E released the following statement:

"The 2007 wildfires were a tragedy for all of us in the community. For those who suffered losses, we are deeply sorry this disaster occurred. As the commissioners pointed out, wind-driven wildfires are an unfortunate fact of life in Southern California, and no utility can fire- or weather-proof its system 100 percent.

California appellate courts have put utilities like SDG&E in an untenable position without some kind of recourse for rate recovery. In a 1999 case involving Southern California Edison, a state appeals court determined that power lines serve a public use, and when those lines ignited a fire that damaged property, the utility that owned the lines was subject to the law of "inverse condemnation." Earlier this year, a ruling by a different California appellate court similarly found a utility subject to inverse condemnation.

Inverse condemnation effectively makes utilities strictly liable for damage caused by their equipment, regardless of fault, even when the utility has complied with all safety requirements. The assumption by courts has been that, like a government, a utility can pass on to its ratepayers the damages paid under inverse condemnation.

In other words, what the courts are telling us is the utility must compensate individual damages - such as those claimed as a result of the 2007 wildfires - with the understanding that those costs will be passed along to all customers, who also share in the benefits of the utility's infrastructure.

As Commissioner Simon noted, SDG&E had $1.1 billion in liability insurance in 2007, but to date, we have paid out approximately $1.9 billion in claims, which includes all the money received in insurance proceeds and third-party recovery. Approximately 600 cases still have not been resolved, and it could be many months before we would know the final payment amounts for these cases.

SDG&E already has taken major steps: to strengthen our system and make it more impervious to high winds; to provide better real-time weather data and its potential impact; and to work together with local fire agencies and first responders to help prepare our communities for emergencies, including wildfires.

We realize the proposed wildfire expense balancing account (WEBA) has been a difficult, complex and emotional issue for many people. The public discussion sometimes has been heated, but it has been thorough. This proceeding has been going on for more than three years. It has included hearings before the commission in which all parties participated, including ratepayer advocates. A public hearing was held this year in San Diego on April 5, and on Nov. 26, Commissioner Sandoval held an extensive briefing that was open to all parties. Due process was very much followed here.

We believe the Commission today reached a reasonable compromise that gives SDG&E the opportunity to continue to make its case for rate recovery, while also allowing a robust reasonableness review by commissioners in the best interest of its customers."


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