Professional Documents
Culture Documents
S______
(Court of Appeal No. D074417)
JEFFREY N. BOOZELL (S.B. No. 199507) *KATHLEEN M. SULLIVAN (S.B. No. 242261)
QUINN EMANUEL URQUHART & SULLIVAN LLP DANIEL H. BROMBERG (S.B. No. 242659)
865 South Figueroa Street, 10th Floor QUINN EMANUEL URQUHART & SULLIVAN LLP
Los Angeles, California 90017 555 Twin Dolphin Drive, 5th Floor
Telephone: (213) 443-3000 Redwood Shores, CA 94065
Facsimile: (213) 443-3100 Telephone: (650) 801-5000
jeffboozell@quinnemanuel.com Facsimile: (650) 801-5100
kathleensullivan@quinnemanuel.com
danbromberg@quinnemanuel.com
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TABLE OF CONTENTS
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TABLE OF AUTHORITIES
Page(s)
CASES
Aetna Life & Cas. Co. v. City of Los Angeles
(1985) 170 Cal.App.3d 865 ................................................................................. 26
Aetna Life Ins. Co. v. Lavoie
(1986) 475 U.S. 813 .............................................................................................. 46
Albers v. Los Angeles Cnty.
(1965) 62 Cal.2d 250 ...................................................................................... 24, 35
Barham v. S. Cal. Edison Co.
(1999) 74 Cal.App.4th 744 ............................. 11, 12, 13, 25, 26, 27, 28, 31 33, 34
Belair v. Riverside Cnty. Flood Control Dist.
(1988) 47 Cal.3d 550 ............................................................................................ 23
Brown v. Legal Found. of Wash.
(2003) 538 U.S. 216 ........................................................................................ 32, 33
Bunch v. Coachella Valley Water Dist.
(1997) 15 Cal.4th 432 ........................................................................................... 35
E. Enters. v. Apfel
(1998) 524 U.S. 498 .............................................................................................. 32
Holtz v. Superior Court
(1970) 3 Cal.3d 296 ............................................................................ 11, 23, 28, 32
Johnson v. Mississippi
(1971) 403 U.S. 212 .............................................................................................. 46
Kaufman v. Court of Appeal
(1983) 31 Cal. 933 ................................................................................................ 45
Koontz v. St. Johns River Water Mgmt. Dist.
(2013) 570 U.S. 595 .............................................................................................. 32
Lesko v. Valley Presbyterian Hosp.
(1986) 180 Cal.App.3d 519 ................................................................................. 46
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Penn & Eavis, California Utility Customers May Be on Hook for Billions in
Wildfire Damage, N.Y. Times (Nov. 18, 2018) at
<https://www.nytimes.com/2018/11/14/business/energy-
environment/california-fire-utilities.html> [as of Nov. 24, 2018].) ......... 15, 40
Rating Action: Moody’s Changes San Diego Gas & Electric’s Rating Outlook to
Negative From Stable (Apr. 11, 2018) Moody’s Investors Service, at
<http://www.moodys.com/research/Moddys-changes-San-Diego-
Gas-Electric-rating-outlook-to-negative-PR_38074> [as of Nov. 24,
2018] ....................................................................................................................... 39
Rivas, PG&E: It’s Like Sticking a Fork in a Socket (Jan 2, 2018) Barron’s, at
https://www.barrons.com/articles/pg-e-its-like-sticking-a-fork-in-a-
socket-1514920990> [as of Nov. 24, 2018] ......................................................... 40
Ruvolo, California’s Amendment to Canon 3E of the Code of Judicial Conduct
Requiring Self-Recusal of Disqualified Appellate Justices—Will It Be
Reversible Error Not to Self Recuse?
