California Utilities Say Climate Change Caused Recent Fires, Not Them

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Ultimately, insurance companies and liability lawyers may do what James Hansen, Michael Mann, the Paris climate accords, Jerry Brown, the Union of Concerned Scientists, and a carbon tax cannot. When insurers jack up their premiums to cover the cost of climate change related harm — from rising sea levels to more powerful storms to fires and floods — that’s the moment in time when all the debate about climate change and junk science will come to an end. That’s when the horror of the disaster humanity has wrought by its own hand will become real. Banks won’t loan money on projects that can’t get insurance. No loans, no commerce. Simple as that. Over and done with. Finis.

climate change and wild fires

Who Pays?

This scenario is playing out right now in California, where the state’s largest public utility companies are defending themselves against lawsuits claiming they were negligent in the way they removed debris and brush from beneath their wires and transmission lines. The suits allege that negligent behavior caused or contributed to the horrific forest fires that swept through various parts of California the last few years. Utility companies are forbidden by law from automatically passing on losses not covered by insurance to their customers without permission from the state’s PUC. If they lose the lawsuits that have been filed against them, they could be in serious financial trouble.

According to a report in Think Progress, “What the California utilities are facing is that large wildfires can bankrupt them if they can’t pass on the cost, if the size of potential liabilities exceed the value of the companies,” says Lucas Davis, a professor of economic analysis and policy at University of California’s Haas School of Business.

At the most recent earnings call for Pacific Gas & Electric, whose service area includes San Francisco and the Bay Area, CEO Geisha Williams emphasized that lawmakers and regulators need to take action to protect the utility industry from losses before the state experiences another fire season. “Over the long term, not addressing this issue has grave implications to the industry’s financial health and our ability to attract affordable capital needed not only for California to meet its clean energy goals but for us to continue to deliver on our priorities of safe, reliable, affordable and clean energy for our customers,” she said.

Liability And Stock Prices

Williams is right. Already Fitch Ratings, a stock rating service, has downgraded its ratings of PG&E’s stock to reflect the company’s potential exposure to damages for the “unprecedented 2017 wildfires across large swaths of the utility’s service territory and seemingly absent legislative support for recovery of such costs.” Reducing a company’s stock rating has a follow-on effect. It makes it harder for the company to attract investors and much needed capital. That, in turn, could spell trouble for the utility industry in general.

Late last year, the California public utilities commission denied a request by San Diego Gas & Electric to pass along about $380 million in losses over and above its insurance coverage from a fire that occurred in 2007. The company is appealing that ruling. Ari Vanrenen, a spokesperson for PG&E, tells Think Progress, “Allowing essentially unlimited liability undermines the financial health of the state’s utilities, discourages investment in California, and has the potential to materially impact the ability of utilities to access the capital markets to fund utility operations. All of these are bad for customers and bad for the state of California.”

Is Climate Change To Blame?

The utilities insist the real culprits are warmer temperatures and lack of rain caused by climate change, conditions over which they have no control. They have a point. In a way, it is refreshing to hear major corporations dare to mention climate change, a subject that is anathema to the current administration. If the utility companies really want to press their claim, they should be standing shoulder to shoulder with the cities of San Francisco and Oakland, which are suing 5 major oil companies for the money they say will be needed to protect residents of the San Francisco Bay Area from the ravages of climate change attributable to rising sea levels.

Apportioning financial responsibility for destroying the environment by extracting, transporting, and burning fossil fuels will become a major issue in coming years. Companies that made trillions in profits by poisoning the Earth, the oceans, and the skies will be called to account for their actions. After all that has been written and said about climate change, the tipping point will come when corporations have to start ponying up cold hard cash to atone for their sins. You can almost feel a crack in the dam of deniability around the fossil fuel companies has occurred. Soon, the vultures who lined their pockets for decades with the wages of greed will be swept away by the tide, both literally and figuratively.

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Steve Hanley

Steve writes about the interface between technology and sustainability from his home in Florida or anywhere else The Force may lead him. He is proud to be "woke" and doesn't really give a damn why the glass broke. He believes passionately in what Socrates said 3000 years ago: "The secret to change is to focus all of your energy not on fighting the old but on building the new."

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