Utilities ask to charge ratepayers for future fires

Sep 10 - North County Times, Calif.

Four of California's utilities want preapproval to bill their customers for wildfire expenses that exceed the utilities' insurance coverage, according to their joint application to the California Public Utilities Commission.

The proposal from San Diego Gas & Electric Co., Southern California Gas Co., Southern California Edison, and Pacific Gas and Electric Co. would create "Wildfire Expense Balancing Accounts" to which they could submit expenses, and which would hold insurance payouts.

If the commission, which regulates the industry, deems the utility blameless in a given wildfire, the utility could bill customers for full recovery up to $1.2 billion (less insurance payouts), and 95 percent of subsequent expenses.

In the arcane world of utility regulation, such costs are typically collected from customers in the form of slightly higher bills spread out over years.

Opponents said giving such permission would make it easier for utilities to take their maintenance duties less seriously.

The utilities said in the filing that the accounts are crucial because insurers will no longer offer as much fire coverage to California utilities, and what they do offer has become expensive.

Under the proposal, the utilities would pay out all claims and costs associated with fire damage directly to claimants.

If the expenses exceed $10 million, they would become subject to the balancing accounts.

Insurance payments stemming from the wildfires would be paid into the balancing accounts.

For the first $1.2 billion, the utility would get full recovery from either insurance or customers.

After that, the utility would absorb 5 percent of expenses, with the remaining 95 percent coming from customers.

In addition, the utilities would pay $5 million for each wildfire, up to $10 million annually.

Also, the commission would assess whether the utility's negligence or malice caused the fire.

Only if the utility is held blameless could it recover its expenses from customers.

As an example, SDG&E had $1.1 billion in insurance coverage for damage related to the Rice, Witch and Guejito fires of 2007, which killed two people, injured 45, destroyed 1,380 homes and torched about 210,000 acres.

State and county investigators have said power lines started the fires.

As of June 30, the utility had paid $191 million beyond its coverage.

The proposal is the second attempt by utilities to create the accounts.

On the first attempt, in August 2009, the commissioners suggested that the utilities consult with opponents and resubmit the application.

In its objection to the original proposal, the Division of Ratepayer Advocates, the advocacy arm of the PUC, suggested that utilities' shareholders should carry at least some of the costs of wildfires.

"Requiring that shareholders have 'some skin in the game' will ensure that utilities have the incentive to safely maintain infrastructure as well as investigate and defend against frivolous claims," the division wrote in 2009.

Although no one from the division was available to comment on the new application, other opponents maintain the same objection.

"No one wants fires; no one is making anyone out to be any nefarious, cackling villain," said Melissa Kasnitz, managing attorney for Disability Rights Advocates. "We've seen time and again that big corporations cut corners to increase profit if they know in advance they won't have to pay."

Stephanie Donovan, a spokeswoman for SDG&E, said the utility had not yet seen the most recent objection filings from opponents, that the system basically mimics what most businesses do when they have expenses.

"Such a system would allow recovery of what is not already included in the companies' (California Public Utilities Commission)-approved rates," Donovan wrote in an e-mail. "Businesses of all kinds adjust their rates/prices for customers to cover cost increases they must absorb. This really is no different."

Call staff writer Eric Wolff at 760-740-5412.

-----

To see more of the North County Times or to subscribe to the newspaper, go to http://www.nctimes.com.

Distributed by McClatchy-Tribune Information Services.