Electric Utility Wildfire Liability Reform in California
| Date | 01 November 2019 |
| Author |
11-2019 NEWS & ANALYSIS 49 ELR 11003
COMMENT
Electric Utility Wildfire Liability
Reform in California
by Myanna Dellinger
Myanna Dellinger is an Associate Professor of Law at the University of South Dakota School of Law.
As climate change worsens,1 so does the risk of wild-
res.2 is is especially so in already hot, dry areas
such as the western United States.3 Adding to this
problem is the rapid growth of the wildland-urban inter-
fac e (WU I).4 As more and more houses are built in the
WUI, wildres will pose an even greater risk to lives and
homes, they will be harder to ght, a nd let ting natural res
burn will become impossible.5 At the same time, equip-
ment owned by California’s three largest utilities ignited
more than 2,000 res in California in just 3.5 years.6 e
resulting nancial liabilities caused electric power utility
giant Pacic Gas and Electric (PG&E) to le for bank-
ruptcy in 2019, leaving numerous homeowners stranded
with massive losses.
Among other causes, this led to the rapid develop-
ment and passage of Assembly Bill 1054 in California in
late July 2019. Although the bill has been criticized for a
number of reasons, analyzed below, its passage was also a
Hobson’s choice and better t han the status quo. e bill
establishes a $21 billion Wildre Fund to help utilities pay
more quickly for claims from the victims of future cata-
1. Ciara Nugent, Carbon Dioxide Concentration in the Earth’s Atmosphere Has
Hit Levels Unseen for 3 Million Years, T, May 14, 2019, https://time.
com/5588794/carbon-dioxide-earth-climate-change/.
2. Is Global Warming Fueling Increased Wildre Risks?, U C
S, July 24, 2018, https://www.ucsusa.org/global-warming/sci-
ence-and-impacts/impacts/global-warming-and-wildre.html.
3. Id.
4. Volker C. Radelo et al., Rapid Growth of the US Wildland-Urban Interface
Raises Wildre Risk, 115 P. N’ A. S. 3314, 3314 (2018).
5. Anu Kramer et al., Where Wildres Destroy Buildings in the US Relative to the
Wildland-Urban Interface and National Fire Outreach Programs, 27 I’ J.
W F 329, 330 (2018).
6. Taryn Luna, California Utility Equipment Sparked More an 2,000 Fires in
Over ree Years, L.A. T, Jan. 28, 2019, https://www.latimes.com/poli-
tics/la-pol-ca-california-utilities-wildres-regulators-20190128-story.html.
strophic wi ldres.7 Before utilities can participate in the
fund, they must spend a combined $5 billion over three
years to reduce wildre risk s.8
A new safety cert ication process allows pre-approved
utilities to obtain help from a fund separate from those
available to non-approved util ities.9 To qualify for the
fund, utilities must tie executive compensation to measur-
able safety metrics.10 Costs and expenses to be paid out
of the overall fund must be “just and reasonable, after
consideration of the conduct of the utility.”11 e ex ist-
ing strict liability sta ndard remains, but changing t his to
a fault-based standard has been discussed.12 Instead, a new
burden of proof regime was established in relation to certi-
ed utilities.13
is is good and much-needed news in relation to
regulated, quasi-governmental utilities in California that,
although sometimes not taking enough action on wildre
mitigation, are simply a necessity in today’s society, which
is still too dependent on traditional energy sources. How-
ever, there is a cost to be paid for A.B. 1054, as only some
of the money for the fund will be paid by the utilities. e
ratepayers will pay the rest. e costs wi ll be distributed
7. Assemb. B. 1054, ch. 79, §§3288(a)-(b), 3291(a)-(b)(1) (Cal. 2019);
Dale Kasler & Bryan Anderson, Newsom’s Wildre Plan for PG&E, Other
Utilities, Needs Two-irds Vote in Legislature, S B, June 28,
2019, https://www.sacbee.com/news/politics-government/capitol-alert/
article232071582.html; Becca Habegger, Lawmakers Deciding Wildre
Bills’ Fate Accepted $141k From PG&E, ABC10, July 10, 2019, https://
www.abc10.com/article/entertainment/television/programs/connect-the-
dots/lawmakers-deciding-wildre-bills-fate-accepted-141k-from-pge/103-
9f909fdd-44f0-4c12-ab07-277e5d17c1a1.
8. Assemb. B. 1054, ch. 79, §8386.3(e) (Cal. 2019); Kasler & Anderson, supra
note 7; Times Editorial Board, California Is Inexplicably Racing to Pass a
Badly Vetted Wildre Bill, L.A. T, July 10, 2019, https://www.latimes.
com/opinion/editorials/la-ed-wildre-fund-rush-20190710-story.html.
9. Assemb. B. 1054, ch. 79, §§3288(a), 3291 (Cal. 2019); Taryn Luna, Cali-
fornia Senate Approves Newsom Bill to Protect Utilities From Wildre Costs,
L.A. T, July 8, 2019, https://www.latimes.com/politics/la-pol-ca-gavin-
newsom-wildre-damages-plan-20190708-story.html.
10. Luna, supra note 9.
11. Assemb. B. 1054, ch. 79, Legislative Counsel’s Digest p. 2 (Cal. 2019).
12. Times Editorial Board, supra note 8.
13. Assemb. B. 1054, ch. 79, Legislative Counsel’s Digest p. 2 (Cal. 2019) (em-
phasis added).
Author’s Note: is Comment is dedicated to all the reghters who
put their lives at risk to save the lives and property of others under
increasingly challenging circumstances around the world.
Copyright © 2019 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.
