Wildfire-Related Costs

Even as wildfires raged in Southern California in December, the California Public Utilities Commission denied a request from San Diego Gas & Electric Company (SDG&E) for authority to recover costs related to the Witch, Guejito, and Rice wildfires that ravaged parts of the utility’s territory in 2007.

The commission explained that its investigation had revealed that SDG&E had not operated its facilities in a reasonable manner, such that the utility was prohibited from recouping fire-related costs in rates. According to the application the company filed with the commission, SDG&E was seeking to recover only $379 million out of total fire expenses of $2.4 billion, which costs included both direct damage as well as legal fees incurred by the utility as it attempted to resolve third-party damage claims arising from the fires.

In evaluating SDG&E’s claims, the commission said it had to determine whether the company’s operational, engineering, and management practices at facilities involved in the ignition of the wildfires were reasonable. While the commission addressed each fire separately under the commission’s prudent management standard, it came to the same conclusion for all three, which was that the utility’s management protocols had been lacking, as a consequence of which the firerelated costs must be disallowed.

The fire storm ripped through portions of Southern California beginning on October 21, 2007. The fire storm, comprised of more than a dozen individual fires, spread over parts of Orange, San Diego, Los Angeles, San Bernardino, Ventura, Santa Barbara, and Riverside counties. In addition to extensive damage to properties in the region, the wildfires also caused widespread evacuations and several fatalities. The commission reported that investigators later traced the ignition of three of the wildfires to SDG&E facilities. (Decision 17-11-033, Application 15-09-010)