PG&E a tempting target for California attorneys
The once-venerable Pacific Gas & Electric Company has seen its reputation plummet among the utility’s 16 million electricity and natural gas customers in Northern California. The combination of wildfires and blackouts has resulted in strong public antipathy to the company.
In January, PG&E filed for Chapter 11 bankruptcy while facing an estimated $30 billion in potential liabilities as a result of two dozen or so wildfires since 2016. A move many observers dubbed the first “climate change bankruptcy”. The PG&E stock price which reached an all time high ($71.56) in September 2017 fell to an all time low ($3.80) in October 2019.
As an easy scapegoat, California Governor Gavin Newsom has repeatedly blamed PG&E’s “greed” and “mismanagement” for the fires and blackouts. But California state policy “progressivism” is much more to blame.
California has a so-called inverse condemnation law that holds a utility company strictly liable for all property damages associated with wildfires if their infrastructure is found to be a cause of ignition—whether the utility was negligent or not.
This strict liability regime, practically unique in the country, wasn’t so problematic when wildfires and resulting damage they cause were more manageable. But as climate change produces larger and more frequent mega-fires, the California policy, a provision in its constitution, threatens the financial stability of utilities.
The law makes PG&E a tempting target for plaintiffs’ attorneys. These plaintiffs’ lawyers also argue PG&E should pay punitive damages because it knew its lines posed a public threat and pay victims for emotional damages as well.
California’s increasingly dry and overgrown forests play a role in devastating fires. President Trump blamed California’s fires on “gross mismanagement of the forests.” While Trump’s view was widely derided, California’s Little Hoover Commission, an independent state agency, found “California’s forests are reaching a breaking point.”
Their Commission report made recommendations such as prescribed burning and dedicating more money and jobs toward forest management. It found poor management policies and environmental restrictions on logging having left forests vulnerable to fires.
Former Governor Jerry Brown is criticized for his veto of SB 1463 in 2016, which promoted the clearing of trees dangerously close to power lines. Brown justified his veto by claiming it duplicated existing efforts. SB 1463 had been unanimously approved by the state legislature.
Then there are California’s green energy mandates. In 2006, the legislature required that utilities generate 20% of electric power from renewables such as solar or wind by 2010. Lawmakers have since raised the mandate to 33% by 2020, 60% by 2030, and 100% by 2045. As a result of these requirements, PG&E electric rates are already among the highest in the country—twice as high as in Oregon and Washington– and have increased 40% over the past decade compared to 15% nationwide.
Last year PG&E invested more than $150 million in battery storage and “sustainable technologies”, paid for by a special charge on ratepayers. The California Public Utilities Commission also required PG&E to install 7,500 electric-car charging stations at apartment buildings and workplaces. While PG&E boasts a “chief diversity officer” and keeps specific employment diversity metrics, it hasn’t maintained detailed records on its transmission towers and wires.
This is all part of a “progressive” political strategy to use PG&E to advance a green agenda to redirect capital and ratepayer revenue away from fortifying the grid and tree-trimming. In 2012, PG&E requested a $4.8 billion rate increase over three years earmarked for grid reliability and to replace aging equipment. Only half the request was approved. PG&E operates nearly 40 hydroelectric facilities built before 1950, with many of the associated electric lines and towers just as old.
Is it any wonder that electric equipment is malfunctioning? The most recent “progressive” proposed solution — a state of California takeover of PG&E.
Jim Hartman is an attorney residing in Genoa