A state bill aimed at making big utilities' power equipment cause fewer fires moved a step closer to becoming law Tuesday, although critics say the proposal could shift the cost for utility-sparked fires from investors to ratepayers.
Some of California’s worst fires have been ignited by power lines owned by investor-owned utilities. The companies can be liable for millions or even billions of dollars in damages for lost lives, homes and businesses.
When the utility is found to be negligent -- like failing to replace rotting poles or securing lines -- ratepayers are protected from paying the uninsured costs. That burden falls on shareholders and company profits.
The Utility Infrastructure Safety, Reliability and Accountability Act, SB1088, by Sen. Bill Dodd (D-Napa) would change the long-standing practice of determining negligence through an investigation by fire officials.
How might a new law increase utility bills?
The bill would require the state Office of Emergency Services to set new fire safety criteria for investor-owned utilities to meet. Utilities would have to submit a plan to the California Public Utilities Commission every other year describing how they would make their equipment less likely to start wildfires.
The utilities would be allowed to pass the cost of the safety improvements in their plans directly to ratepayers. Currently, costs for safety improvements are calculated every three years during lengthy rate-paying procedures before the PUC.
Under the bill, utilities that comply with their plan would be deemed by the PUC to have performed in a prudent manner. That finding means the PUC could not find the utility negligent if its equipment caused a fire. And the cost of utility-caused fires in those cases would be passed on to ratepayers.
The bill passed through the Senate Committee on Government Organization Tuesday. It must still clear the Appropriations Committee, the full Senate and Assembly before it can be put before the governor to be signed into law.
Why do consumer advocates oppose the change?
Groups like Consumer Watchdog and The Utility Reform Network oppose the bill. They say if the utilities comply with thier plan, they will have, by definition, met the state’s definition of prudent action. They cannot be found negligent even if their equipment starts a fire.
They also oppose the bill's requirement that the PUC must approve any fire safety plan presented to it by Dec. 31 or the plan is automatically approved. They question whether the kind of plan called for in the bill could truly foresee all the situations in which power equipment could accidentally start a fire.
Who is for this plan and who’s against it?
The California Association of Counties likes it, so do groups of utility workers.
Consumer advocate groups don’t like the provision that lets utilities pass on the safety costs of these fire prevention plans to ratepayers. They say the proper place for that is in the every-three-years rate-setting procedures before the PUC, where the evidence requirements to justify new rates is more rigorous.
They also distrust the requirement that the utilities’ plans to improve fire safety have to be approved by the end of each year or the plan is automatically approved. For a slow-moving agency like the PUC, that’s a tall order.
Would this bill keep fire victims from suing utilities for damages?
No, the bill affects only the ability of the state PUC to find that a utility was prudent or negligent. It does not directly affect individuals who sue an investor-owned utility contending that its equipment started a fire and that the utility was negligent. However, that finding before the PUC that a utility had acted prudently because it followed its fire safety plan might influence a jury in the utility's favor.
Why is this an issue now?
Utilities have been fighting to protect their shareholders from these large damages.
For example, after the 2007 wildfires in San Diego, San Diego Gas and Electric was deemed negligent and liable for a couple hundred million dollars in costs. It’s something the company is still fighting. Also, the costs from gargantuan fires are expected to rise as climate change extends the fire season and makes our region more vulnerable to hotter, more destructive fires.