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MARY GANDESBERY
MICHAEL KLOTZ
Attorneys for
PACIFIC GAS AND ELECTRIC COMPANY
Dated: September 11, 2017
BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORNIA
moves for party status.1 As discussed below, in July 2017, PG&E filed Application (A.) 17-07-
Among other things, in A.17-07-001, PG&E raised the same issues of California state law and
policy with respect to the application of inverse condemnation liability to privately owned
utilities as San Diego Gas and Electric Company (SDG&E) raised in A.15-09-010. The
Commissions resolution of that issue, as well as its method of application of the prudent
manager standard in this proceeding are likely to impact PG&E directly in the future. Therefore,
PG&E seeks party status at this time. PG&E notes that the Commission granted party status to
SDG&E in A.17-07-001 in light of overlapping legal issues between the two Applications.3
1
Concurrent with this motion, PG&E is filing joint comments with Southern California Edison Company
(SCE) on the Proposed Decision of Administrative Law Judges (ALJ) Tsen and Goldberg dated August
22, 2017 (PD).
2
Application of Pacific Gas and Electric Company (U 39 E) for Authority to Establish a Wildfire
Expense Memorandum Account (filed July 26, 2017).
3
A.17-07-011 Motion of Party Status of San Diego Gas & Electric Company (U 902 E) (filed August 4,
2017); ALJ Kerstens August 17, 2017 Email Ruling Granting Party Status of San Diego gas and Electric
Company.
1
II. BACKGROUND
recover $379 million recorded in its Wildfire Expense Memorandum Account (WEMA).4
Among other things, one basis for SDG&Es application was Californias law of inverse
condemnation, which SDG&E noted was the driving factor in SDG&Es handling of the 2007
Wildfire litigation.5
Under inverse condemnation, a public utility may be held strictly liable where its electric
facilities cause or are deemed to be a cause of a wildfire, whether or not the utility was negligent
or otherwise at fault. Courts have rejected arguments that the cost spreading rationale underlying
inverse condemnation did not apply to public utilities because they lacked taxing authority
stating that the utility, has not pointed to any evidence to support its implication that the
[C]ommission would not allow [the utility] adjustments to pass on damages liability during its
periodic reviews.6 As SDG&E explained, the court presumed utilities would be permitted to
recover their costs through rates, just as a municipally owned utility would recover its costs
The PD does not address this issue of California law. Rather, it applies a prudent
manager standard of reasonableness review and ultimately denies SDG&Es request for recovery
4
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 (WEMA).
5
SDG&E Application, p. 4.
6
Id. at p. 6, citing Pac.Bell.Tel.Co. v. So.Cal.Ed., (2012) 208 Cal. App. 4th 1400, 1407.
7
Id. at p. 6.
2
distribution and sale of electricity and gas under the jurisdiction of the Commission. PG&E
discussed below, the Commissions resolution of legal issues pertaining to inverse condemnation
and the prudent manager standard it applied in this case directly affects PG&E, as well as the
Climate change and its adverse impacts, including the effects of the California drought
and tree mortality conditions continue to be far reaching, particularly regarding wildfire risk.8
While utilities generally carry insurance coverage for wildfire claims, it is possible that the
amount of insurance will be insufficient, particularly given the increased wildfire risk caused by
the drought conditions and the application of inverse condemnation liability to the utilities
On July 26, 2017, PG&E filed A. 17-07-001 to establish a WEMA. Similar to SDG&Es
record wildfire related expenses, thereby preserving its ability to seek Commission review and
PG&Es application raises similar legal issues as SDG&Es application with respect to
Californias law of inverse condemnation. In particular, the Superior Court for the County of
Sacramento very recently ruled that the doctrine of inverse condemnation applied to PG&E with
respect to the Butte Fire,9 which essentially makes PG&E liable for all property damage
8
See, e.g., October 30, 2015 Tree Mortality Proclamation of a State of Emergency (available at,
https://www.gov.ca.gov/docs/10.30.15_Tree_Mortality_State_of_Emergency.pdf) and September 1, 2017
Executive Order B-42-17 of Governor Edmund Brown (available at
https://www.gov.ca.gov/news.php?id=19936).
9
June 22, 2017 Ruling on Submitted Matter: Inverse Condemnation Motions, Butte Fire Cases, Case No:
JCCP 4853, Superior Court of California for the County of Sacramento (available at,
https://bloximages.chicago2.vip.townnews.com/calaverasenterprise.com/content/tncms/assets/v3/editorial
/e/cd/ecd78c9c-57bd-11e7-b75e-3bdfd51bbf85/594c80b29f9cc.pdf.pdf).
3
associated with claims in the coordinated proceeding. Like with SDG&E, the application of
strict liability to PG&E in the civil litigation is a significant factor in its handling of claims
against the Company. With respect to regulatory cost recovery, the Superior Court specifically
considered and rejected arguments PG&E presented that the cost-sharing policy underlying
inverse condemnation does not apply, finding no evidence that the Commission would not allow
PG&E is concerned that the PD contains legal errors that could negatively affect PG&E
and other utilities by: (1) failing to address the impact of the doctrine of inverse condemnation on
cost recovery; and (2) applying a prudent manager standard of review in a manner that seemingly
holds the utility to a standard of perfection with the benefit of hindsight review of its
management. Given the increased wildfire risk due to drought and tree mortality conditions, the
breadth and magnitude of the utilities efforts required to comply with the Governors drought
and tree mortality proclamations, and the potential that utilities may not be able to procure
sufficient cost-effective insurance to cover wildfire risks, the PD inappropriately places the
ultimate responsibility for the costs of wildfire risk on the utility, as opposed to spreading them
For these reasons, PG&E seeks leave to submit comments under Rule 14.3 and otherwise
to participate in this proceeding as a party. PG&Es comments on the PD will focus on legal
errors associated with inverse condemnation issues, the Commissions application of the prudent
manager standard, and other issues as may be appropriate. Granting PG&Es request will not
prejudice any party. PG&E reserves the right to raise and respond to substantive issues and to
participate beyond the filing of comments on the PD, as warranted by the proceeding.
10
Id. at p. 16.
4
should be directed to:
V. CONCLUSION
For the foregoing reasons, PG&E respectfully requests that the Commission grant this
Respectfully submitted,
MICHAEL R. KLOTZ
Attorneys for
Dated: September 11, 2017 PACIFIC GAS AND ELECTRIC COMPANY