(2003) 25 Thomas Jefferson L. Rev. 529 ............................................................ 47
San Diego Gas & Electric Company: Update following downgrade to A2 stable
(Sept. 10, 2018) Moody’s Investor Services, at
<https://www.moodys.com/research/Moodys-downgrades-San-
Diego-Gas-Electric-to-A2-from-A1--PR_388482> [as of Nov. 24,
2018] ....................................................................................................................... 40
Sempra Energy, Annual Report (Form 10-K), Feb. 27, 2018, at
<https://investor.sempra.com/static-files/c53628aa-4b86-47d7-b91a-
14e4e8bbc2bd> [as of Nov. 24, 2018] ........................................................... 37, 41
Shipman and Grosberg, Research Update: PG&E Corp. and Subsidiary
Downgraded to “BBB+’ on Contingent Liabilities; Still CreditWatch
Negative, RatingsDirect (Feb. 22, 2018) S&P Global Ratings ......................... 38
Smyth et al., Fitch Downgrades PG&E Corp v. and Sub. To ‘BBB+’; Places on
Ratings Watch Negative (Feb. 26, 2018) Fitch Ratings, at
<https://www.fitchratings.com/site/pr/10021816> [as of Nov. 24
2018] ....................................................................................................................... 39
Tani Cantil-Sakauye, C.J., State of the Judiciary Address to a Joint Session
of the California Legislature (Mar. 19, 2018) at <https://newsroom.
courts.ca.gov/news/2018-state-of-the-judiciary-address> [as of Nov.
24, 2018] ................................................................................................................. 42
Van Alstyne, Statutory Modification of Inverse Condemnation: The Scope of
Legislative Power (1967) 19 Stan. L. Rev. 727 ..................................................... 24
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TABLE OF AUTHORITIES
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Vives, Etehad and Cosgrove, Southern California's fire devastation is 'the new
normal,' Gov. Brown says, L.A. Times (Dec. 10, 2017) at
<http://www.latimes.com/local/lanow/la-me-socal-fires-2017120-
story-html> [as of Nov. 24, 2018] ....................................................................... 43
Yamamoto, Market Notes: Tuesday, December 12, 2017 (Dec. 12, 2017), at
<https://investitute.com/activity-news/market-notes-tuesday-
december-12-2017/> [as of Nov. 24, 2018] ........................................................ 39
9
PETITION FOR REVIEW
San Diego Gas & Electric Company (“SDG&E”) respectfully petitions this
Court to review the decision of the Fourth District Court of Appeal, Division
One, in San Diego Gas & Electric Company v. Public Utilities Commission (Nov. 13,
2018, D074417), attached as Exhibit A (“Order”). Because the decision was made
in a summary order and became final immediately, SDG&E filed no petition for
rehearing in the Court of Appeal. Pursuant to Rule 8.500, subd. (b)(1), this
ISSUES PRESENTED
such utilities, which have no taxation power and can increase rates only with the
recuse herself from a petition for review related to the subject matter of her suit?
10
INTRODUCTION
compensation from a public entity if its property is “damaged” for public use.
This Court has consistently explained that the “underlying purpose of [inverse
the individual by the making of the public improvements: to socialize the burden
296, 303 (Holtz), internal citations and quotation marks omitted.) When inverse
unilaterally recoup the costs from the benefited public though taxation or rate
increases.
contrast, the benefited public shares in the cost only if the CPUC approves
recovery of those costs through ratemaking. For this reason, Court of Appeal
utilities over the past two decades only on the express assumption that the CPUC
will spread the costs of that liability among ratepayers. (Barham v. S. Cal. Edison
11
Co. (1999) 74 Cal.App.4th 744, 752–753 (“Barham”); Pac. Bell Tel. Co. v. S. Cal.
Edison Co. (2012) 208 Cal.App.4th 1400, 1407 (“Pacific Bell”).) Indeed, Pacific Bell
expressly noted that it could find no “evidence … that the commission would not
In the orders below, the CPUC and the Fourth District Court of Appeal
have now provided exactly that evidence, creating a square conflict with Barham
its jurisdiction over rate recovery, the CPUC applied its “prudent manager”
Fourth District summarily denied SDG&E’s petition for review, stating (per
Benke, J.) that “[t]he Commission’s determination that the principals [sic] of
inverse condemnation did not bar its prudent manager analysis under section
451 was not in excess of its powers, nor a violation of the law.” (Order, p. 2.)
