Governor Brown Signs SB 901, Addressing Wildfire Cost Recovery, But Ignoring Inverse Condemnation Liability
September 24, 2018
On August 31, 2018, the California Legislature passed Senate Bill (“SB”) 901, which addresses a number of wildfire-related items relating to public utilities. Governor Brown signed the Bill into law on September 21, 2018. While the bill introduces a series of new changes, it is particularly noteworthy for what it does not include from Governor Brown’s initial June 2018 proposal for wildfire liability reform. At least for the time being, lawmakers abandoned the most controversial aspect of Governor Brown’s proposal for the bill: modifying California’s strict liability standard applied to utility companies for wildfires. SB 901 as passed by the Legislature does not make any changes to the state’s legal doctrine of inverse condemnation. However, SB 901 does makes several changes relevant to public and investor-owned utilities that are within jurisdiction of the California Public Utilities Commission (“CPUC”).
Addresses cost recovery before the CPUC
New Reasonableness Standard for Recovery of Wildfire Costs – Authorizes the CPUC to use a more detailed reasonableness standard in determining whether an electrical utility will be allowed to recover through rates charged to consumers expenses related to damages stemming from a wildfire caused by the utility’s equipment. Specifically, SB 901 authorizes the CPUC to permit utilities to recover costs associated with wildfires occurring after December 31, 2018 and to consider 12 specified factors to determine whether the expenses are allowed or disallowed. The new reasonableness standard refines and puts a wildfire-specific nuance into the existing generalized CPUC-wide “prudent manager” standard, but only in the context of wildfire costs by electric corporations.
Rules for 2017 Wildfires – Specifies that for applications by an electrical corporation to recover costs and expenses arising from catastrophic wildfires ignited in 2017, the CPUC is required to continue to determine just and reasonableness without specifying the 12 enumerated factors identified for the fires in 2019 and beyond. In the case of the 2017 wildfires, the bill requires the CPUC to consider the electric utility’s financial status and determine the maximum amount the corporation can pay without harming ratepayers, also known as a “financial stress test,” and requires the CPUC to limit the disallowance from the 2017 wildfires to the threshold determined by the stress test.
Financing Via Rate Recovery Bonds – Allows (but does not require) the CPUC to authorize, under specified circumstances, the use of financing to reduce the bill shock associated with damages paid by utilities for wildfires for the amounts borne by ratepayers of the 2017 wildfires or of future fires. Upon a finding that certain wildfire damage costs are just and reasonable, the CPUC may authorize an electrical corporation to issue rate recovery bonds in order to finance such costs over a specified period of time. This financing provision is applicable only to electric corporations and does not cover the cost of fines and penalties.
Increased Penalties – Increases the amount of a penalty that the CPUC can assess for violations of CPUC orders, laws, and decisions from up to $50,000 to up to $100,000 per violation per day. Unlike the above provisions applicable only to electrical corporations, the increased penalties would be applicable to all types of utilities before the CPUC,
https://www.californiaeminentdomainreport.com/2018/09/articles/new-legislation/governor-brown-signs-sb-901-addressing-wildfire-cost-recovery-but-ignoring-inverse-condemnation-liability/
Note: Simply put..California has Inverse Condemnation Eminent Domain Laws. Which translates to you broke it you bought it..The utility company decides how much they pay. Interesting here is how quickly, they made the change to the utility company being at fault, something the utility and the government of CA can take advantage of quite easily in a situation like this..homeowner looses, but the gains for Utility and govt of CA are enormous.
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