CLIMATE RISK IN THE ELECTRICITY SECTOR: LEGAL OBLIGATIONS TO ADVANCE CLIMATE RESILIENCE PLANNING BY ELECTRIC UTILITIES.

• Author: Webb, Romany M.

1. INTRODUCTION 579 II. CLIMATE RESILIENCE PLANNING IN THE ELECTRIC UTILITY SECTOR 582 A. The Basics of Climate Resilience Planning 584 B. The Importance of Climate Resilience Planning 592 C. Extent of Climate Resilience Planning in the Electric Utility Sector 594 1. California 599 2. New York 601 III. ADVANCING CLIMATE RESILIENCE PLANNING THROUGH ELECTRIC UTILITY REGULATORY PROCEEDINGS 605 A. Advocating for Climate Resilience Planning Through Rate Case Proceedings 608 1. The Prudence Standard 610 2. The Used and Useful Test 614 3. The Least Cost Principle 616 B. Petitioning the State Utility Commission to Require Climate Resilience Planning 620 IV. ADVANCING CLIMATE RESILIENCE THROUGH TORT LAW CLAIMS IN STATE COURT 624 A. Climate Resilience Claims and Precedent 626 B. Duty of Care 629 1. To Whom Is the Duty of Care Owed? 631 2. What Does the Duty of Care Entail? 633 C. Breach of Duty 637 1. Risk-Utility Analysis 637 2. Multi-Factor Balancing Test 638 3. Industry Custom 639 4. Public Policy Considerations 641 D. Causation 642 1. Cause-in-Fact 642 2. Proximate Cause 643 E. Harm 645 V. INTERPLAY BETWEEN STATE UTILITY COMMISSIONS AND COURTS 646 A. Proper Forum: Primary Jurisdiction and Exhaustion 646 1. Direction on Forum Availability 649 a. Civil Court 650 b. State Utility Commission 651 2. Evaluative Framework for Assessing Forum Availability 653 3. No Rules Emerge from Precedent 656 B. State Utility Commission Findings in "Collateral" Case 657 1. Florida 657 2. Texas 658 3. Pennsylvania 658 4. Massachusetts 659 C. Limitations on Liability 660 VI. CONCLUSION 665 I. INTRODUCTION

   The electric system is significantly affected by weather conditions. (1) High temperatures increase demand for electricity while simultaneously reducing the operating efficiency of thermoelectric generating facilities and the carrying capacity of transmission and distribution lines. (2) Droughts can force the curtailment or shutdown of hydroelectric and other water-dependent generation, as can storms and flooding, which can also damage or destroy transmission and distribution infrastructure. (3) Seeking to reduce these and other risks, electric system operators have designed their infrastructure in the context of historic weather patterns, with the goal of ensuring reliability and quick recovery following extreme weather events. (4) However, with climate change now causing major shifts in historic weather patterns and more frequent and severe extremes, electric system operators must fundamentally rethink their approach.

   The Fourth National Climate Assessment, published in 2018, concluded that "[a]nnual average temperature over the contiguous United States has increased by 1.2[degrees]F (0.7[degrees]C) over the last few decades and by 1.8[degrees]F (1[degrees]C) relative to the beginning of the last century." (5) This temperature increase has led to more frequent and intense heat waves, droughts, storms, and other extremes, as well as environmental changes such as sea level rise, (6) all of which are negatively affecting the electric system.

   The number and severity of weather-related electricity outages have increased in recent years as system operators grapple with multiple compounding climate impacts. (7) One example occurred in Washington state in the summer of 2015, when higher than average temperatures led to a spike in demand at the same time as a wildfire forced the shutdown of a transmission line, which in turn necessitated the curtailment of output from a hydroelectric generating facility. (8) This led to a twenty percent shortfall in electricity supply which cost the local utility--Seattle City Light--approximately $100,000 per day to replace. (9) More recently, what may be the hottest terrestrial temperature ever reliably recorded in California, along with severe wildfires, contributed to a grid operator forced blackout in August 2020. (10)

