Wildfire investigation puts powerful California electric utility on the hot seat

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California state fire authorities concluded that electric power infrastructure owned by Pacific Gas and Electric (PG&E) — the largest electric utility company in the state — caused 12 wildfires in last October. The fires burned at least 245,000 acres in Northern California’s wine country.

Officials from the California Department of Forestry and Fire Protection (Cal Fire) were the lead investigators in the numerous wildfires, including a wildfire that became known as the Atlas Fire in Napa County, California, that burned a total of about 51,600 acres, destroyed 783 structure, and caused six deaths.

Cal Fire determined this fire, one of the most destructive of the Northern California fires, started in two locations: one location where a large tree limb broke and came into contact with a PG&E power line; and a second location where investigators determined a tree fell onto the same line.

Cal Fire’s findings have now been sent to the county district attorneys’ offices for review. The investigation could have huge financial ramifications for PG&E if regulators and the courts determine the company must bear financial responsibility.

PG&E is facing dozens of lawsuits over the Northern California fires that altogether killed 44 people and caused an estimated $10 billion in damages.

“The implications of this for shareholders are not good,” Michael Wara, director of the climate and energy policy program at Stanford University, told Bloomberg. “It appears that PG&E is going to bear some fault here.”

Shares of PG&E Corp., the parent company of Pacific Gas and Electric, have dropped about 4.5 percent to $39.00 per share since Cal Fire released its wildfire investigation results late Friday. The company’s equity value has dropped dramatically over the past seven months. PG&E’s stock price was trading near $70 per share in early October 2017, immediately prior to the start of the ferocious wildfire season.

PG&E said in a statement that it is reviewing Cal Fire’s reports on the wildfires. “Based on the information we have so far, we continue to believe our overall programs met our state’s high standards,” the company said Friday in a news release.

The Northern California fires occurred in October, the month when the state sees its worst wildfires. Elsewhere in the state, wildfires continued into December 2017 and early 2018. Higher temperatures and drier conditions, driven in part by climate change, are lengthening the season when Californians can expect the worst wildfires.

Electric utilities have been citing climate change, not faulty utility practices, as the reason for an increase in wildfires in the state. In some areas of California, the wildfire season is now lasting two months longer due to the dry conditions and the severity of the fires is intensifying. Seven of California’s 10 largest modern wildfires occurred in the last 15 years.

In its statement, PG&E said years of drought in California, extreme heat, and 129 million dead trees have created a “new normal” for the state that “requires comprehensive new solutions.”

“We are committed to advocating with legislative leaders and policymakers across the state on comprehensive legislative solutions for all Californians, as we collectively seek to meet the challenge of climate change, and position the California economy for success,” PG&E said.

The politically powerful utility company also noted that California is one of the only states in the country where the courts have applied inverse condemnation liability in events associated with utility-owned equipment. This means PG&E could be liable for property damages and attorneys’ fees even if the company followed established inspection and safety rules, PG&E said.

California’s courts have held utilities liable regardless of fault by applying “inverse condemnation” — a principle typically applied to governments, not to private entities. Under inverse condemnation, the order of parties is reversed, as compared to the usual procedure in direct condemnation where the government is the plaintiff who sues a defendant to take his or her property.

Inverse condemnation is not limited to the physical taking of property. Rather, it can include a temporary taking such as by flooding and wildfires — the cause of which in some instances can be tied to government. Under an inverse condemnation scenario, the government has failed to pay just compensation for the private property rights that have been taken — whether physically or by disaster events that could have been mitigated.

The landowner has the right to file a suit against the government in order to receive just compensation for the “seized” property. The government can then pass along these costs and risks incurred for the public good onto the taxpayer.

Like a government entity, the same logic has been applied to utilities that have millions of customers — electric utilities can “socialize,” or spread, wildfire costs among their customers in the form of rates.

“Liability regardless of negligence undermines the financial health of the state’s utilities, discourages investment in California, and has the potential to materially impact the ability of utilities to access the capital markets to fund utility operations and California’s bold clean energy vision,” PG&E said Friday.

In its investigation, Cal Fire linked several other destructive Norther California wildfires to PG&E infrastructure. This includes the Redwood fire that killed nine people in Mendocino County, California, burning 36,523 acres and destroying 543 structures. The fire was caused by trees or parts of trees falling onto power lines, Cal Fire concluded.

The Norrborn, Adobe, Patrick, Pythian, and Nuns fires were part of a series of fires that merged in Sonoma and Napa counties, California and resulted in three deaths — these too were tied to PG&E investigators found. A combined total of 56,556 acres were burned and 1,355 structures were destroyed. Four of these fires were caused by trees falling onto PG&E power lines. The fifth fire, the Pythian, was caused by a downed line that came into contact with the ground after PG&E tried to reenergize it.

Investigators also looked at the Pocket Fire, in Sonoma County, which burned a total of 17,357 acres and destroyed six structures. Cal Fire determined the fire was caused by the top of an oak tree breaking and coming into contact with PG&E power lines.

Cal Fire, in a news release issued Friday, said its investigations have been referred to county district attorneys’ offices for review in eight of the 12 fires — Sulphur, Blue, Norrbom, Partrick, Pythian, Adobe, Pocket and Atlas — due to evidence of alleged violations of state law.

For the Redwood Fire, Cal Fire determined that PG&E did not violate state law and did not refer the case to the Mendocino County district attorney. While Cal Fire has determined that vegetation coming into contact with PG&E equipment caused this fire, it does not believe that PG&E failed to maintain their power lines and other equipment to the standards required by law.

Cal Fire also found no evidence that PG&E violated state regulations in the wildfires known as the 37 Fire and the Nuns Fire in Sonoma County and the Cherokee Fire in Butte County, California, even though PG&E power infrastructure was involved.

The deadliest of the Northern California wildfires in 2017, the Tubbs Fire, killed 43 people in Sonoma County. Cal Fire has yet to complete its investigation of that fire.



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Author: Mark Hand

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