Dive Brief:

• The California Public Utilities Commission (CPUC) yesterday ruled San Diego Gas & Electric is responsible for $379 million in costs related to the 2007 southern California wildfires, concluding the utility did not reasonably operate its facilities linked to the fires.
• The utility in 2015 petitioned the CPUC to recover those funds, which represented a portion of the $2.4 billion in costs and legal fees incurred by SDG&E to resolve third-party claims arising from the Witch, Guejito and Rice wildfires.
• The decision was closely watched in a state that has become known for wildfires. It could have an impact on Pacific Gas & Electric, which is under investigation for its role in a massive October wildfire that devastated Sonoma and Napa counties in California's wine country.

Dive Insight:

Regulators yesterday concluded that three wildfires that devastated SDG&E's system in 2007 were all the fault of the utility and those costs could not be passed on to customers. The ruling was closely watched by the other two investor-owned utilities in the state as extreme weather and fire damage becomes more common.

“There is no dispute that SDG&E facilities caused these fires," CPUC Commissioner Liane Randolph said in a statement. "The question we had to analyze was whether the costs related to the fires should be paid by customers or shareholders. The CPUC undertook a careful review of the facts of each fire and determined in each case that customers should not have to bear these costs.”

Each of the fires is addressed separately under the CPUC’s prudent management standard, and for all three fires the CPUC determined that SDG&E’s operation and management of its facilities prior to the ignition of the wildfires was not prudent.

Currently, the state's Department of Forestry and Fire Protection (Cal Fire) is investigating whether Pacific Gas and Electric's equipment may have been responsible for October wildfires. The utility has said third-party equipment may be at fault. The decision yesterday could have an impact on PG&E's claim, and markets reacted accordingly.

According to the Sacramento Bee, PG&E shares dropped more than $0.80/share, to $54.24.

PG&E CEO Geisha Williams told Bloomberg that the decision was disappointing.

“If these wildfires become endemic and part of the effects of climate change day in and day out, I don’t believe it is sustainable for utilities to absorb that on a long-term basis,” Williams reportedly told the news outlet. “I don’t think it is fair to put the burden on energy companies.”

Several California lawmakers have said they intend to propose new legislation next year that would block investor-owned utilities from recovering the costs associated with wildfires if they are determined to be at fault in starting those fires.