As wildfires intensify, utilities want liability protections

Alex Brown, Tribune News Service

As climate change drastically increases the frequency and severity of wildfires, power companies say they’re facing growing risk for payouts that could bankrupt them or require massive rate hikes on customers. Across the West, electrical utilities are pushing state lawmakers to grant them legal immunity or limit damage payouts if their equipment sparks a blaze. They’re backing bills, which have passed or been proposed in at least eight states over the past few years, that would require the utilities to follow plans to limit their risks of causing a fire, such as trimming trees or burying power lines. In exchange for taking those steps, lawmakers would give utilities protection from lawsuits that could expose them to billions of dollars in damage claims. “We’re only one wildfire away from bankruptcy,” said Shawn Taylor, executive director of the Wyoming Rural Electric Association, a group that represents electrical cooperatives. “Even if we avoid bankruptcy, we’d have huge rate increases to cover the cost of a lawsuit.”

Already, utilities are facing soaring insurance premiums because of the magnitude of claims they would face if they caused a fire. Taylor and other industry leaders argue that power companies should be granted relief if they take actions to limit their risk. In 2019, Pacific Gas and Electric Company in California declared bankruptcy over its roughly $30 billion liability from a series of wildfires caused by its equipment, including the devastating Camp Fire. And in Oregon, PacifiCorp is facing billions of dollars in damage claims due to its role in the state’s 2020 Labor Day fires. PacifiCorp has been a key player backing liability bills in five states, the Oregon Capital Chronicle reported. The proposals face strong opposition from wildfire victims, insurance companies and trial lawyers. Those groups say the bills don’t do enough to protect residents from dangerous electrical infrastructure. And insurers say their own customers could pay the price if lawmakers protect utilities.

“When you push in one side of the balloon, it comes out somewhere else,” said Greg Van Horssen, a representative for State Farm Insurance, delivering testimony before the Montana House Judiciary Committee in February. “If we have a problem with recovering costs for burnt-down houses in Montana, from an insurance company’s perspective, we only have one option, and that’s to raise the rate of homeowners’ insurance.” Utah became the first state to limit utilities’ liability when it passed a law in 2020. The law protects companies from negligence charges if they have a wildfire mitigation plan in place, and it puts limits on the damages victims can collect, using a fair market value figure that can fall well short of the full cost to rebuild. This year, Idaho and Wyoming have enacted similar measures, and Montana lawmakers have sent a proposal to the governor. A bill in Arizona has cleared the House, while a North Dakota bill passed the Senate but was narrowly defeated in the House. An Oregon measure is still in committee. Alaska has also considered liability legislation in recent years.

Utah state Rep. Carl Albrecht, a Republican who sponsored that state’s liability law, said it has compelled power companies to trim trees, bury lines and take other steps to ensure they are complying with their safety plan. He said utilities are frequent targets of litigation. “People look at the utility as deep pockets that can pay out a lot of damages,” he said. “It’s whoever has the best attorneys and can sell their case in court.” Michele Beck, director of the Utah Office of Consumer Services, serves as an advocate for Utah energy customers. She said it’s difficult to protect electrical customers and wildfire victims at the same time.

“The costs for ratepayers are substantial, and it’s reasonable to try and find a balance between these extremely high jury awards,” she said. “I admit, it’s a devastating loss for people who are impacted (by wildfires), but somebody is also paying on the other side.” In Oregon, consumer advocates are similarly torn. “It is a difficult place to be, having utilities close to bankruptcy and unable to make investments that are necessary to provide service,” said Bob Jenks, executive director of the Oregon Citizens’ Utility Board, a nonprofit representing ratepayers. “At the same time, the principle that customers shouldn’t be bailing out utilities for bad practices is a critical standard.” PacifiCorp says it faces more than $45 billion in liabilities, much of that driven by the 2020 Labor Day fires in Oregon. Multiple juries have found the company liable for failing to cut power to its lines. The massive costs PacifiCorp is facing have limited the company’s ability to invest in its infrastructure and clean energy, Jenks said. PacifiCorp did not grant a Stateline interview request, but the company has been involved in shaping legislation across several Western states.

Oregon state Rep. Pam Marsh, a Democrat, said her bill would not give utilities legal immunity. It would establish a certification process to ensure utilities are mitigating wildfire risk. “The utilities need somebody else to help them identify the risk they’re carrying,” she said. “We never meant that if you got a safety certification in April that you’re bulletproof over the next year for any sort of wildfire liability.” But some legal experts told the Oregon Capital Chronicle that utilities would likely use their compliance with the certification process in a legal defense against wildfire claims. In Arizona, a liability measure has passed the House and advanced in a Senate committee. The bill would protect companies from lawsuits if they follow mitigation plans. Utility leaders say it’s necessary to ensure they can continue providing service.

“Unlike other businesses that might stop doing business in an area where risk has grown too high, we have an obligation to serve customers,” said Joe Barrios, senior media relations specialist with Tucson Electric Power. “Wildfire liability costs and higher insurance costs are passed along to customers through the rates that they pay. (This bill) helps to maintain service affordability.” But state Rep. Alex Kolodin, a Republican, believes the proposal violates a state constitutional provision that bars the state from limiting residents’ right to sue. And he said that limiting utilities’ liability will reduce their incentive to take safety measures. “I wouldn’t want to be the legislator who voted for this, and then the utility causes a fire that burns down 200 houses in my district,” he said. “Then I have to explain to my constituents why they can’t recover any damages. ‘Sorry, guys, it’s because your legislator is an idiot.’” Brandon Vick, a regional vice president with the National Association of Mutual Insurance Companies trade group, said utility groups have made a coordinated push across several Western states this session. He noted that more and more residents in fire-prone areas are going without insurance coverage, leaving them with no recourse if they can’t seek damages from a utility.

“Utilities are rightfully concerned that they’re gonna do something that causes a catastrophic wildfire,” he said. “The question we’ve been posing is, who should be responsible when that ultimately happens? [These bills] are really pushing that liability onto the people who can least afford it.” Several states are also considering a wildfire fund similar to the one California enacted in 2019. Such measures allow utilities to set aside money, funded by a mix of rate increases and shareholder contributions, which they can later tap into to help cover damages caused by wildfires. Marsh, the Oregon lawmaker, said her proposal would allow wildfire victims to quickly access funding to rebuild their lives. Residents would still have the option to forgo payouts from the fund and sue utilities for full damages. The bill died in committee amid opposition from wildfire victims who characterised it as a bailout for utilities.