PG&E Can't Dodge Judge Whose Tolerance for Wildfire Risk Is Zero

(Bloomberg) -- A federal judge who’s commanding California utility giant PG&E Corp. not to spark any wildfires in 2019 is either doing his job to rein in a troubled company or he’s assuming the role of a “super regulator.”

That’s how experts read the extraordinary measures proposed by U.S. District Judge William Alsup -- including his plan to subject the company to criminal sanctions if it fails to trim tree branches too close to thousands of miles of power lines and to force regional grid outages in high-risk weather conditions.

The veteran judge is taking no chances with a utility that’s already been convicted of felonies for safety violations after one of its gas pipelines exploded in a city south of San Francisco and killed eight people in 2010. Alsup says his job is to “protect the public from further wrongs” and “promote the rehabilitation of the offender.”

As the overseer of PG&E’s probation, Alsup has warned that the company may face further prosecution from findings that its equipment caused 18 wildfires in 2017 -- although officials haven’t determined the causes of the most destructive and deadliest of the blazes over the last two years, the Tubbs and Camp fires.

PG&E is preparing to file for bankruptcy after the cost of the wildfires left it with potential liabilities of $30 billion or more. A Chapter 11 bankruptcy would freeze lawsuits filed on behalf of thousands of property owners, but it won’t get the company off the hook with Alsup.

After the November fire that leveled the town of Paradise and killed 86 people, the company pledged precautions similar to what Alsup is calling for, including more careful vegetation management near its electric equipment.

But Alsup’s directive that the company turn off transmission lines on windy days appears to exceed the authority of PG&E’s state regulator, the California Public Utilities Commission, at least as far as high-voltage lines are concerned, said Michael Wara, an energy lawyer and senior research scholar at Stanford University. The CPUC can, however, order PG&E to turn off power for local distribution lines, according to Wara.

“He’s acting like a super-regulator,” Wara said. Energy policy makers and regulators are “talking and kind of scratching their heads and saying, ‘Wow, I’ve never seen anything like this.’"

California Governor Gavin Newsom applauded the judge’s “assertiveness.”

“We have a federal judge who’s been active, who’s been very active in this space and he’s been very pointed as it related to safety,” Newsom told reporters Monday. “PG&E, with respect, has not been a trusted player in the past. They have admitted knowingly misleading regulators in the past, very recent past.”

PG&E is reviewing Alsup’s orders, company spokesman James Noonan said.

“We are committed to complying with all rules and regulations that apply to our work, while working together with our state and community partners and across all sectors and disciplines to develop comprehensive, long-term safety solutions for the future,” Noonan said in an email.

Alsup declined to comment.

The judge’s hands-on approach isn’t new to companies that have appeared before him. Appointed to the bench in San Francisco in 1999 by President Bill Clinton, he routinely holds “tutorial” sessions in his courtroom to get up to speed in complicated cases of corporate wrongdoing.

Alsup learned programming code to help him with intellectual property disputes including Oracle Corp.’s copyright suit against Alphabet Inc.’s Google. To prepare for Waymo’s trade secret-theft trial against Uber Technologies Inc., the judge required the companies to bring hardware to court so that he could understand the LiDar technology at issue in the case, which helps driverless cars see their surroundings.

When Alsup suspects criminal behavior, he isn’t shy about referring a civil case to the Justice Department for possible prosecution, as he did with the engineer at the heart of the Waymo-Uber fight.

To some legal experts, Alsup’s approach to PG&E is hardly extraordinary because he’s prioritizing safety. Citing PG&E’s history of falsifying inspection reports in his Jan. 9 proposal to put the company under a tighter leash, Alsup said the utility can’t consider the reliability of its service or inconvenience to customers in determining whether it needs to cut power.

“Only safe operation will be allowed,” Alsup wrote. The goal, he emphasized, is “to reduce to zero the number of wildfires caused by PG&E in the 2019 wildfire season.”

Alsup is saying “there will be no fires on my watch,” said Mike Danko, a lawyer who sued PG&E on behalf of victims of the 2010 gas explosion, as well as the 2017 and 2018 fires. “As the judicial officer supervising PG&E’s probation he’s entitled to essentially re-sentence PG&E, so an order like this will be a part of PG&E’s new sentence.”

The judge gave federal prosecutors and PG&E a Jan. 23 deadline to voice any concerns about the rigorous conditions he wants to impose on the company. He also asked state regulators to weigh in before a Jan. 30 hearing.

In response to a demand he issued last month, Alsup received a heap of detailed reports from the utility on Dec. 31 about wildfires that have broken out on its turf. He then said on Jan. 3 that he was putting off for now the “adequacy of PG&E’s response” about whether it caused the fires.

To Danko, that indicates Alsup thinks the company “may not have been exactly candid.”

“He’s saying, ‘I have a lot of questions of you, PG&E. Right now my role is to make sure we don’t have another fire,’” Danko said.

©2019 Bloomberg L.P.