SDG&E may request wildfire damages from ratepayers

SDG&E may request wildfire damages from ratepayers

23 February 2010

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USA —  San Diego Gas & Electric Co. may ask state regulators for permission to bill its customers for legal damages stemming from the 2007 wildfires, if the amount the utility owes fire victims exceeds its insurance coverage, financial documents say.

In its third-quarter filing with the Securities and Exchange Commission, SDG&E’s for-profit parent company, Sempra Energy, said it had already allocated $940 million of its $1.1 billion in insurance coverage to settle lawsuits connected to the 2007 wildfires. Regulators and fire officials said the utility’s power lines caused three of those fires, and the company has been battling claims in and out of court ever since.

SDG&E expects the total future damages to exceed the coverage it has left, and it may ask the California Public Utilities Commission to let it charge customers —- some of whom would be the recipients of the legal damages —- to cover its loss.

“I don’t think anybody was prepared to the extent of the damage,” said Stephanie Donovan, a spokeswoman for the utility. “Providing service and making sure we have insurance is obviously the cost of doing business. If those costs go beyond what we get in revenues, we have to ask for the difference, and there is a process for that.”

In October 2007, the Witch Creek-Guejito fire combination tore through 198,000 acres of San Diego County, killing two people and injuring 40 firefighters, destroying 1,075 houses and causing $295 million in damage, according to a San Diego County government report. The Rice fire burned 9,500 acres and caused $100 million in damage, including 240 houses and 1,000 acres of agricultural land.

Investigators from the California Department of Forestry and Fire Protection and from the Consumer Protection and Safety Division of the CPUC found that power lines owned by SDG&E directly or indirectly caused all three fires.

In addition, the CPUC accused SDG&E of failing to secure its lines according to commission rules. SDG&E disagreed with that assessment, and the two settled a lawsuit in October for $14.75 million and no admission of wrongdoing.

“There’s a significant difference from being an ignition source for the fire and being responsible for the fire,” Donovan said.

The government reports have provided plenty of fodder for lawsuits. Sempra’s SEC filing said that as of Sept. 30, 175 lawsuits had been filed against the utility for unspecified damages relating to the fires.

On Oct. 30, SDG&E settled with 97 percent of the suits involving home insurers, the damages from which ate up most of the utility’s insurance coverage. But claims are still outstanding by 1,800 plaintiffs consisting of uninsured homeowners, local governments hoping to recover firefighting costs, personal injuries and others.

“SDG&E expects that the aggregate amount of these additional claims and the remaining homeowner insurer claims that are ultimately asserted will substantially exceed its remaining $140 million in insurance coverage,” the filing said.

A prominent consumer advocate was nonplussed Tuesday.

“It is fairly common knowledge that SDG&E will resist paying a dime out of its pockets for the wildfire costs,” said Michael Shames, executive director of the Utility Consumers’ Action Network. “The precedent alone would be viewed by the utility as unacceptable.”

The CPUC’s Division of Ratepayer Advocates, which uncovered the SEC filing as part of research on a related issue, refrained from commenting because there was no request before the commission.

SDG&E maintains that while it’s possible its lines started the fires, the 10-year California drought and the high-velocity Santa Ana winds that year are the true culprits in the devastating blazes.

“We have an obligation to serve; that means we don’t get to pick and choose where we run our lines,” Donovan said.

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