State lawmakers tackle question of who pays for wildfires

Ten months after wildfires ravaged the North Bay, a high-stakes political tug of war is under way in Sacramento, where the governor, state lawmakers, utilities, local government officials and fire survivors are battling over who pays for at least $10 billion in damages.

As Santa Rosa and other fire-stricken communities struggle to rebuild, PG&E is lobbying hard for a limit to the financial liability of California electric utilities in the destructive wildfires expected to come as climate change exposes the state to a combustible “new normal.”

A 10-member bipartisan conference committee - including Sen. Bill Dodd of Napa and Assemblyman Jim Wood of Santa Rosa, both Democrats - was formed earlier this month to deal with a host of issues related to fire preparedness and response, many of them commonsense, such as forest management practices and emergency response systems.

But the conflict is coming from a PG&E-backed proposal to revise an obscure legal doctrine, called inverse condemnation, that requires utilities to pay for wildfire damage to private property even when they are not deemed negligent.

Geisha Williams, the utility giant’s CEO and president, has called it “simply bad public policy” and her company has spent $2.2 million on lobbying lawmakers in general during the 2017-18 legislative session.

While the Legislature is on recess, the conference committee will hold its first in a series of public hearings Wednesday at the Capitol, and PG&E will have an apparent ally in the lead-off witness.

Michael Wara, a lawyer and Stanford University scholar focused on climate and energy policy, is the lone witness on the subject of “Wildfire, Utilities and Climate Change.”

Wara did not respond to a request for comment Friday, but he was quoted in June as saying utilities have a good case for policy change. “The current legal regime, I believe, is unsustainable,” he said in Stateline, an initiative of The Pew Charitable Trusts.

Under inverse condemnation, PG&E could be at risk of bankruptcy from the next destructive wildfire.

“That’s a huge risk for their investors,” he said. “That’s like a coin toss with your money.”

Wara is a senior research fellow at the Steyer-Taylor Center for Energy Policy and Finance at Stanford.

Brad Sherwood, whose Larkfield home was destroyed by the Tubbs fire - one of the nearly 5,300 homes lost in Sonoma County - is adamantly opposed to a policy change, even if it is not retroactive, as state officials have promised.

“Now is not the time to let the utilities off the hook,” said Sherwood, who works as a spokesman for the Sonoma County Water Agency. “We know we have to be the voice for future wildfire survivors. They need to have every tool available to them to rebuild.”

The stakes are high for PG&E, which has said it has about $840 million in insurance coverage and expects to be held liable for at least $2.5 million in fire damages and possibly much more.

Compounding the utility’s predicament, Cal Fire has determined that PG&E power equipment was responsible for causing 16 major fires across Northern California in October and failed, in 11 blazes, to keep tree limbs clear from its equipment.

Meanwhile, the committee convened by Gov. Jerry Brown and top state lawmakers has until Aug. 31 to come up with a wildfire response bill that will be embodied in SB 901, a measure Dodd introduced in January.

One sentence in the five-page bill says “current legal standards should be refined” to allow courts to determine the liability of utilities that have “acted reasonably” in maintaining their transmission systems.

Unless Brown calls a special legislative session, the August deadline would be his last chance to address the wildfire liability issue.

The California State Association of Counties, which backed Sherwood at a press conference 11 days ago in front of his demolished home site, will send representatives to Wednesday’s hearing, including Napa County Supervisor Diane Dillon.

“There needs to be a longer, more thorough discussion” of the complex issues involving liability, said Cara Martinson, CSAC’s senior legislative representative, objecting to the short time frame for an overhaul of longstanding policy.

Liability law now “provides a very strong incentive” for utilities to invest in protection of their equipment, she said.

And even with inverse condemnation in effect, utilities can petition the Public Utilities Commission for permission to pass some fire costs onto ratepayers “if they did nothing wrong,” Martinson said.

Wood, a committee member and coauthor of SB 901, said the bill is a vehicle for whatever policy changes the committee approves and will “look dramatically different than it does now.”

“There’s a lot at stake for a lot of people,” he said, acknowledging that lawmakers will be acting within a “short time frame.”

Wood said he is awaiting Cal Fire’s report on the Tubbs fire, the most destructive of the October blazes, to inform his policy preferences.

Should PG&E be deemed negligent, Wood said, “I cannot conceive of myself supporting something that absolves them of that negligence.”

Sen. Mike McGuire, another coauthor, said he joined in a unanimous Senate vote in May when SB 901 only required electric utilities to adopt wildfire mitigation plans. He is dropping his coauthorship pending the final product from the committee, he said Friday.

“I will never support legislation that will cap liability on North Bay fire survivors,” he said.

Dodd’s office was unable to produce a statement from the senator on Friday.

In a press release issued Thursday, Dodd said the state needs a “holistic approach to improving the electric system that prevents future disasters while sparing ratepayers from shouldering unfair costs.”

PG&E wants to see the inverse condemnation doctrine amended to include a “reasonableness standard,” relieving the company of liability for fire damages if it has acted reasonably, said Lynsey Paulo, a Sacramento-based PG&E spokeswoman.

“California’s existing laws were not made for the new normal of these wildfires,” she said.

Without policy changes, utilities will face “massive and uninsurable risk even when they have followed all established safety and compliance rules,” Paulo said.

Even with reform, she said, “anyone harmed by a wildfire would still have the ability to pursue a negligence claim against the utility.”

You can reach Staff Writer Guy Kovner at 707-521-5457 or guy.kovner@pressdemocrat.com. On Twitter @guykovner.