In the middle of the terrible news from the latest wildfires to hit California comes this order from the California Court of Appeal, Fourth District, declining to issue a writ to review the California Public Utilities Commission's rejection of SDG&E's request for a rate increase to cover the costs of settling inverse condemnation claims stemming from the Witch Fire.
The order is really short and you can read it yourself in its entirety, so we will only say that the court concluded that the PUC didn't stray outside of its delegated authority and discretion when it turned down SDG&E's rate request. The court also made it a point to note that the utility settled the inverse cases and not litigate and "continue to advance its position that it could not be held strictly liable as a nongovernmental entity." Order at 2.
Recall that the ability (or not) to recoup inverse losses is one of the main reasons that California utilities are arguing that they cannot be liable in inverse condemnation. In a dream-within-a-dream argument, the utilities are arguing that subjecting them to takings liability without the accompanying ability to spread the loss is a taking.
This latest development doesn't foreclose that, of course, and the court made it a point to note that "had the Commission determined that SDG&E acted as a
prudent manager, the costs could have been passed onto the ratepayers regardless of any potential strict liability in a civil litigation setting." Order at 2. So it still leaves open the possibility that in some cases, a utility might be able to spread the loss over its customer base by obtaining a rate increase from the PUC. Just not in this case.
But is the mere possibility of cost-spreading via an administrative process if they can show they acted reasonably enough to invalidate the utilities' arguments that they can't be subject to inverse condemnation without a guaranteed way to do so? And can that decision be made by an agency and only reviewed by a court under an administrative standard of review? As the title to this post suggests, hard questions to come.
San Diego Gas & Elec. v. Public Utilities Comm'n, No. D074417 (Cal. App. Nov. 13, 2018)