The U.S. Supreme Court on Monday said it will not hear San Diego Gas & Electric’s appeal of a California Supreme Court case that turned back the utility’s request to pass along $379 million in costs related to the 2007 wildfires that blazed through San Diego County.
“The petition for a writ of certiorari is denied,” the high court said in regard to the SDG&E request that was part of a long, 78-page list of dispositions of cases from parties from around the country who were asking for their cases to be heard.
SDG&E released a statement Monday saying it was “disappointed in today’s U.S. Supreme Court decision denying our petition … SDG&E has shown that the fires occurred due to circumstances beyond our control, but nevertheless the application to spread the costs through rates was denied.”
The utility went on to say, “Despite this legal outcome, SDG&E remains committed to help strengthen wildfire preparedness and prevention and will continue our collaboration with other regional leaders to protect our customers and help prevent wildfires from devastating the communities we serve.”
SDG&E has spent about $1.5 billion in ratepayer funds since the 2007 fires to prevent wildfires in its service territory, including launching a state-of-the-art weather network, installing mountaintop wildfire detection cameras and replacing wooden poles with steel poles.
The U.S. Supreme Court generally receives more than 7,000 such requests a year and agrees to hear only 100 to 150 of those petitions.
Former California Public Utilities president Loretta Lynch said SDG&E is now out of legal options.
“It’s been at least two years that they’ve been pursuing this appellate strategy to delay paying for their own negligence,” said Lynch, who is now a board member for the Protect Our Communities Foundation, a San Diego area environmental group. “We’re not talking strict liability here. They were found to be negligent. So of course, they should pay.” According to Lynch, the $379 million will have to be paid by SDG&E shareholders.
The dispute over the $379 million dates back more than a decade, when SDG&E first applied to recover the money from ratepayers.
But investigations into the causes of the Witch, Guejito and Rice fires — three of the worst wildfires in a devastating firestorm that befell San Diego County in October 2007 — found they were sparked by SDG&E equipment that had not been properly maintained.
The three fires combined to kill two people, injure 40 firefighters and destroy 1,300 homes.
In the aftermath of the wildfires, investigators determined that SDG&E had not properly trimmed trees and other vegetation growing near its backcountry power lines.
SDG&E spent $2.4 billion to resolve more than 2,000 lawsuits related to the 2007 wildfires but the utility insisted the blazes were ignited by factors it could not control — including extreme Santa Ana winds, a lashing wire owned by Cox Communications that hit an SDG&E power line and a tree limb that fell onto an SDG&E line due to high winds.
The utility had $1.1 billion of liability insurance in place in 2007, which SDG&E officials say was the maximum amount they could obtain.
SDG&E officials have pointed out the Federal Energy Regulatory Commission, which regulates interstate transmission rates, granted SDG&E settlement payments through rates that eventually came to $80 million and found “the record indicates SDG&E behaved as a reasonable, prudent utility in the maintenance of its lines prior to the wildfires.”
The utility held that under the legal principle of inverse condemnation, energy companies such as SDG&E are held strictly liable for property damage caused by wildfires, regardless of fault, based on the rationale that these companies can spread the costs through the rates.
SDG&E filed an application to charge customers the $379 million, but the California Public Utilities Commission refused to approve the request. A California appeals court rejected the argument and the state Supreme Court quickly followed.
After the appeals court ruling, SDG&E said Judge Patricia Benke improperly failed to recuse herself from the case because she co-owned a home that was destroyed by the Guejito fire.
California Supreme Court judges rejected the bias argument as well.
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San Diego attorney Michael Aguirre said the U.S. Supreme Court not taking the case bolsters his legal challenge to turn back Assembly Bill 1054, a sweeping wildfire liability bill passed by the California Legislature that creates a $21 billion fund the state’s investor-owned utilities can access if their equipment ignites a fire that leads to significant financial damages.
“We feel you were not able to persuade the Supreme Court (to take the case) and we think you shouldn’t have been able to persuade the Legislature because there is no merit to your argument that you should make utility customers pay, even if you act imprudently,” Aguirre said.
Working on behalf of a Pacific Gas & Electric ratepayer in Central California, Aguirre has filed a lawsuit in federal court, looking to block the legislation signed into law by Gov. Gavin Newsom in July.
Under AB 1054, the state’s big three investor-owned utilities — SDG&E, PG&E and Southern California Edison — must qualify for a first-of-its-kind safety certification issued by the state before tapping the $21 billion fund.
Half of the money in the fund would come from the power companies and half would come from ratepayers by way of extending a bond issued through the state’s Department of Water Resources. The bond was about to expire but the $2.50 monthly surcharge to ratepayers across the state was extended under AB 1054.
The lawsuit claims extending the fee without “just compensation” violates the due process rights of ratepayers under the U.S. Constitution and the higher utility bills violates ratepayers’ Fifth Amendment rights against unlawful government takings.
The California Attorney General’s office and the California Public Utilities Commission have filed to dismiss the lawsuit. A hearing is scheduled Nov. 14 before U.S. District Court Judge Edward Chen.
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