As PG&E Files for Bankruptcy, Who Is Liable for California's Wildfires?

Climate change and development have undoubtedly increased fire risk in California, but if utilities don't pay the damages, someone else will.
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Flames from the Camp Fire burn near a home atop a ridge near Big Bend, California, on November 10th, 2018.

Flames from the Camp Fire burn near a home atop a ridge near Big Bend, California, on November 10th, 2018.

In November, the Camp Fire destroyed tens of thousands of homes, killed at least 85 people, and caused an estimated $7.5 billion in damages. Under California law, the Pacific Gas and Electric Company, whose equipment was linked to this fire and many others, will pay the cost. But the utility argues there's another culprit at fault: climate change.

PG&E plans to file for bankruptcy by the end of this month, court filings obtained by the New York Times show. Facing complaints, a class action lawsuit, and as much as $17 billion in damages for a number of fires, its shareholders claim that climate change and development in the wildland-urban interface bears as much responsibility.

This argument marks a reversal of the typical trend, in which plaintiffs use climate change to seek damages from large corporations. It also contradicts existing state law, which holds utilities accountable for damages.

Legally, the utility is at fault for California's wildfires. But who is really to blame? It depends on your perspective.

Utility Companies

In December, a PG&E report linked a downed and bullet-ridden power line to the Camp Fire, although the fire's cause is still unknown. In California, utilities must pay compensation for property damages caused by their equipment, even when they are found to be in compliance with safety regulations. In other words, a company doesn't need to be negligible to be liable.

The courts have upheld the principle of "inverse condemnation," the San Diego Tribune reports, despite pushback from the state's three privately owned utility companies. The companies argue that, when they're held liable for extensive damages, they're forced to raise rates, and their customers suffer. Indeed, now that the wildfires have driven PG&E to bankruptcy, rate-payers might be left with the bill.

Recently, the state considered measures to relieve the company's burden. After PG&E equipment was linked to several fires in Northern California in 2017, the state passed new legislation requiring the California Public Utilities Commission to take the company's compliance into account before charging it.

PG&E and some legislators want to extend that protection to the 2018 fires, but critics say this is not a solution—it merely passes the costs on to customers. One lawmaker called the bill a "happy Thanksgiving gift" for the company's shareholders, the Mercury News reports. These divisions will only intensify with PG&E's impending bankruptcy.

Climate Change

Climate change is certainly responsible for intensifying fires across the state. As Pacific Standard has reported, warming and drying has doubled the area of forest in the United States considered vulnerable to fire since the 1980s. But does that mean it should be liable too? The utility companies think so.

"Our climate has changed, yet California's liability laws haven't kept pace," Steve Malnight, senior vice president of strategy and policy at PG&E wrote in a 2018 op-ed for the San Francisco Chronicle. "Without a solution, these outdated laws threaten to jeopardize our state's clean energy progress and leave us vulnerable to the future effects of climate change."

This defense is rare coming from a large corporation, but plaintiffs have long used climate change to seek damages from big polluters; West Coast crab fishers and state attorneys general have sued the fossil fuel industry over public health and their livelihoods. In another prominent case, American youth have levied similar challenges to the federal government's climate policy.

But this argument has no clear winner. If PG&E gets out of costs due to climate change, the burden falls to either insurance companies, homeowners and business owners, public agencies, or all of the above, explains Sean Hecht, co-executive director of the Emmett Institute on Climate Change and the Environment at the University of California–Los Angeles.

"It's beyond question that climate change is one of the factors exacerbating fire risks," he says. "That doesn't necessarily mean that the company is off the hook. Someone has to pay for these costs. There's not any more or less reason for the utility to pay for those costs than the insurance companies, the government, or other institutions."

Homeowners

Companies have also blamed increased development in at-risk areas. It's true that researchers have identified this as a major factor in the American West's increasingly destructive fires, as Pacific Standard has reported:

Over the last few decades, three to four million Californians have moved into rural areas—high-risk zones for fire, where a source as small as a spark from a car can set off a destructive fire. "Where people move, fire follows," wildfire policy expert Char Miller, says. "We have to figure out a way to better live in the ecosystems that we now call home."

As a result, some reformers are calling for increased regulation to limit expansion into the wildland-urban interface. Meanwhile, California insurance agencies have started to refuse to insure people who live in these at-risk areas. If insurers were forced to pick up the utility's costs, premiums would become even more unaffordable.

"The question is more practical than moral," Hecht says. Instead of asking who should be responsible, he asks, "What's the set of things we can do that causes the least harm and creates the most benefit, given a bunch of different choices, all of which are kind of bad?"

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