The U.S. Supreme Court said Monday that it will not hear San Diego Gas & Electric’s appeal of a California Supreme Court case that rejected the utility’s request to put ratepayers on the hook for $379 million in costs related to the 2007 wildfires that blazed through San Diego County.
Investigators have faulted SDG&E for the deadly spate of fires. Since those blazes, the utility — a unit of Sempra Energy — has spent about $1.5 billion in ratepayer funds to prevent wildfires in its service territory, including launching a state-of-the-art weather network, installing mountaintop wildfire detection cameras and replacing wooden poles with steel poles.
The utility said it was disappointed by the Supreme Court’s decision. “SDG&E has shown that the fires occurred due to circumstances beyond our control,” it said Monday in a statement. Still, it said, it “remains committed to help strengthen wildfire preparedness and prevention.”
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Former California Public Utilities president Loretta Lynch said SDG&E is now out of legal options.
“It’s been at least two years that they’ve been pursuing this appellate strategy to delay paying for their own negligence,” said Lynch, who is now a board member for the Protect Our Communities Foundation, a San Diego area environmental group. “We’re not talking strict liability here. They were found to be negligent. So of course, they should pay.”
The dispute over the $379 million dates back more than a decade, when SDG&E first applied to recover the money from ratepayers.
But investigations into the causes of the Witch, Guejito and Rice fires — three of the worst wildfires in a devastating firestorm that befell San Diego County in October 2007 — found they were sparked by SDG&E equipment that had not been properly maintained.
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The three fires combined to kill two people, injure 40 firefighters and destroy 1,300 homes.
In the aftermath of the wildfires, investigators determined that SDG&E had not properly trimmed trees and other vegetation growing near its backcountry power lines.
SDG&E spent $2.4 billion to resolve more than 2,000 lawsuits related to the 2007 wildfires but the utility insisted the blazes were ignited by factors it could not control — including extreme Santa Ana winds, a lashing wire owned by Cox Communications that hit an SDG&E power line and a tree limb that fell onto an SDG&E line due to high winds.
The utility had $1.1 billion of liability insurance in place in 2007, which SDG&E officials say was the maximum amount they could obtain.
SDG&E officials have pointed out the Federal Energy Regulatory Commission, which regulates interstate transmission rates, granted SDG&E settlement payments through rates that eventually came to $80 million and found “the record indicates SDG&E behaved as a reasonable, prudent utility in the maintenance of its lines prior to the wildfires.”
The utility held that under the legal principle of inverse condemnation, energy companies like SDG&E are held strictly liable for property damage caused by wildfires, regardless of fault, based on the rationale that these companies can spread the costs through the rates.
SDG&E filed an application to charge customers the $379 million, but the California Public Utilities Commission refused to approve the request. A California appeals court rejected the argument and the state Supreme Court quickly followed.
After the appeals court ruling, SDG&E said Judge Patricia Benke improperly failed to recuse herself from the case because she co-owned a home that was destroyed by the Guejito fire.
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California Supreme Court judges rejected the bias argument as well.
Utility experts say the $379 million will not be picked up by ratepayers because any funding from customers must be approved by the California Public Utilities Commission. Since the commission turned down SDG&E, the money, by default, will be shouldered by shareholders of Sempra Energy, the parent company of SDG&E.
San Diego attorney Michael Aguirre said the U.S. Supreme Court not taking the case bolsters his legal challenge to turn back Assembly Bill 1054, a sweeping wildfire liability bill passed by the California Legislature that creates a $21 billion fund the state’s investor-owned utilities can access if their equipment ignites a fire that leads to significant financial damages.
“We feel you were not able to persuade the Supreme Court (to take the case) and we think you shouldn’t have been able to persuade the Legislature because there is no merit to your argument that you should make utility customers pay, even if you act imprudently,” Aguirre said.
Working on behalf of a Pacific Gas & Electric ratepayer in Central California, Aguirre has filed a lawsuit in federal court, looking to block the legislation signed into law by Gov. Gavin Newsom in July.
Under AB 1054, the state’s big three investor-owned utilities — SDG&E, PG&E and Southern California Edison — must qualify for a first-of-its-kind safety certification issued by the state before tapping the $21 billion fund.
Half of the money in the fund would come from the power companies and half would come from ratepayers by way of extending a bond issued through the state’s Department of Water Resources. The bond was about to expire but the $2.50 monthly surcharge to ratepayers across the state was extended under AB 1054.
The lawsuit claims extending the fee without “just compensation” violates the due process rights of ratepayers under the U.S. Constitution and the higher utility bills violates ratepayers’ Fifth Amendment rights against unlawful government takings.
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The California Attorney General’s office and the California Public Utilities Commission have filed to dismiss the lawsuit. A hearing is scheduled Nov. 14 before U.S. District Court Judge Edward Chen.
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