PG&E Judge Says `No Basis' to Rule Out Huge Fire Cost Claim

(Bloomberg) -- PG&E Corp. suffered another legal setback with a judge saying he won’t release the company from a key legal claim over the most destructive wildfires in California history.

PG&E has been challenging a California law allowing private property owners to hold the utility 100 percent responsible for any losses caused by its equipment or power lines even if it didn’t act negligently. Edison International, owner of the dominant utility in southern California, is also facing the prospect of multibillion-dollar payouts under the same law over a record-setting blaze near Los Angeles.

Friday’s tentative ruling marks the second time in a month a state judge has refused to spare PG&E from having to face a claim under inverse condemnation.

PG&E has said since it’s a private company and can’t “socialize the burden” from damage to individuals through taxes, it shouldn’t be liable under inverse condemnation. PG&E doesn’t have the authority to tax and can only raise rates approved by the California Public Utilities Commission.

“There is no basis for PG&E’s argument that imposing inverse condemnation liability” is unconstitutional unless the utility is guaranteed to “automatically recover” its costs through rate hikes, Superior Court Judge Curtis Karnow said in the ruling.

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In April, a Sacramento judge said trial judges’ hands are tied by previous appellate court rulings and they can’t interpret the law the way the utility is asking.

“We continue to believe that inverse condemnation, as applied to a privately owned utility, is a flawed legal doctrine that is bad for all Californians,” PG&E said in a statement. “We believe it is in everyone’s interest to have this issue decided promptly.”

During a hearing Friday, PG&E’s lawyer, Kevin Orsini, said the court’s ultimate conclusion about inverse condemnation “goes to the very viability of” of investor-owned utilities.

"It is critical that we hear from the higher courts of the state sooner rather than later,” he said. Once a trial draws near, all parties will gain the “benefit of further guidance from the court of appeal whether inverse condemnation does apply,” he said.

Karnow was skeptical of PG&E’s request to seek an immediate appeal, just as Superior Court Judge Allen Sumner in Sacramento refused to do. California courts ordinarily require lawsuits to play out to final resolution before appeals begin, a process that may take two to three years.

The judge said it’s unlikely he will have any “unique" insight to offer on the dispute that appeals courts couldn’t figure out for themselves.

Orsini said that in the Sacramento case, which involves the 2015 Butte Fire in the Sierra Nevada foothills, the utility has filed a writ with the state court of appeals -- a procedure that could fast-track the outcome.

PG&E fell as much as 1 percent before recovering to $42.32 at 2:22 p.m in New York.

Officials haven’t determined the causes of the Tubbs Fire and a series of other blazes that burned through wine country north of San Francisco last year, but analysts have said the utility could face more than $15 billion in claims from the fires.

The case is California North Bay Fire Cases, JCCP No. 4955, California Superior Court, San Francisco County.

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