An Impossible Task

A bankruptcy judge has ruled that PG&E must compensate the fire victims for damages caused by its equipment. The judge's ruling seems clear-cut to us non-lawyers, but an unfamiliar legal term slowed down this reader. [bold added]

Judge Dennis Montali said Wednesday the principle of inverse condemnation applies to PG&E, rejecting an argument that the utility was attempting to invoke to limit the amount it owes for homes and businesses destroyed by the fires...

The idea behind the doctrine of inverse condemnation is that operators of public utilities should have to pay for damage done to private property, whether the utilities are public or owned by investors, as PG&E is.

PG&E argued that the doctrine is unfair because it won’t be able to raise electric rates to cover the cost of wildfire damages. Judge Montali said the utility is speculating and doesn’t know what state regulators would say if it asked for a rate increase and proved its operations were safe.

What is "inverse condemnation? Wikipedia [bold added]

Inverse condemnation is a term used in the law to describe a situation in which the government takes private property but fails to pay the compensation required by the 5th Amendment of the Constitution, so the property's owner has to sue to obtain the required just compensation. In some states the term also includes damaging of property as well as its taking. In inverse condemnation cases the owner is the plaintiff and that is why the action is called inverse – the order of parties is reversed, as compared to the usual procedure in direct condemnation where the government is the plaintiff who sues a defendant-owner to take his or her property.

Bloomberg explains PG&E's legal argument:

Inverse condemnation usually applies to government agencies that damage private property while providing a public service. But courts in the Golden State have ruled that the doctrine also can be used against utilities, since they’re authorized by the state to provide a vital public service.

That’s why California utilities can be held liable for damages from fires sparked by their equipment, even if they followed all of the state’s stringent safety rules. They can try to pass on those costs to ratepayers, but there’s no guarantee such efforts will get approved by the state’s California Public Utilities Commission.

The arcane becomes a little clearer. PG&E followed the safety rules dictated by the Public Utilities Commission, yet inverse condemnation makes it liable for damages as if it were a public agency. However, PG&E is not the government and so can't raise taxes to pay for its debts. It must apply for a rate increase to be approved by the PUC. Just try getting that through when everyone seems to want the utility's blood, if not its dismemberment.

As we've said before, under the current constraints running PG&E is an impossible task.

Related--given that PG&E is held liable for wildfires but not power shutdowns, its behavior is perfectly understandable: PG&E Refuses to Get Burned--Under the utility’s incentive structure, blackouts make sense.