12
Privately owned utilities like SDG&E are now caught in a legal whipsaw
between two conflicting lines of decision. On the one hand, they are subject to
decisions in Barham and Pacific Bell, which assumed that the costs of that liability
hand, the Court of Appeal has now approved the CPUC’s decision that it need
not take a privately owned utility’s strict liability for inverse condemnation into
account in rate recovery, and may instead deny such recovery under its “prudent
reconcile its ruling with Barham and Pacific Bell. This Court’s review is necessary
pressing and important question of law. Privately owned utilities serve over 75
percent of the State’s residents across 75 percent of the State’s territory, and play
13
a vital role in the State and its economy. And inverse condemnation claims
California become more endemic and severe. Thousands of plaintiffs have filed
owned utilities in Butte Fire Cases (Super. Ct. Sacramento County, No. JCCP
4853), Southern California Fire Cases (Super. Ct. Ventura County, No. JCCP 4965)
and California North Bay Fire Cases (Super. Ct. S.F. City and County, No. JCCP
4995), and thousands more inverse condemnation claims may well be filed in the
14
capitalization eroded and their credit downgraded in the aftermath of the
CPUC’s decision. This looming crisis has captured national media attention. 1
Nor has there been any legislative resolution of the issue. In summer 2018,
Governor Brown—who has recognized that wildfires are the “new normal” in
have replaced strict liability for inverse condemnation with a reasonableness test
legislature failed to adopt the Governor’s proposal, instead enacting a law that
largely preserved the existing approach to rate recovery. (See Pub. Util. Code, §§
451.1, 451.2, as amended by Stats. 2018, ch. 626 §§ 26, 27.) Only this Court,
therefore, can resolve the conflict and address the pressing statewide problem
that has been created by the Court of Appeal in extending the application of
1 See, e.g., Penn & Eavis, California Utility Customers May Be on Hook for
Billions in Wildfire Damage, N.Y. Times (Nov. 18, 2018) at
<https://www.nytimes.com/2018/11/14/business/energy-environment/california-
fire-utilities.html> [as of Nov. 24, 2018].).
15
STATEMENT OF THE CASE
A. Background
to over 3.4 million customers in San Diego County and southern Orange County.
(1App497, 500.) SDG&E owns and operates nearly 19,000 miles of electrical
practices, SDG&E has multiple programs to mitigate and reduce wildfire risk,
Program, which the CPUC described as “robust” (31App11813) and has been
with reported wind speeds of 40 to 60 miles per hour and gusts up to 100 miles
per hour. (1App382; 31App11787, fn. 30.) As these winds swept across Southern
California, they caused hundreds of fires, only some of which the thinly
16
stretched firefighting resources were able to contain and which burned over
October 21, 2007 in a remote backcountry area of San Diego County, combined
with the Guejito Fire, which ignited the following day, to burn nearly 200,000
acres and damage over 1,140 homes. (31App11786, 11789, 11804.) The Rice Fire
also ignited on October 22, 2007 and burned nearly 9,500 acres and damaged
the Witch, Guejito, and Rice Fires filed more than 2,500 lawsuits against SDG&E,
filed by SDG&E, the Superior Court held that the inverse condemnation claims
could be brought against privately owned utilities such as SDG&E. (See Minute
Order, In re 2007 Wildfire Insurer Litig. (Super. Ct. San Diego County, Jan. 29,
17
damages, SDG&E was able to resolve those claims with payments totally only
$2.4 billion. (1App57.) SDG&E recovered $1.1 billion from its liability insurers
and another $824 million from settlements with third parties based on cross-
claims it had filed, leaving SDG&E with $476 million in unrecovered settlement
San Diego Gas & Elec. Co. (2014) 146 FERC ¶ 63017 [2014 WL 713556].) In so
doing, FERC held that recovery was warranted without regard to the prudence
that SDG&E would have been held liable under California inverse condemnation
law without regard to fault, and that, “[b]y settling, SDG&E avoided facing
considerable litigation risk and disposed of the claims for significantly less than
18
B. The CPUC’s Decision Denying Recovery
not all of the unrecovered settlement payments—in the rates under the CPUC’s
ground that SDG&E had failed to prove that its operation and management of
the facilities connected with the Witch, Guejito, and Rice Fires satisfied the
standard, the CPUC deemed the fact that SDG&E had been subjected to strict
19
condemnation to private utilities, and deeming “unsound” the premise that
utilities will be able, as prior judicial decisions had assumed, to “socialize[]” the
that is not guaranteed to recover its costs increases those utilities’ capital and
The concurrence therefore urged the courts and the Legislature to reconsider
(31App11850.)
