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In Fire Blame Game, SDG&E Wants a Blank Check

Under an SDG&E proposal, a jury could find that the company could’ve prevented three fires that ravaged San Diego in 2007. And customers would still see their bills go up.

 

An alarm went off at the Santa Ysabel electrical substation on that October 2007 morning, the unforgettable Sunday when the air was bone dry and the wind howled. Something was wrong.

A troubleshooter from San Diego Gas & Electric named Ray Necochea got a call at home in Ramona and was dispatched to figure out what. Troubleshooters are the company’s first responders, among its highest-trained electrical workers.

What Necochea couldn’t have known: The problem he was being sent to investigate would start an inferno that would eventually destroy his house, his brother-in-law’s home and hundreds of others.

When Necochea, a 35-year SDG&E vet, arrived at the backcountry power station, he went through a familiar routine. He saw that a white indicator light was on. It meant a problem on a power line somewhere in the backcountry. Maybe a bird had touched two wires and been electrocuted. Maybe a branch was touching a wire. Maybe wires had slapped together. The substation’s monitors wouldn’t say exactly where the problem was. But they would steer him closer.

Necochea finished his checks and identified the problem as best he could. In his notes, under the heading “Cause,” he wrote what he thought: “trouble/wind.” He pinpointed the power line that was causing trouble, too. In just two-and-a-half hours, that same line would start the devastating Witch Fire.

Necochea called in to SDG&E’s grid control. It isn’t known what he said; SDG&E wouldn’t release the audio of the call. He phoned in again about two hours later.

The record of that call shows he asked for help.

According to a transcript, Necochea said he knew roughly where the problem was. But he said he had something else to check on and wanted someone to go inspect the wires.

“You guys can’t get the transmission patrol guys out?” Necochea asked SDG&E’s grid control. “We — whoever does that?”

“We have not got them out yet,” came the response.

“You’ve got to get them out here, man,” Necochea said.

Six minutes later, a pilot flying overhead spotted the Witch Fire.

Three hours had passed between the first sign of trouble and the sighting of the fire, which combined with another blaze and burned 198,000 acres, killing two people, injuring 40 firefighters and destroying more than 1,100 homes. The power lines at Witch Creek sent warnings at 8:53 a.m., 11:22 a.m. and again at 12:23 p.m. The pilot saw the fire at 12:29 p.m.

SDG&E didn’t dispatch a patrol until 12:59 p.m. By then, it was too late. The fire had exploded.

If the company had turned the lines off after those early warnings, it could’ve prevented the Witch Fire. SDG&E says it followed standard industry procedure. Each time the line’s power supply had been interrupted, a device checked to see if the problem was still there. It wasn’t, so electricity started flowing again.

Investigators would later say the two power lines were slapping in the wind and, at 12:23 p.m., created the sparks that started the fourth-largest wildfire in California’s history.

♦♦♦

Necochea’s story opens a dramatic window into the moments before a power line’s spark became a county’s nightmare.

It’s not just any old story from the fires, either. It’s emerged as part of the evidence in an ongoing lawsuit aiming to prove not just that SDG&E caused the Witch Fire and two others, but that the company was negligent and didn’t do enough to prevent the blazes.

Attorneys for people who lost their homes will try to convince a jury that SDG&E knew the risks its power lines posed during dry, Santa Ana winds, but didn’t take reasonable precautions.

After paying out more than $1 billion to victims, the region’s main electricity supplier estimates it is still facing a $463.9 million bill because it’s been sued by so many homeowners who lost houses in the fires.

That’s a bill you might have to worry about.

Regardless of the court verdict, SDG&E is asking for permission to pass those costs not to its shareholders but instead to every San Diego County resident and business who pays an electricity bill each month. Bills would rise across the county.

The company’s move has prompted an outcry from fire victims, politicians and ratepayer advocates, who say allowing SDG&E to pass through its uninsured costs from the 2007 blazes — and any future fires — would give the utility little reason to responsibly maintain its power lines. The company, not its customers, should be held liable, they say.

“They basically are saying the customers are going to pay for the costs associated with the fires, whether they started them or not,” said Mike Aguirre, an attorney contesting the utility’s proposal. “What SDG&E has done is simply pay off the claims and try to pass off the liability. There’s no consequences.”

State Sen. Christine Kehoe and county Supervisor Dianne Jacob have asked for public hearings in San Diego before the California Public Utilities Commission, SDG&E’s regulator, makes any decisions. SDG&E has opposed public hearings as premature.

In a letter to the commission, Jacob said approving SDG&E’s plan would give utility companies “a disincentive to properly maintain their infrastructure and the burden to ensure safe equipment would be thrust unfairly upon ratepayers.”

Since the smoke cleared, SDG&E has settled with hundreds of victims of the Rice, Guejito and Witch fires without actually admitting liability. The company estimates that by the time it has finished writing checks, it will have paid more than $2 billion.

SDG&E initially said its customers had little to worry about. They were unlikely to have to pay any damages, a company spokeswoman said in 2008. Yes, the company’s power lines had been identified as the cause of three fires. And yes, the victims were going to want money to rebuild.

