California’s big utilities breathed easily in the early fall this year, relieved by a new state law that seemed to guarantee they would never go bankrupt over liabilities from fires caused by their equipment.
But that relief lasted only until the Camp, Hill and Woolsey fires flared up spectacularly, destroying the Butte County town of Paradise and some surrounding areas, while many hundreds of homes burned in the Thousand Oaks and Malibu areas of Ventura and Los Angeles counties.
For last summer’s utility bailout bill known as Senate Bill 901 contained what amounted to a doughnut hole noticed by few before it passed. The law ended this year’s fiercest legislative battle on terms long sought by utilities like Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric.
They forgot one thing: Their pet bill covered liabilities from most future fires and the big blazes of 2017, which raged through the wine country, Lake County and Ventura County – but it left out 2018. Oops.
Few noticed the omission until the state’s most destructive fire ever broke out near Paradise in Butte County. It was quickly linked to possible power line problems. Then came huge flames in Southern California, where an electric line connection was also alleged.
But it appears the utilities will soon get more relief. “We think it’s clear anything that would cause the bankruptcy of a major utility would have a negative effect on the ratepayers,” said Democrat Chris Holden of Pasadena, chairman of the state Assembly’s Utilities and Energy Committee. Translation: Some utilities are too big to fail.
Holden, who received more than $51,000 – well over one-fourth of his 2018 campaign funds – from the big utilities now at risk and other power-producing companies, promised in an interview to carry a bill in the new Legislative session filling the SB 901 doughnut hole.
If it could have passed this month, current Gov. Jerry Brown, whose sister Kathleen sits on the board of San Diego Gas & Electric’s parent company, would surely have signed it. But Holden delayed his bill until January, and it’s not so certain what Governor-elect Gavin Newsom might do. Holden and Newsom have talked.
Here’s the rub in the potential fire bailouts for the utilities: If any company can show it is in danger of bankruptcy due to fire damage it caused – negligent or not – its customers would pick up much of the resulting tab.
Like SB 901, Holden’s putative new bill would force the companies to pay all damages not covered by their insurance until the state Public Utilities Commission determines they are close to going broke. At that point, Holden said, the PUC would have the companies issue 20-year bonds for the rest, to be paid back via increased rates. So all utility customers, including any who consciously chose not to live or build businesses in fire-prone areas, most likely will foot most of fire expenses.
No one knows just how broke a company must be for the PUC, which historically favors utilities over their customers, to declare it in danger.
In the Camp Fire alone, potential PG&E liabilities could exceed $15 billion, Holden said. He did not explain why a utility bankruptcy would necessarily harm consumers, when PG&E’s Chapter 11 filing during the energy crunch almost 20 years ago caused no service interruptions.
Nor did he say why, in case of bankruptcy, utility assets like dams and power lines couldn’t be sold to the highest bidders and keep operating, while city- and county-run Community Choice Aggregation utilities move in and provide other services. CCAs are already spreading rapidly around the state, with Republican San Diego Mayor Kevin Faulconer the latest local official to advocate one for his city.
In short, if customers don’t quickly fight the new bailout, they will likely find themselves paying for most damage from the latest fires and all other major ones going forward. Then the sky would be the limit on millions of electric bills.