Thursday, February 21, 2019

Besieged CPUC Denies SDG&E Wildfire Recovery

Commission Under Fire over Safety, Ethics

By Jason Fordney

Utilities are at the epicenter of public battles between the California Public Utilities Commission and its critics over wildfires, public safety and ethics that have major financial implications for companies and ratepayers.

Those controversies surfaced at a Nov. 30 CPUC meeting at which the commission denied San Diego Gas & Electric’s request to recover from ratepayers $379 million in costs related to the 2007 Southern California wildfires. SDG&E quickly vowed to vigorously fight the commission’s unanimous decision.

california puc wildfire

The CPUC denied SDG&E’s request for $379 million in ratepayer cost recovery for the 2007 California wildfires | © RTO Insider

Following recommendations by an administrative law judge, the CPUC said the utility “did not reasonably manage and operate its facilities prior to the 2007 Witch, Guejito and Rice Wildfires,” which killed two people and destroyed homes and property. SDG&E’s $379 million request was separate from other court proceedings, settlements, insurance payments and federal cost recovery regarding the fires.

Commissioner Liane Randolph said the SDG&E case turned on the specific question of equipment maintenance, including faults on a transmission line, a communications wire and vegetation management.

“There is no dispute that each of the fires were caused by SDG&E facilities,” she said. Randolph noted the decision is not a final statement of the doctrine of inverse condemnation, the legal tool that SDG&E leaned on in its claim. The logic is that “the costs of a public improvement benefiting the community should be spread among those benefited rather than allocated to a single member of the community.”

But Randolph said it is appropriate to put the costs on Sempra shareholders, not ratepayers, and the case has nothing to do with the utility’s current management of the system. “The decision is specific to the 2007 incident and the facts of this case,” she said.

california puc wildfire

Rechtschaffen | © RTO Insider

Commissioner Clifford Rechtschaffen added that inverse condemnation “is somewhat of a theoretical issue in this matter.”

“The decision does not hold the utilities to a standard of perfection,” he said. “We can’t apply a standard that provides an incentive for a utility to act imprudently or unreasonably,” adding that would send the wrong signal to the utility.

In a written statement, SDG&E Chief Regulatory Officer Lee Schavrien said: “SDG&E strongly disagrees with today’s decision. The CPUC got it wrong. The 2007 wildfires were a natural disaster fueled by extreme conditions including the worst Santa Ana wind event this region has ever seen, combined with high heat, low humidity and hurricane-force winds as high as 92 mph.”

During its third-quarter earnings call, SDG&E parent Sempra Energy vowed to take legal action if denied the cost recovery. (See SDG&E’s Wildfire Costs Undercut Sempra Profits.) The commission did receive praise from The Utility Reform Network and the California Office of Ratepayer Advocates for denying the cost recovery.

During the meeting, commissioners also discussed the increased risk of fires attributed to climate change in California. PUC President Michael Picker noted that areas of elevated or extreme fire hazard are growing in California, to almost 42% of the state, and more people are moving into those areas with higher wind and lightning.

“This is become an increasingly complex area for us,” Picker said, adding that the decision “may or may not” set a precedent for future cases.

As the battle over the 2007 fires continues, the CPUC is preparing to evaluate a similar situation for Pacific Gas and Electric regarding the particularly destructive fires that ravaged California’s wine country this summer, from which the death toll rose to 44 this week. The cause of the fires is still under investigation. (See Wildfires Color California PUC Utility Decisions.)

Embroiled in Controversy

The CPUC issued the ruling amid a swirl of legal battles, regulatory proceedings and public accusations that focuses heavily on the tenure of former President Michael Peevey, who resigned from the commission in January 2015 and has been under investigation by the state’s attorney general for engaging in back-channel discussions with Southern California Edison over the financial terms of the San Onofre nuclear plant’s closure.

The environment around the current CPUC has been increasingly darkened by years of public allegations of other ethics violations. State lawmakers last week renewed their call for Attorney General Xavier Becerra to file charges regarding improper communication between the PUC and PG&E concerning the 2010 explosion of the company’s gas pipeline in San Bruno. The request came soon after the discovery of old email communications between the PUC and former PG&E consultant and Commissioner Susan P. Kennedy regarding the San Bruno settlement. (See Probe Reveals More CPUC-PG&E Contacts on Pipeline Blast.)

california puc wildfire

Picker (left) and Randolph | © RTO Insider

The situation led to a confrontation at last week’s meeting between Picker and San Diego attorney Michael Aguirre, a frequent CPUC critic who is involved in the San Onofre case.

As Aguirre approached the microphone during the public comment period at the San Francisco hearing, Picker asked him if he was there to apologize for his “rude, abusive and disruptive behavior” at a recent hearing regarding the San Onofre plant. Aguirre ignored Picker and instead spoke of recent wildfire deaths, the San Bruno explosion and the natural gas leak at the Aliso Canyon storage facility near Los Angeles.

Aquirre said the victims of the Tubbs Fire in Napa and Sonoma Counties “are not here to ask why the California Public Utilities Commission did not enforce the safety rules against PG&E that could have saved our lives.” Picker told Aguirre he himself was a party to one of the proceedings and his appearance might violate commission rules.

Commission Response

The commission on Dec. 1 issued a lengthy public statement saying, “The CPUC has cooperated with the attorney general’s office through every step of the investigation as well as with federal investigators whose demands for documents preceded those of the attorney general. Throughout the process, the CPUC has produced more than 1 million documents to the attorney general.”

The CPUC said the agency had fully complied with a search warrant as of December 2016. “The case is in the hands of the attorney general’s office, and the next steps are up to the office,” the commission said.

At its Nov. 30 meeting, the commission also voted to defer consideration of a related $86 million settlement between it, PG&E and other parties over improper ex parte communications in the wake of the San Bruno blast.

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