FILED

BEFORE THE PUBLIC UTILITIES COMMISSION 9-11-17
04:59 PM
OF THE STATE OF CALIFORNIA

Application of San Diego Gas & Electric
Company (U 902 E) for Authorization to Application 15-09-010
Recover Costs Related to the 2007 Southern
California Wildfires Recorded in the Wildfire
Expense Memorandum Account (WEMA)

MOTION FOR PARTY STATUS OF
PACIFIC GAS AND ELECTRIC COMPANY (U 39 E)

MARY GANDESBERY
MICHAEL KLOTZ

Pacific Gas and Electric Company
77 Beale Street, B30A
San Francisco, CA 94105
Telephone: (415) 973-7565
Facsimile: (415) 973-5520
E-mail: Michael.klotz@pge.com

Attorneys for
PACIFIC GAS AND ELECTRIC COMPANY
Dated: September 11, 2017
BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORNIA

Application of San Diego Gas & Electric Application 15-09-010
Company (U 902 E) for Authorization to
Recover Costs Related to the 2007 Southern
California Wildfires Recorded in the Wildfire
Expense Memorandum Account (WEMA)

MOTION FOR PARTY STATUS OF
PACIFIC GAS AND ELECTRIC COMPANY (U 39 E)
I. INTRODUCTION

Pursuant to Rule 1.4(a) of the California Public Utilities Commission (Commission or
CPUC) Rules of Practice and Procedure, Pacific Gas and Electric Company (PG&E) hereby

moves for party status.1 As discussed below, in July 2017, PG&E filed Application (A.) 17-07-

011, seeking authority to establish a Wildfire Expense Memorandum Account (WEMA).2

Among other things, in A.17-07-001, PG&E raised the same issues of California state law and

policy with respect to the application of inverse condemnation liability to privately owned

utilities as San Diego Gas and Electric Company (SDG&E) raised in A.15-09-010. The

Commission’s resolution of that issue, as well as its method of application of the prudent

manager standard in this proceeding are likely to impact PG&E directly in the future. Therefore,

PG&E seeks party status at this time. PG&E notes that the Commission granted party status to

SDG&E in A.17-07-001 in light of overlapping legal issues between the two Applications.3

1
Concurrent with this motion, PG&E is filing joint comments with Southern California Edison Company
(SCE) on the Proposed Decision of Administrative Law Judges (ALJ) Tsen and Goldberg dated August
22, 2017 (PD).
2
Application of Pacific Gas and Electric Company (U 39 E) for Authority to Establish a Wildfire
Expense Memorandum Account (filed July 26, 2017).
3
A.17-07-011 Motion of Party Status of San Diego Gas & Electric Company (U 902 E) (filed August 4,
2017); ALJ Kersten’s August 17, 2017 Email Ruling Granting Party Status of San Diego gas and Electric
Company.

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II. BACKGROUND

On September 25, 2015, SDG&E filed A. 15-09-010 seeking Commission approval to

recover $379 million recorded in its Wildfire Expense Memorandum Account (WEMA).4

Among other things, one basis for SDG&E’s application was California’s law of inverse

condemnation, which SDG&E noted “was the driving factor in SDG&E’s handling of the 2007

Wildfire litigation.”5

Under inverse condemnation, a public utility may be held strictly liable where its electric

facilities cause or are deemed to be a cause of a wildfire, whether or not the utility was negligent

or otherwise at fault. Courts have rejected arguments that the cost spreading rationale underlying

inverse condemnation did not apply to public utilities because they lacked taxing authority

stating that the utility, “has not pointed to any evidence to support its implication that the

[C]ommission would not allow [the utility] adjustments to pass on damages liability during its

periodic reviews.”6 As SDG&E explained, the court presumed utilities would be permitted to

recover their costs through rates, just as a municipally owned utility would recover its costs

through rates established by or taxes levied by the municipality.7

The PD does not address this issue of California law. Rather, it applies a prudent

manager standard of reasonableness review and ultimately denies SDG&E’s request for recovery

of wildfire expenses recorded to the WEMA.

III. PG&E’S INTERESTS AND POSITIONS

PG&E is a privately owned utility engaged in—among other things—the transmission,

4
Application of San Diego Gas & Electric Company (U 902 E) for Authorization to Recover Costs
Related to the 2007 Southern California Wildfires Recorded in the Wildfire Expense Memorandum
Account (WEMA).
5
SDG&E Application, p. 4.
6
Id. at p. 6, citing Pac.Bell.Tel.Co. v. So.Cal.Ed., (2012) 208 Cal. App. 4th 1400, 1407.
7
Id. at p. 6.

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distribution and sale of electricity and gas under the jurisdiction of the Commission. PG&E

distributes gas and electric commodities to approximately 16 million people in California. As

discussed below, the Commission’s resolution of legal issues pertaining to inverse condemnation

and the prudent manager standard it applied in this case directly affects PG&E, as well as the

other California utilities.

