California Legislators Take Note of POU Perspectives on Wildfire Preparedness and Liability

By Matt Williams, CMUA

SMUD CEO and General Manager Arlen Orchard, who is the president of CMUA, testifies at the State Capitol on Thursday.

California publicly owned utilities this week shared important perspectives about how they’re preparing and responding to the increasing threat of wildfires and the associated liability that could result, during a pair of hearings in front of a bipartisan committee examining potential legislative solutions for the state’s mounting wildfire issue.

On Thursday, SMUD CEO and General Manager Arlen Orchard, who is the president of CMUA, participated in a hearing titled Inverse Condemnation and Electric Utilities (streaming video of the hearing is viewable here). Discussion centered on the many complicated issues surrounding utility liability and inverse condemnation — the concept a utility must compensate property owners and others affected in the event of a major wildfire or other type of disaster, even if the utility was not negligent in causing the fire.

California’s liability requirements as currently constituted could force “massive” rate increases at a big POU like SMUD or put a small POU into bankruptcy if fault is determined on a huge wildfire, said Orchard. Strict liability also has caused insurance rates to skyrocket; SMUD’s insurance is four times costlier than a year ago, he added.

“Unlike investor owned utilities, publicly owned utilities like SMUD don’t have shareholders to bear the cost of the damages inflicted by the catastrophic wildfire. The only recourse is to collect from our customers, with those costs having a disproportionate impact on those least likely to afford it, including low income customers, the elderly and renters,” Orchard explained to the legislators.

Orchard said SMUD is among those supporting the Governor’s proposal to reform the state’s strict liability standard. Utilities should remain liable when they’re at fault, said Orchard. “That’s only fair. Utilities should not be held strictly liable for wildfire damages when the utility acted reasonably and responsibly and met all applicable standards.”

Orchard outlined how SMUD is taking numerous proactive measures to mitigate the risk of wildfire, including vegetation management outside of its rights-of-way near its hydro facilities, and is investing more in technology to detect “problem trees.” On behalf of SMUD, he urged the state to adopt more robust forest management practices.

Part of the governor’s proposal for liability reform sets a higher standard for utilities in these new preparedness plans, Orchard noted. If you violate that new standard, you will be held liable.

“For me, speaking from SMUD, that’s a huge incentive to move quickly. We’re already moving quickly because we recognize the broader risk,” said Orchard. “Our only option is to pass it on to our customers, and obviously I work for seven elected officials who hate every rate increase but do it prudently. We’re going to move forward to limit that liability as quickly as we can.”

A number of representatives for investor owned utilities, consumer groups, and other groups also were on hand at Thursday’s hearing to talk about the complexities of liability and inverse condemnation.

On Tuesday, two other POU leaders and CMUA Executive Director Barry Moline spoke as part of a panel discussion at a separate Legislative Conference Committee informational hearing titled Ensuring a Safe and Reliable Electric Grid (streaming video can be viewed here). The three representatives said POUs of all sizes are proactively taking measures to reduce the risk of wildfires and outages in their service territories.

Martin L. Adams, COO of the Los Angeles Department of Water and Power, discusses LADWP fire preparedness measures on Tuesday.

Martin L. Adams, COO of the Los Angeles Department of Water and Power, said the threat of wildfire is still real in a dense urban area like L.A. and serious wildfires do occur within the 475-square-mile city limits. LADWP has adopted construction standards in high-risk fire zones that require heavier conductors, and a longer spacing between wires than what’s required by state standards, and upgraded wind loads for construction.

“We’ve strengthened our infrastructure in these areas that we believe are most prone to fire threat,” said Adams.

Healdsburg Utility Director Terry Crowley details how Healdsburg goes above industry standards to maintain its infrastructure.

Terry Crowley, utility director of the City of Healdsburg, said the city’s four-square-mile service area includes 60 miles of line within that territory, some of which are overhead lines that run through high-risk fire areas.

Healdsburg has high system reliability and few outages due to its maintenance practices, said Crowley. Trees near power lines are trimmed annually instead of every three years (the industry norm), and the required clearance is a minimum of four feet. The Healdsburg utility also works with property owners to remove trees that pose a risk. The city also rebuilds and reconducts lines before their end of life and is inspecting and replacing infrastructure in wildland fire areas.

“This is a new normal, we can’t do the same old, same old. So we’re looking at a new way of operating our utility and adopting the best technologies,” said Crowley.

CMUA Executive Barry Moline tells lawmakers on Tuesday that POUs stand ready to be part of a broad solution.

Moline said there are some parallels to what California is dealing with today on wildfires, and what Florida utilities faced several years ago with hurricane preparation and response. California can learn from Florida’s efforts to develop a comprehensive approach to disaster mitigation, which involved fostering a culture among utilities of information sharing about best practices.

The actions in Florida, said Moline, were similar to what California is now considering for wildfires — strengthening utility infrastructure, bolstering mutual aid, educating local communities and preparing residents for the fire season, including taking personal responsibility for their own safety.

“We’re at an inflection point in California, and POUs are committed to being part of a broad solution to the statewide issue. We implement proactive wildfire prevention and response to protect our residents and prevent wildfires from developing and spreading,” said Moline.

The California Municipal Utilities Association represents the common interests of a diverse coalition of California’s publicly owned utilities.