Chris Patterson 1415 L Street, Suite 280

Director Sacramento, CA 95814

State Government Relations
(916) 386-5704
(916) 386-5720 Fax
Chris.Patterson@pge.com

April 11, 2018

The Honorable Ben Hueso, Chair

Senate Committee on Energy, Utilities & Communications
State Capitol, Room 4035
Sacramento, CA 95814

Letter of Concern on SB 1088 (Dodd)

Dear Chairman Hueso:

Pacific Gas and Electric Company (PG&E) is committed to working with the state to build resiliency into
our infrastructure as we collectively confront the escalating pace and intensity of catastrophic events
brought on by climate change, such as the 2017 wildfires. PG&E appreciates Senator Dodd’s efforts to start
the conversation on important and necessary reforms needed to harden the utility systems to climate change
related events, but at this point we believe this bill does not provide the comprehensive solution that the
state needs.

SB 1088 takes strides towards mitigating future risks to the electric and gas distribution systems by
requiring a safety, reliability, and resiliency plan for each gas corporation and electric corporation. PG&E
agrees that we can and should build resiliency into our electric and gas systems to continue to reduce the
risks of climate change, even if we can’t prevent them all. To help meet the climate driven challenge of
increasing wildfires and extreme weather events, PG&E announced a comprehensive Community Wildfire
Safety Program on March 22 to implement additional precautionary measures that may reduce wildfire
threats and strengthen our communities for the future. It is focused on three key areas: 1) Bolstering wildfire
prevention and emergency response efforts, 2) Putting in place new and enhanced safety measures, and 3)
Doing more over the long term to harden our electric system to help reduce wildfire risks and keep our
customers safe.

SB 1088 includes some good ideas that should be fully explored as part of a legislative response to the 2017
wildfires, including some that are already being implemented by PG&E. However, the proposals in this bill
are not a complete solution. The safety, reliability, and resiliency plan proposed in SB 1088 represents only
one element of the comprehensive reforms needed to address the devastating effects of extreme weather
events.

PG&E agrees with Governor Brown and the state’s legislative leaders that the state must also “update
liability rules and regulations for utility services in light of a changing climate and the increased severity
and frequency of weather events.”1 California is an outlier in applying inverse condemnation liability to
investor-owned utilities for wildfire events, which may subject utilities to strict liability without regard to
fault or reasonableness. Application of strict liability for inverse condemnation means that if a utility’s
equipment is found to have been a substantial cause of a wildfire, the utility may be liable for all property

1
https://www.gov.ca.gov/2018/03/13/governor-brown-and-legislative-leaders-partner-to-bolster-climate-resilience-and-improve-
disaster-planning-management-and-response/
The Honorable Ben Hueso
April 11, 2018
Page Two

damage and legal fees associated with that wildfire even when it followed construction standards,
inspection, and safety rules set up by federal, state, and local governments. This is contrary to a fundamental
principle everyone agrees should apply: liability should be based on a utility’s actions and conduct. Liability
without regard to fault or reasonableness of utility action undermines the financial health of the state’s
utilities, discourages necessary investment in California and has the potential to materially impact the ability
of utilities to access the capital markets to fund utility operations.

Additionally, as identified by California Public Utilities Commission (CPUC) President Picker and
Commissioner Guzman-Aceves, for SB 1088 to provide the comprehensive solution needed by the state to
address climate change related catastrophic events, it must address changes to the prudency standard as
applied at the CPUC. In applying an “all or nothing” standard, the CPUC disallowed cost recovery for all
costs associated with the 2007 Southern California Wildfires. Specifically, President Picker and
Commissioner Guzman-Aceves stated that “the application of a prudency standard, which provides the
Commission with…a binary choice of determining prudency in the aggregate, could be improved upon to
explicitly allow a more nuanced assessment of fault… [T]he ability to do a more nuanced assessment of
fault could be a helpful regulatory tool and we respectfully ask the legislature to consider this issue.”2
PG&E agrees with the CPUC’s request.

At this time, in order for PG&E to take a position on any legislative proposals offered in response to the
2017 wildfires, we must see companion proposals by our state’s leaders that address the other significant
issues brought to light by our state’s “new normal” of climate driven disasters – in particular, the
unsustainable application of the strict liability standard to public and investor-owned utilities for property
damages caused during natural disasters and application of an “all or nothing” approach to cost recovery at
the CPUC. PG&E appreciates the effort by Senator Dodd in SB 1088 to mitigate future risks to the electric
and gas distribution systems by requiring safety, reliability, and resiliency plans, but cautions that the
legislature needs to take a more holistic view in dealing with this “new normal” of catastrophic events
associated with climate change, without which we must withhold our support at this time.

Thank you for the opportunity to comment on SB 1088. We look forward to working with the committee,
author, and all stakeholders as we develop solutions to protect all Californians from the threat of natural
disasters and climate change.

Sincerely,

cc: The Honorable Bill Dodd

Members, Senate Energy, Utilities and Communication Committee
Kip Lipper, Office of Pro Tempore
Catalina Bautista-Hayes, Office of the Governor
Gabrielle Zeps, Office of the Speaker

2
Concurrence of President and Commissioner Michael Picker and Commissioner Martha Guzman Aceves, Decision Regarding
Application of San Diego Gas & Electric Company for Authorization to Recover Costs Related to the 2007 Southern California
Wildfires Recorded in the Wildfire Expense Memorandum Account, at
http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M202/K420/202420814.PDF.