On October 30, 2018, Southern California Edison (SCE) issued a press release acknowledging that their equipment started the Thomas Fire in at least one of the two locations identified as flashpoints. This admission is material, as SCE will now be exposed to an undetermined amount of liability from a variety of claims.
SCE simultaneously disclosed in its Form 10-Q Quarterly Report that the deductible limits of its $1 billion policy of wildfire-specific insurance coverage could result in significant uninsured costs which may not be recovered through electric service rates (i.e., our utility bill) should CPUC find that SCE did not “prudently manage its facilities.” Also disclosed was that “wildfire insurance expense (premiums), prior to any regulatory deferrals (us paying for it), will total approximately $237 million during 2018.”
For salvation, SCE looks to recently-passed SB 901, which lists various criteria to determine whether costs are recoverable in rates (us paying for it) for wildfires occurring on or after January 1, 2019. To set liability boundaries, SB 901 requires utilities to prepare annual wildfire risk mitigation plans, and an indication of SCE’s wildfire plan can be found in its recently filed Grid Safety and Resiliency Program (GS&RP): replacing nearly 600 miles of overhead power lines in high fire risk areas with insulated wire by the end of 2020 and another 3,400 miles of overhead lines with insulated wire between 2021 and 2025.
4,000 miles of insulated wire and of course, we’re paying for it.
In addition to all this additional cost, we are also facing the prospect of preemptive outages as part of utility “public safety power shutoff” policy. Examples include PG&E’s recent shutdown that affected 60,000 and SCE’s near power shutdown of 130,000 residents in four counties due to Santa Ana wind conditions. Given SCE’s liability exposure, one has to wonder how often these preemptive actions (and their collateral economic impacts) will be taken during these regularly occurring conditions.
One thing is certain: whatever the cost, we the ratepayers will foot the bill. Maybe a better use of those funds would be to develop local renewable energy generation and storage that doesn’t rely on power lines running through the hazardous wildfire zones that surround Santa Barbara County.
Food for thought.