   As these experiences demonstrate, the consequences of climate change already present a significant physical risk to electricity infrastructure, with that risk expected to increase in coming years as climate change worsens. (11) The Chief Executive Officer of investment giant BlackRock, Larry Fink, recently observed that climate risk is "driving a profound reassessment of risk and asset values." (12) The U.S. Commodity Futures Trading Commission's report, Managing Climate Risk in the U.S. Financial System, (13) similarly found that "[a]wareness is growing across infrastructure sectors, including energy, water,' transportation, and communications, that physical risks do not just impact particular sites and locations, but also shorten the lifecycle of infrastructure and degrade its operational reliability." (14)

   A number of electric utilities have acknowledged climate risk in general terms in their corporate filings with the U.S. Securities and Exchange Commission and other documents. (15) Most electric utilities are, however, yet to integrate climate considerations into system planning, design, operation, and other decisions. (16) Indeed, only a handful of electric utilities have conducted a comprehensive assessment of where and under what conditions their systems are vulnerable to the impacts of climate change, and fewer still have identified and implemented measures to reduce those vulnerabilities. Consistent with industry parlance, in this Article, we refer to the process of assessing vulnerabilities and developing remedial measures as "climate resilience planning."

   This Article argues that electric utilities are legally obligated to plan for climate risks to protect already made investments and proactively improve future investment decisions. We identify two separate legal bases for such an obligation, though others almost certainly exist. The first is found in state public utility law, which requires electric utilities to provide customers with continuous, reliable service at just and reasonable rates--something that will not be possible unless electric utilities plan for future climate impacts. The second arises from tort law principles, under which electric utilities may be held liable for negligence if they breach an owed duty of care, which we argue here extends to failure to plan for reasonably foreseeable climate impacts.

   This Article explores how public utility law and tort law can be used to drive climate resilience planning by electric utilities. We consider the feasibility of each approach and discuss relevant legal considerations, doctrines, and precedents. This Article should not be read, however, to endorse a particular litigation strategy or offer recommendations as to when, where, or how a particular approach should be pursued. The remainder of the Article is structured as follows: Part II defines climate resilience planning and details its use in the electric utility sector. (17) Part III explores opportunities to advance climate resilience planning through state utility commission proceedings. (18) It identifies key statutory and common law requirements imposed by public utility law that authorize, and in some cases even compel, state utility commissions to mandate climate resilience planning by electric utilities. (19) Part IV considers whether and when electric utilities that fail to engage in climate resilience planning can be held liable under tort law in state court. (20) Part V considers the interplay between the two primary forums identified in Parts III and IV, analyzing legal considerations centered upon choice of forum, including doctrines of primary jurisdiction and exhaustion, and related evidentiary issues. (21) Part VI concludes with a summary of our key findings. (22)

2. CLIMATE RESILIENCE PLANNING IN THE ELECTRIC UTILITY SECTOR

   Electric utilities face differing climate risks, partly because of regional differences in the nature and extent of climate-induced weather and environmental changes and, also, partly because of differences in electric utility systems and assets. All electric utilities will, however, be affected by climate change in some way. (23) Across all regions, electric utilities will be faced with higher average and extreme temperatures, changing precipitation patterns, and more intense storms that could force the curtailment or shutdown of generating facilities and lead to widespread transmission and distribution outages. (24)

   The U.S. Department of Energy (DOE) and various other government bodies and private-sector entities (e.g., Moody's) have recommended that electric utilities engage in climate resilience planning to identify vulnerabilities within their systems and develop management options. (25) This Part describes the basic steps involved in climate resilience planning and the data required. We also explain how climate resilience planning differs from traditional electric utility planning processes and the benefits it provides. Finally, we survey recent electric utility climate resilience planning efforts and assess their adequacy. Based on that analysis, we conclude that climate risks to electric utility infrastructure can be identified and incorporated into decision-making using well-established, proven planning processes. We observe instances where those processes have been effectively employed by electric utilities but additionally find that the sector generally has often failed to engage in climate resilience planning despite its feasibility and usefulness. That failure has major implications for electric utility customers who are more likely to experience climate-induced service disruptions due to the utility's failure to prepare and will ultimately bear the costs of recovery, which may be significantly higher than the costs of prevention. (26) Climate-induced electricity service disruptions can also have broader social consequences. For example, where electricity outages affect critical facilities, such as hospitals or water treatment plants, public health and safety may be threatened. (27) Similar threats may...