CPUC Opens Rulemaking on Utility Wildfire Cost Recovery “Stress Test”

On January 18, the California Public Utilities Commission (CPUC) issued the Order Instituting Rulemaking (R.19-01-006), approved at its last voting meeting, opening proceedings aimed at addressing the complex question of how to incorporate consideration of the electric utilities’ financial well-being when reviewing wildfire-related costs.

This so-called “stress test” was mandated by Senate Bill 901, enacted last year in response to devastating wildfires in Northern and Southern California. By law, utilities may be found liable for property damage caused by utility facilities, and the CPUC has the authority to deny rate recovery for those costs if it finds a utility’s costs were not just and reasonable. As the scope of property damage and potential utility liability associated with wildfires has increased in the past two years, the California Legislature instructed the CPUC to design a method for determining the “maximum amount the corporation can pay without harming ratepayers or materially impacting its ability to provide adequate and safe service” and to take that into consideration in allocating costs between ratepayers and shareholders.

As a first step, the CPUC invites comments from interested parties on preliminary questions:

  • What factors or financial metrics should the Commission consider when examining an electrical corporation’s “financial status”?
  • How should the Commission define a “material impact” on a utility’s ability to provide safe and adequate service?
  • How should the Commission define harm to ratepayers?

Initial comments are due February 11. A prehearing conference is scheduled for February 20. The CPUC may contract with financial experts to advise on these issues.

Our attorneys are following all of the wildfire-related proceedings at the CPUC, the California Legislature, and courts.

For more information, contact Andy Brown or Ron Liebert.