California utilities PG&E Corp. and Edison International have been fighting in the courts to avoid liability for damage from last year’s wildfires, which were the most destructive in history. Although it has not yet been determined that the utilities were responsible for starting any of the fires, they have been seeking a court ruling that they can’t be held liable in an inverse condemnation claim brought by homeowners. The homeowners have reason to suspect that power lines may have sparked the 2017 blazes.
Inverse condemnation claims are typically brought against governments or government agencies who, through action or inaction, take or damage property without paying just compensation. When this is done, citizens have the right to sue for that compensation.
PG&E and Southern California Edison are investor-owned public utilities, not parts of the government. However, courts have held that the California Constitution allows property owners to hold utilities fully responsible when their equipment causes losses, even if the utilities didn’t act negligently. Essentially, this is meant to place the burden of catastrophic losses on the party most able to bear it.
According to Fitch Ratings, PG&E could be facing over $15 billion in claims, while southern California Edison could be liable for over $4 billion. Moreover, a November ruling by the California Public Utilities Commission cast doubt on whether the utilities can pass on these costs to ratepayers. In the first case where the regulator sought to raise rates to cover uninsured losses, the CPUC denied the request.
The utilities see this as a major crisis that could drive it into bankruptcy, disrupting electrical service to the 70 percent of California’s population that rely on these utilities. Therefore, they have argued that it is unconstitutional to hold them liable since they can’t pass their losses on to the consumer.
On Friday, however, a San Francisco superior court judge ruled that the utilities (represented here by PG&E) have no legal basis for their argument. Last month, a Sacramento judge also ruled that trial judges have no authority to interpret the law in the way the utilities have asked them to.
The utilities have indicated that only a California Supreme Court ruling will satisfy them, but both the San Francisco and Sacramento judges appeared skeptical of allowing any fast-track appeal to the high court.
While the legal wrangling plays out, hundreds of thousands of homeowners have lost everything. If the utilities are responsible for these fires, those homeowners have every right under the California Constitution to seek redress for their losses.