Liability for Utility Negligence Under Scrutiny in California
I read a very thought-provoking New York Times article that questions the financial responsibility arising from utility negligence. The article centers on a bill currently before the California Legislature that would enable the state’s investor-owned utilities to pass the costs from legal settlements to customers (as opposed to shareholders), even when the utility is legally responsible.
Although my bias is always on the utility side, the article makes an interesting case that utilities should be liable for their own negligence and/or misjudgments.
What Constitutes Utility Negligence?
The NYT article lays out some interesting, real-world examples of ratepayers being on the hook for utility negligence. For example, a $400 million price tag to remediate a leaking coal ash pond that is negatively impacting the local environment (Duke Power), a $9 billion price tag to cover environmental studies and related costs for a now-shelved nuclear plant (South Carolina Electric and Gas), and a $6.5 billion price tag to reimburse a utility for a bad bet on the wholesale power market (Florida Power & Light).
In a recent report by the California Dept. of Forestry and Fire Protection, they concluded that PG&E was responsible for a whopping 12 forest fires in a single month in 2017 (Oct), 8 of which may have potentially involved violations of California State law. For its part, PG&E maintains that ratepayer cost recovery is necessary to protect the company’s assets.
From a pure emergency preparedness perspective, enabling ratepayer reimbursement for utility negligence in theory could help maintain the integrity of the grid, but it could also create a mentality that fosters poor decisions – which in the long run could actually hinder reliability. I suppose it depends on who you ask. Either way, it is definitely an extremely complex question that will require much discussion to get right, and I, for one, will be watching closely as everything unfolds.
