Wildfire legislation will hold PG&E accountable
Bill before the Legislature would pay off fire victims and minimize costs to utility’s customers
OPINION: Assemblymember Bill Quirk, Mercury News
AB 33 would provide timely compensation to the victims of the 2017 Northern California wildfires, ensure safe and reliable electric service to PG&E customers and hold PG&E accountable for its actions. Further, AB 33 assures that PG&E stockholders would pay for any damages the CPUC finds unreasonable. This is why I have introduced AB 33, the 2017 Northern California Wildfires bill.
The 2017 wildfires in Northern California are expected to have caused $10 to $15 billion in damages. Preliminary reports suggest that PG&E wires were found to cause those fires. PG&E must pay for those damages, whether it was negligent or not. California court decisions in the 1990s ruled that if a fire is caused by power lines, the utility that owns the power lines is liable. This doctrine is called “inverse condemnation.” The court expected that these damages would be paid by the utility’s customers.
The logic behind this ruling was that those who benefit from the electric infrastructure should pay for any damages that it creates. Subsequently, however, the California Public Utilities Commission ruled that if a utility is found to be negligent, their stockholders — not the customer — should pay for the damages. If the utility is not found negligent, the customers still pay for the damages. The last time such a determination was made by the CPUC, it took 10 years. Thus, PG&E will have to pay $10 to $15 billion if its wires caused the fires and whether the company was negligent or not. Some years from now, the CPUC will decide whether PG&E was negligent and therefore whether the stockholders or customers are responsible for the costs.
If tomorrow PG&E was told that it had to pay $15 billion for fire damages, it does not have the cash to pay it. Thus, PG&E would have to pay very large interest rates for bonds; this could cost ratepayers billions of dollars.
The bond-rating agencies already have downgraded PG&E bonds to near junk bond status. Billions of dollars more in debt likely would push bond interest rates to very high levels. It could take another 10 years for the CPUC to determine whether PG&E was negligent. During that time, ratepayers would be responsible for paying these very high interest rates. The interest alone would cost billions of dollars.
Alternatively, PG&E could file for bankruptcy. This would put PG&E debtors including fire victims in Federal Bankruptcy Court. The court would have complete discretion as to how or if fire victims would be paid. Further, the court would determine if PG&E could fund the prevention of future fires by hardening its transmission system and could fund the infrastructure necessary to the increase use of renewable energy.
AB 33 would avoid bankruptcy, pay off fire victims, allow PG&E access to bond markets to harden its infrastructure and minimize costs to its customers. The bill uses a well-established and proven practice called securitization. The bill would authorize PG&E to issue bonds backed by dedicated customer charges to pay settlement costs for the 2017 wildfires. Rates for customers would rise, but far less than if PG&E were paying for unsecured high interest bonds. Under AB 33, if PG&E acted imprudently or violated state law, the CPUC would require shareholders to pay back the customers.
There is too much uncertainty and too much at stake not to act now. Securitization has been used successfully by investor-owned utilities in California. In the end, AB 33 is a solution that ensures that there are funds available to help wildfire victims and preserves our state’s ability to achieve its clean energy future.
Bill Quirk, D-Hayward, represents the 20th District in the California state Assembly.