But SDG&E’s $1.1 billion insurance policy would likely be enough, the spokeswoman said.

Fast forward to 2012. The utility’s settlements have exceeded its policy. Now it’s taking steps to get regulators to allow it to charge customers — even if the company is found negligent for causing destructive wildfires.

SDG&E was joined in the effort by the state’s two other investor-owned utilities, Pacific Gas & Electric and Southern California Edison. Both have since withdrawn.

SDG&E believes it is entitled to recover its uninsured expenses from ratepayers as a cost of doing business. Because SDG&E assumes risk by providing electricity in fire-prone areas, spokeswoman Stephanie Donovan said, it should be allowed to recoup its costs when fires happen.

Even if a jury ultimately finds the company acted negligently, Donovan said SDG&E would not commit to reimbursing ratepayers and letting shareholders instead bear the burden.

“Our ability to recover these costs should not depend on whether we have performed our responsibilities perfectly,” Donovan said.

♦♦♦

On July 18, 2007, months before the fires, an SDG&E tree-trimming contractor inspected a sycamore tree on a roadside near Fallbrook. A branch was vigorously growing toward the power line, the inspector noted. He recommended trimming it within three months. That would’ve been by Oct. 18 — four days before the branch broke, fell on a power line and started what became known as the Rice Fire, which burned 9,500 acres and destroyed 206 homes.

SDG&E says it had scheduled the tree to be cut by Nov. 1, after the fires. The company told state investigators it started the three-month countdown from the time it formally approved the trimming.

A Cal Fire investigator pinpointed the fire’s cause quickly. When the investigator called an SDG&E representative to report that one of the company’s power lines had started the fire, the reported response he got was matter-of-fact.

“I know that,” an SDG&E rep said, according to a Cal Fire report.

Victims’ attorneys say the company also knew the risks its lines posed in gusty winds. They’d started fires before, most notably in 1970. The power-line-caused Laguna Fire east of San Diego killed five people, burned 175,000 acres and set a record at the time as the largest blaze in state history.

The challenge for those attorneys will be to convince a jury to find that SDG&E could have foreseen the risks and didn’t take reasonable precautions to address them. A jury could find that SDG&E acted negligently, said Janet Bowermaster, a California Western School of Law professor, even though the company’s regulators didn’t reach that conclusion.

A division of the California Public Utilities Commission found that the company hadn’t done enough to prevent fire risks, pointing to incidents like the untrimmed sycamore limb. The division said in 2008 that SDG&E violated numerous power line maintenance rules.

The division recommended a formal investigation to determine the extent to which SDG&E violated those rules. But the company settled the inquiry in 2010 for $14.75 million without admitting responsibility.

Now SDG&E is asking the utilities commission for permission to automatically bill customers for uninsured costs from past and future wildfires. The money for those losses has to come from either SDG&E’s customers or its investors. Because SDG&E is a regulated utility company, it has to get approval from state regulators before charging customers.

Even if the current plan isn’t approved, SDG&E could still pass the costs through. It would have to file a formal request with the commission and then painstakingly justify its costs. But with its proposal, SDG&E would get a blank check. For the 2007 fires, that check could be worth $463.9 million.

Ratepayer advocates say the plan would strip most of their ability to formally intervene in regulatory proceedings where they can protest excessive costs.

“This application is just a huge, broad stroke,” said Nina Suetake, an attorney for The Utility Reform Network, a San Francisco-based ratepayer advocate. “We’re talking about the potential for multi-billion dollars being dropped on your ratepayers.”

SDG&E’s preferred plan would require company shareholders to pay 5 percent of any uninsured fire costs if regulators find it acted negligently (with a $30 million annual cap). Customers would pick up the remaining 95 percent — or all 100 percent if negligence isn’t established. A ruling isn’t expected until summer.

As it turns to ratepayers, the utility has pushed to delay a civil trial that could establish whether the company was at fault in 2007. Earlier this month, a San Diego Superior Court judge delayed a September trial until March 2013. SDG&E says the delays are giving it needed time to continue settling 50 to 60 cases a month. Cases that can’t be settled would be included in the trial.

Mitchell Wagner, a lawyer for 200 plaintiffs who haven’t settled, says the trial should proceed before SDG&E can tap its customers for money. A jury’s ruling wouldn’t have any effect on SDG&E’s proposal. But if the company is found negligent and still recovers hundreds of millions from customers — not its shareholders — Wagner said it leaves SDG&E little incentive to act properly.

“What message does that send to SDG&E?” he asked. “That they can allow those conditions and just pass it along to ratepayers.”

If a jury finds that SDG&E could’ve foreseen and prevented problems like those Necochea investigated, a large financial award to victims could increase customers’ bills under SDG&E’s current proposal.

It would give nearly every San Diego County resident a financial stake in the civil trial and a reason to cheer for SDG&E’s attorneys to win.

Rob Davis is a senior reporter at voiceofsandiego.org. You can contact him directly at rob.davis@voiceofsandiego.org or 619.325.0529.

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