Edison Once Again Seeks to Limit Liability From California Fires

(Bloomberg) -- Edison International once again will try to sway a California state court judge to rule that it can’t be held liable for all the damage to private property caused by a wildfire, if it isn’t allowed to pass on some costs to ratepayers.

With this year’s fire season already causing havoc in communities up and down California, Edison is making a preemptive bid to limit its liability from the Woolsey Fire that tore through Malibu last year and destroyed 1,600 structures, including homes of singer Miley Cyrus, rocker Neil Young and actor Gerard Butler. Losses from the fire total $4 billion, according to a CoreLogic Inc. estimate.

The hearing Tuesday in downtown Los Angeles comes a week after Edison’s Chief Executive Officer Pedro Pizarro disclosed on an earnings call with investors that county investigators have found that the Woolsey fire was caused by Southern California Edison’s equipment.

Edison Once Again Seeks to Limit Liability From California Fires

The finding could leave Edison on the hook for billions of dollars in damages. California’s so-called inverse condemnation doctrine holds utilities 100% responsible for damage caused by their equipment whether or not they were negligent.

The same legal principle has driven the state’s biggest utility, Pacific Gas and Electric Co., to file for bankruptcy protection after its equipment was linked to devastating wildfires in Northern California.

It’s not the first time Edison has tried to avoid liability for a fire. The utility failed to convince a judge a year ago to dismiss inverse-condemnation claims for the massive 2017 Thomas Fire that scorched parts of Santa Barbara County and Ventura County. That fire was blamed for a subsequent mudslide that destroyed part of the affluent coastal enclave of Montecito. The first trials in both the Woolsey and Thomas Fire litigation are scheduled for next year.

Edison Once Again Seeks to Limit Liability From California Fires

The strict liability the utilities face under California law for damage caused by their power lines has become an existential threat to them in recent years as widespread wildfires have become the new normal in the state. It’s become an even more pressing issue after the California Public Utilities Commission refused a request from Sempra Energy’s San Diego Gas & Electric to increase its rate to compensate for payouts over a 2007 wildfire.

Sempra’s yearslong fight to overturn the state commission’s decision ended last month when the U.S. Supreme Court declined to take up the case.

Inverse-condemnation liability is based on the idea that losses will be spread throughout society, Edison argued in the court filing. That’s something Edison can’t do on its own, the utility said.

“Edison’s rates are regulated by the PUC and it lacks the power to control market price,” it said.

Lawyers representing the people who lost their homes in the Woolsey Fire predictably weren’t impressed by Edison’s argument and have called it an “improper challenge to established California law and the California constitution” that has failed in all other wildfire lawsuits involving investor-owned utilities.

Edison also can’t rely on the PUC’s decision in the Sempra case because each case is different, they said.

“As Edison is well aware, that decision has no application outside that proceeding or those particular fires,” the plaintiffs’ lawyers said.

What Bloomberg Intelligence Says

EPS in 3Q was hurt by 10 cents due to wildfire-related equity issuance, and 21 cents more from wildfire operating costs. The company is applying to regulators to recover these unauthorized costs, but that may be difficult. The outages now sweeping southern California make recovery potential more difficult.

-- Kit Konolige, Senior Analyst: Utilities

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The final investigation report on the causes of the Woolsey Fire hasn’t been made public yet and the company and the plaintiffs’ lawyers have only been given a redacted version. The California Forestry and Fire Protection Department and the Venture County Fire Department have fought requests to turn over the full report because it relates to an ongoing criminal investigation.

Southern California Edison isn’t aware of any basis for felony liability related to the fires, Pizzaro said during the Oct. 28 earnings call.

The case is Woolsey Fire Cases, JCCP 5000, California Superior Court, County of Los Angeles (Los Angeles).

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