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PG&E wants break from obligation to pay for wildfire damages

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PG&E, facing responsibility for billions of dollars in 2017 wildfire damages, will renew a push next year to change California’s stringent legal standard of holding power companies liable for losses from fires caused by their equipment.

Geisha Williams, PG&E’s CEO, said Monday in a livestreamed quarterly earnings report the state’s liability policy is “flawed and it needs to be addressed,” repeating a contention she had made previously when state lawmakers considered a comprehensive wildfire response bill.

That bill, signed into law by Gov. Jerry Brown in September, is “a constructive initial step,” Williams said.

The law did give PG&E precedent-setting relief, allowing it for the first time to tap ratepayers for a portion of last year’s wildfire costs the embattled utility anticipates could reach $17 billion. The California Public Utilities Commission was ordered to apply a financial “stress test” determining the specific amount PG&E can pay without harming ratepayers or affecting power service. PG&E can then recoup any additional amount through sales of state-sponsored bonds, which will be repaid by the utility’s customers through charges on their monthly bills.

The average residential customer would pay about $5 more a year for every billion dollars in financing over the life of the bonds, PG&E said.

The stakes are high for the state’s largest utility since Cal Fire determined PG&E equipment caused 17 major wildfires across Northern California in October 2017. The agency has not yet released a report on the historic Tubbs fire, the most destructive wildfire in state history which destroyed about 5,300 homes and caused nearly $8 billion of insured property damage in Sonoma County.

State Sen. Bill Dodd, a Napa Democrat who co-chaired the wildfire legislation committee, was unimpressed by Williams’ intent to renew the liability debate and try to limit the utility’s risk.

“PG&E needs to be focused on improving the way it operates and meeting its duties under current law, especially newly required wildfire mitigation plans,” Dodd said Monday in an email.

The governor backed PG&E’s bid for liability relief in July, as lawmakers began their deliberations with wildfires blazing throughout the state and with PG&E spending nearly $1.7 million lobbying state officials.

The bill the governor signed into law two months ago did not change the state doctrine called inverse condemnation that holds electric utilities responsible for any damage caused by their equipment, even if they have done nothing wrong. Unless changed, that legal standard would remain in effect for future wildfires.

“We will continue our focus on reforming inverse condemnation,” said Williams, PG&E’s top executive. “... It remains our firm view that his must be resolved through legislative reform or legal challenges.”

Dodd countered that “the courts and the Legislature declined to change inverse condemnation this year, and I don’t see why that would be different next year.”

Patrick McCallum, head of a coalition called Up from the Ashes that lobbied for the wildfire bill, said there was scant support for PG&E among lawmakers in the waning weeks of the legislative session that ended Aug. 31.

“We’ll be completely prepared to beat back” PG&E’s new initiative, he said.

Williams’ statements Monday “makes me think they (PG&E) must be worried about the Tubbs report,” said McCallum, whose Fountaingrove home was destroyed by the Tubbs fire.

Michael Wara, a lawyer and Stanford University scholar focused on climate and energy policy, said he was not surprised by Williams’ declaration the utility will continue to pursue liability reform, given that her foremost obligation is to PG&E stockholders.

Credit-rating agencies and institutional shareholders have asserted California’s unique and sweeping version of inverse condemnation is “creating an unacceptable level of risk,” said Wara, who was called as a witness at the first hearing of the wildfire legislation committee.

Investors are already worried that “if the wind picks up tonight will my (PG&E) stock be worth anything in the morning,” he said.

It’s hard to predict the legislative reception PG&E will get next year in Sacramento with a new governor in office, Wara said.

The presumptive California voters’ gubernatorial choice, Democrat Gavin Newsom, the current lieutenant governor, “hasn’t stepped into these issues in a substantive way,” Wara said.

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