49 ELR 11004 ENVIRONMENTAL LAW REPORTER 11-2019
evenly among all ratepayers and thus a lso people in already
disadvantaged situations and neighborhoods. ese people
do not stand to benet from the delivery of electricity to
the numerous people who, with all the available k nowledge
of climate change and the ma ny risks that are involved with
living in the WU I, sti ll choose to move to such areas. is
is an issue of fairness a nd environmental justice.
is Comment argues that end-consumers who live
in the WUI should, to a much greater extent tha n is cur-
rently the case, internalize the full costs of their choices
and actions. In other words, they should be prepared to
pay more for electricity delivery to areas that a re already
at high risk of wildres. It is simply not fair to distribute
that cost across a range of users who do not s tand to benet
from choices made by some in marked ignorance of today’s
climate realities. Such action becomes a n environmental
justice issue where costs are distributed evenly among dis-
advantaged people in low re-risk are as. People who move
to the WUI should expec t to pay for the gre ater risk of res
they willingly and readily accept. In fact, many more soci-
etal actors must star t to face on-the-g round rea lity: climate
change is real, da ngerous, and costly. e costs have to be
internalized in a fair and equitable manner under princi-
ples of environmental justice and other notions of fairness
in law and policymak ing.
Climate change is dead ly.14 It could cost the U.S. econ-
omy hundreds of billions of dollars per year by 2090.15 e
time has come to realize t hat at both the private level and
the utility level. Electric utility companies have passed on
wildre mitigation for too long. It is positive to see that
they will now have to change direction in this and other
respects, but the cost distribution must be fur ther consid-
ered than what is the ca se with A.B. 1054. is will also be
the case in other part s of the nation and the world.
Finally, I argue that more private responsibility should
be expected in the future f rom homeowners who must be
legally required to harden their homes in risk-prone areas,
so they become much more able to withstand res. Cur-
rently, many wildre and climate change policies ex ist,
but on-the-ground reality shows that t he problem is out-
growing the voluntary nature of such policies. More legal
mandates are required. is, however, will also result in an
environmental justice issue for people who may not be able
to aord hardening existing homes. us, some grandfa-
thering-in of certain low-income and other groups might
be warranted in future electric pricing and liability com-
pensation schemes.
e Comment proceeds as follows: Part I presents recent
climate change fact s and impacts by way of background. As
one of the costliest, deadliest, and otherwise problematic
14. David R. Boyd (Special Rapporteur on Human Rights and the Environ-
ment), Statement on the Human Rights Obligations Related to Climate Change,
With a Particular Focus on the Right to Life (2018), https://www.ohchr.org/
Documents/Issues/Environment/FriendsIrishEnvironment25Oct2018.pdf.
15. Dana Nuccitelli, Climate Change Could Cost the U.S. Economy Hundreds of
Billions a Year by 2090, Y C C, Apr. 29, 2019, https://
www.yaleclimateconnections.org/2019/04/climate-change-could-cost-u-s-
economy-billions/.
eects of climate change has proven to be wildres in the
WUI, especia lly in arid areas such as the American South-
west, the background to this pa rticular subarea of climate
change is highlighted. A dichotomy becomes clear: the
WUI is becoming more and more densely populated, but
at the same time, ghting wi ldres in the WUI is becom-
ing a problem beyond the capabilities of local reghting
resources. A series of out-of-control wildres, such as Cali-
fornia’s Camp, Carr, and Mendocino Complex Fires, have
amply demonstrated the severity of the situation and the
new realities for which all of societ y must be prepared. is
problem is not only an American problem; nations such as
Argentina, Austra lia, France, Lebanon, South Africa, and
Spain are also currently examining how best to address
WUI and wi ldre issues.
In addition to mere reghting problems, the time has
come to further develop liability schemes for wildres in
the WUI and elsewhere. Although PG&E is legally liable
for some California res, the question becomes whether
the current legal scheme is appropriate under new climate
change realities. Quite simply, society relies on electric
utilities; neither modern organizational nor private life
can function without these important infrastructure com-
ponents. In California, however, utilities are subject to
“inverse condemnation,” which operates as a strict liabil-
ity regime in the re context.16 In other words, a utility
company must currently pay for damages even if not neg-
ligent. Virtually no other state in the United States al lows
for inverse condemnation with strict liability. e time has
come to discuss the viability of this legal scheme.
Part II briey sets forth the strict liability law governing
electric utilities as it was until July 2019, before moving on
in Part III to analy ze A.B. 1054. Strict liability for utility-
caused wildres rema ined with the passage of A.B. 1054;
however, the bill was groundbreaking in several other
ways. Before it passed, the burden of proof remained on
the utilities to prove that they had acted “prudently” in the
case of a wildre.17 Under A.B. 1054, a new certi cation
process allows utilities to be considered to have been per se
reasonable unless serious doubt is raised otherwise. Only
if serious doubt is raised does the burden of proof shift
to the electrical corporation to dispel the doubt and prove
that its conduct was reasonable. Further, this certi cation
process is tied directly to ch ief exec utive ocer (CEO) per-
formance. e exact legal parameters for and ramicat ions
of this remain to be seen, but it is undoubtedly a promising
development in times of much-needed discussions about
reasonable CEO compensation, especially when corpora-
tions ultimately fail as did PG&E.
Part IV analy zes signicant, modern considerations in
relation to the just development of the law. ese include
whether it is fair to expect all ratepayers to pay for the
16. C K ., U P W R
M D P C, W C
C: T R E U (2018).
17. Dale Kasler & Bryan Anderson, PG&E Says It Could Pay 2017, 2018 Wild-
re Victims. Here’s Why at Needs Legislature’s OK, S B, July
2, 2019, https://www.sacbee.com/news/business/article232196382.html.
Copyright © 2019 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.
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