ORIGINAL REPORTING: Utility bankruptcy concerns rise as bill comes due for California wildfires
Utility bankruptcy concerns rise as bill comes due for 2017 California fires; Some 394 wildfires at the end of 2017 could cost California’s IOUs tens of billions, but there are ways to mitigate the financial impact.
Herman K. Trabish, June 25, 2018 (Utility Dive)
Editor’s note: The change in the law described here was not enacted, making the proposed financial solutions more important after the 2018 fires hammered more nails in the IUOs’ coffins.
California's state motto is "Eureka!" But its energy sector's motto is quickly becoming "Somebody do something!" The state's grid operator is slowly learning to cope with levels of renewable generation that require unprecedented system flexibility; regulators are studying an onslaught of customer choice nobody has written rules for; and now, California's investor-owned utilities (IOUs) face liability for the state's 2017 [Editor’s note: And 2018] wildfires that could bankrupt them. The state saw five of its 20 most destructive fires between October and December of 2017, capping a year in which the California Department of Forestry and Fire Protection (Cal Fire) recorded 7,117 wildfires. The previous five years averaged 4,835 wildfires per year. The total cost, including fire suppression, insurance and recovery, could be $180 billion, Courthouse News Service reported. [Editor’s note: 2018’s Campfire was even more destructive.]
For the fires, California's IOUs face a special kind of liability. Contrary to 48 other states, California courts have interpreted the law on utility liability to mean that utilities must pay all damage costs if utility equipment was involved in a fire, whether the utility was negligent or not. There is a growing concern that this financial burden could make it difficult for California IOUs to remain solvent. Regulators are asking how to judge the "prudence" of the IOUs' preparations in the "new normal" of extreme weather linked to climate change. While victims' attorneys and insurance companies want IOUs held accountable, legislators and policymakers are wondering if the IOUs are too big to fail. The concern about the utilities' financial viability has brought forward potential solutions, including ways to reduce their exposure to liability through risk pools and settlements with their insurers and others who contributed to the fire… click here for more
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