A three-judge panel of the Sacramento Superior Court granted a petition filed by Pacific Gas and Electric Company (PG&E), reversing a previous decision that the utility could be liable for punitive damages related to a deadly 2015 wildfire in Jackson, California, also known as the Butte fire.
The Butte Fire started when a tree fell into one of PG&E's power lines, which led to more than 2,050 plaintiffs alleging that the utility failed to properly maintain the vegetation growth around its power lines.
The July 2 opinion states that "there are no triable issues of fact" that "could subject PG&E to punitive damages." The ruling notes PG&E's investments to mitigate fire hazards around its infrastructure.
PG&E and its parent company, PG&E Corp., announced in June they expect to pay at least $2.5 billion for the damage of 10 wildfires from 2017.
Last week's opinion is nevertheless a win, allowing the investor-owned utility to avoid punitive damages for a major 2015 fire. By affirming that malice could not be established in PG&E's risk management controls and fire mitigation efforts, the ruling could provide a legal precedent to support the utility regarding its potential liability for other wildfires, a Citi analyst told financial news publisher, The Fly.
Many of the large wildfires of 2017 started similarly to the 2015 Butte fire, with a tree coming into contact with PG&E power lines and creating a blaze with the resulting sparks during the dry season.
Cal Fire, the state's fire management agency, has so far reported that PG&E's electric equipment started 12 fires last October.The fires ultimately killed 18 people. The agency's research indicated that the utility violated state law governing vegetation management in eight of those wildfires.
The utility can be found responsible for fire damage if investigators determine it did not do enough to clear the vegetation around its equipment. To this point, PG&E and other large utilities have called for reform of the state's fire liability laws. While the July 2 court opinion did not address this point, a previous Superior court ruling in May specified that California's legislature should address whether investor-owned utilities should be liable for damages in a particular fire.
Some industry observers say that PG&E could face bankruptcy due to the liability costs from the 2017 fires. Southern California Edison (SCE) is also under investigation for its potential contributions to the 2017 fires.
A lot rests on state efforts to update utility fire liability rules — a process that Democratic Gov. Jerry Brown put in motion in March by releasing a plan that could reduce PG&E's risk for the consideration of the state legislature.
A potential update to the state's liability rules and regulations could benefit all investor-owned utilities, especially since the California Public Utilities Commission ruled last November that wildfire costs could not be passed on to ratepayers in a request from San Diego Gas & Electric.