A. PG&E’s Application for a WEMA (A.17-07-001)

Climate change and its adverse impacts, including the effects of the California drought

and tree mortality conditions continue to be far reaching, particularly regarding wildfire risk.8

While utilities generally carry insurance coverage for wildfire claims, it is possible that the

amount of insurance will be insufficient, particularly given the increased wildfire risk caused by

the drought conditions and the application of inverse condemnation liability to the utilities

through the California courts.

On July 26, 2017, PG&E filed A. 17-07-001 to establish a WEMA. Similar to SDG&E’s

WEMA, the purpose of PG&E’s Application is to allow PG&E a regulatory mechanism to

record wildfire related expenses, thereby preserving its ability to seek Commission review and

recovery of unreimbursed costs through subsequent application without running afoul of

retroactive ratemaking concerns.

PG&E’s application raises similar legal issues as SDG&E’s application with respect to

California’s law of inverse condemnation. In particular, the Superior Court for the County of

Sacramento very recently ruled that the doctrine of inverse condemnation applied to PG&E with

respect to the Butte Fire,9 which essentially makes PG&E liable for all property damage
8
See, e.g., October 30, 2015 Tree Mortality Proclamation of a State of Emergency (available at,
https://www.gov.ca.gov/docs/10.30.15_Tree_Mortality_State_of_Emergency.pdf) and September 1, 2017
Executive Order B-42-17 of Governor Edmund Brown (available at
https://www.gov.ca.gov/news.php?id=19936).
9
June 22, 2017 Ruling on Submitted Matter: Inverse Condemnation Motions, Butte Fire Cases, Case No:
JCCP 4853, Superior Court of California for the County of Sacramento (available at,
https://bloximages.chicago2.vip.townnews.com/calaverasenterprise.com/content/tncms/assets/v3/editorial
/e/cd/ecd78c9c-57bd-11e7-b75e-3bdfd51bbf85/594c80b29f9cc.pdf.pdf).

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associated with claims in the coordinated proceeding. Like with SDG&E, the application of

strict liability to PG&E in the civil litigation is a significant factor in its handling of claims

against the Company. With respect to regulatory cost recovery, the Superior Court specifically

considered and rejected arguments PG&E presented that the cost-sharing policy underlying

inverse condemnation does not apply, finding no evidence that the Commission would not allow

PG&E to socialize such costs through rates.10

PG&E is concerned that the PD contains legal errors that could negatively affect PG&E

and other utilities by: (1) failing to address the impact of the doctrine of inverse condemnation on

cost recovery; and (2) applying a prudent manager standard of review in a manner that seemingly

holds the utility to a standard of perfection with the benefit of hindsight review of its

management. Given the increased wildfire risk due to drought and tree mortality conditions, the

breadth and magnitude of the utilities efforts required to comply with the Governors’ drought

and tree mortality proclamations, and the potential that utilities may not be able to procure

sufficient cost-effective insurance to cover wildfire risks, the PD inappropriately places the

ultimate responsibility for the costs of wildfire risk on the utility, as opposed to spreading them

to the broader community through rates as state policy intends.

For these reasons, PG&E seeks leave to submit comments under Rule 14.3 and otherwise

to participate in this proceeding as a party. PG&E’s comments on the PD will focus on legal

errors associated with inverse condemnation issues, the Commission’s application of the prudent

manager standard, and other issues as may be appropriate. Granting PG&E’s request will not

prejudice any party. PG&E reserves the right to raise and respond to substantive issues and to

participate beyond the filing of comments on the PD, as warranted by the proceeding.

IV. COMMUNICATIONS AND SERVICE

All correspondence, communications, and service of papers regarding this Application

10
Id. at p. 16.

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should be directed to:

Michael Klotz Conor Doyle
Law Department Regulatory Affairs
Pacific Gas and Electric Company Pacific Gas and Electric Company
P.O. Box 7442 (B30A) P.O. Box 770000 (B23A)
San Francisco, CA 94120 San Francisco, CA 94177
Telephone: (415) 973-7565 Telephone: (415) 973-7817
Facsimile: (415) 973-5520 Facsimile: (415) 973-0942
E-Mail: M1Ke@pge.com E-Mail: JCDT@pge.com

V. CONCLUSION

For the foregoing reasons, PG&E respectfully requests that the Commission grant this

motion for party status.

Respectfully submitted,
MICHAEL R. KLOTZ

By: /s/ Michael R. Klotz
MICHAEL R. KLOTZ

Pacific Gas and Electric Company
77 Beale Street, B30A
San Francisco, CA 94105
Telephone: (415) 973-7565
Facsimile: (415) 973-5520
E-mail: Michael.Klotz@pge.com

Attorneys for
Dated: September 11, 2017 PACIFIC GAS AND ELECTRIC COMPANY

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