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Pacific Gas and Electric will have to pay billions for wildfires

Christian Fernsby ▼ | November 28, 2019
A federal bankruptcy judge ruled that the principle of inverse condemnation applies to investor-owned utilities like Pacific Gas and Electric, meaning the company can be held liable for wildfire damage caused by its equipment even if it was not negligent.
Pacific Gas and Electric
American energy   Pacific Gas and Electric had argued it should not be held to the same standard
Pacific Gas and Electric had argued it should not be held to the same standard as public entities because the state’s utility regulator does not let it automatically pass on inverse condemnation costs to ratepayers.

Topics: Pacific Gas and Electric wildfire

U.S. District Judge Dennis Montali rejected that argument, finding California courts have consistently focused on the concept of public use rather than cost spreading when deciding the state legal concept applied to regulated private companies.

“This court is not tasked to determine what the law should be and is merely tasked with interpreting what the law is and has been for 125 years,” Montali wrote. “The California Legislature has not taken up debtors’ cause to their satisfaction, and this court will not attempt to take its place.”

Montali traced the history of inverse condemnation back to 1894, when the California Supreme Court found a private railroad company could be held liable for damaging a person’s property because the railroad was for “public use.”

Two California appeals courts more recently held that investor-owned utilities are subject to inverse condemnation. But Pacific Gas and Electric said those decisions, from 1999 and 2012, occurred before the California Public Utilities Commission (CPUC) ruled in November 2017 that utilities cannot automatically pass those costs onto ratepayers.

Imposing such a standard on an investor-owned utility equates to an unconstitutional taking of property, Pacific Gas and Electric argued.

“The application of inverse condemnation to Pacific Gas and Electric is nothing more than the transfer of private property from one private entity (Pacific Gas and Electric) to another (the inverse plaintiff) without any compensation, let alone just compensation,” Pacific Gas and Electric argued in a court brief.

In 2017, the CPUC denied San Diego Gas and Electric Company’s application to recover inverse condemnation costs related to wildfires that occurred in 2007. It found the utility did not “reasonably manage and operate its facilities.” Montali accused Pacific Gas and Electric of misreading that decision.

“It does not state that inverse condemnation costs will never be passed on to ratepayers,” Montali wrote.

Montali’s decision is likely to drive up the estimate for Pacific Gas and Electric’s total liability for wildfire damage. U.S. District Judge James Donato is overseeing the estimation process, and a bench trial is scheduled to start on Feb. 18.

An attorney for wildfire victims insisted the decision won’t have a major impact on the estimate because the question of inverse condemnation applying to Pacific Gas and Electric was never seriously in doubt.