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CPUC: Don't read much into panel's wildfire rate hike ruling

One event does not a trend make. By definition, trends reflect "a general direction or something popular." In the context of the law, precedent is something that may herald a trend because it is "a judicial decision that should be followed by a judge when deciding a later similar case." The law is a complicated thing, however, and one can't always be certain when precedent will apply.

A recent action by the California Public Utilities Commission seems to serve as a case in point. In a 5-0 vote, the panel rejected a bid by San Diego Gas & Electric to raise rates to customers to offset some $380 million in losses it suffered from wildfires in 2007. Two people died and individuals suffered significant property losses from the fires. In making its case for the plan, SDG&E argued that it should be eligible to raise rates because of inverse condemnation.

The claim

Inverse condemnation is one in an array of eminent domain actions through which a landowner may seek just compensation for property damaged by a government activity or public project. Under one legal theory, privately owned utilities should be exempt from such claims, but an earlier decision in this case, citing even earlier precedent, said that it could apply to SDG&E.

In making its rate hike request, SDG&E said the implication of costly inverse condemnation actions motivated it to pursue out-of-court settlement efforts – reflecting reasonable and prudent action by the company. In the end, though, it said it still faces $379 million in fire-associated costs. SDG&E said the influence of the inverse condemnation theory should allow the firm to diffuse the remaining liability through its customer base.

The decision

The CPUC rejected that argument. One commissioner said that if the panel had accepted the theory, it could encourage utilities to act imprudently or unreasonably in the future on the assumption that they would always be able to pass costs on to ratepayers.

This decision comes as investigators examine whether Pacific Gas & Electric equipment contributed to this year's wine country fires that have killed more than 40 people and caused extensive property damage. If liability is assigned to that utility, what role might inverse condemnation play in recovery?

The answer is unclear. All we know is that CPUC commissioners made clear in the SDG&E case that their decision does not represent a precedent. SDG&E also says it will appeal.

Source: Sempra Energy, "Application of San Diego Gas & Electric Company (U 902 E) for Authorization to Recover Costs Related to the 2007 Southern California Wildfires Recorded in the Wildfire Expense Memorandum Account," accessed Dec. 6, 2017

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