SDG&E applied for rehearing, which the CPUC denied on July 13, 2018.
arguments of SDG&E and the intervenors that the standard does not apply to
The CPUC declined to harmonize section 451 with the judicial precedents
that had subjected private utilities to inverse condemnation claims on the express
assumption that the CPUC would spread inverse condemnation costs among the
20
ratepayers. (31App12316–12319.) Deeming itself bound to apply its “prudent
manager” standard, the CPUC did not consider whether applying the standard
SDG&E filed a petition for review with Division One of the Fourth
three-page order entered by Acting Presiding Justice Benke, the Fourth District
denied the petition and declined to issue a writ of review. In so doing, the Court
of Appeal did not address the judicial decisions that had for two decades
that resulting costs would be recovered through the ratemaking process. Nor
harmonizing section 451 of the Public Utilities Code with those decisions.
21
The Commission’s determination that the
princip[les] of inverse condemnation did not bar its
prudent manager analysis under section 451 was not in
excess of its powers, nor a violation of the law,
including the Constitutions of the United States and
California. Contrary to SDG&E’s assertion, the
Commission’s review was statutorily mandated, and no
legal authority authorized it to forgo it obligations
under section 451. Of note, SDG&E settled the inverse
condemnation claims in the wildfire litigation rather
than continue to advance its position that it could not be
held strictly liable as a non-governmental entity.
Further, had the Commission determined that SDG&E
acted as a prudent manager, the costs could have been
passed onto the ratepayers regardless of any potential
strict liability in a civil litigation setting.
(Order, p. 2.) The court rejected SDG&E’s challenges to the CPUC’s causation
damaged for a public use … only when just compensation, ascertained by a jury
unless waived, has first been paid to, or into court for, the owner.” (Cal. Const.,
22
art. I, § 19, subd. (a).) An inverse condemnation action allows private property
across the members of the public benefited by the improvement, as this Court’s
is to distribute throughout the community the loss inflicted upon the individual
single member of the community,’” quoting Pac. Bell v. City of San Diego (2000) 81
Cal.App.4th 596, 602]; Belair v. Riverside Cnty. Flood Control Dist. (1988) 47 Cal.3d
23
the loss inflicted upon the individual,” internal citation and quotation omitted];
Power (1967) 19 Stan. L. Rev. 727, 738 [the purpose of inverse condemnation is to
ensure that losses are “distributed over the taxpayers at large rather than …
condemnation may not be able recover those costs from the ratepaying public.
That holding creates a conflict with prior Court of Appeal precedents that
privately owned utilities even though, unlike government entities and public
utilities (see, e.g., Albers v. Los Angeles Cnty. (1965) 62 Cal.2d 250, 263 (Albers);
Belair, supra, 47 Cal.3d at p. 567), privately owned utilities are not backstopped by
the coercive power of taxation or the unilateral power to set their own rates, and
can increase rates only with permission of the CPUC. The Court of Appeal
24
decisions so extending inverse condemnation (Barham, supra, 74 Cal.App.4th at
p. 753; Pacific Bell, supra, 208 Cal.App.4th at pp. 1404–1408) were expressly
premised on the assumption that the CPUC would allow privately owned
to the ratepayers who benefit from the provision of electrical power transmission
and distribution.
For example, in Barham, the Fourth District Court of Appeal held that a
inverse condemnation” just the same “as a public entity.” (Barham, supra, 74
power transmission allegedly damaging the property of the plaintiff in that case
was “for the benefit of the public.” (Id. at pp. 752, 754.) But Barham ruled that
condemnation. (Id. at p. 753, citing Marshall v. Dep’t of Water & Power (1990) 219
25
Cal.App.3d 1124; Aetna Life & Cas. Co. v. City of Los Angeles (1985) 170 Cal.App.3d
865.)
inverse condemnation liability against SCE based on the express assumption that
privately owned utilities are able to spread the cost of inverse condemnation
liability to the ratepaying public. (208 Cal.App.4th at pp. 1404–1408.) SCE there
not apply to privately owned utilities because such utilities “do[] not have taxing
authority and may raise rates only with approval of California’s Public Utilities
Commission.” (Id. at p. 1407.) But the Second District rejected this argument,
relying on Barham and finding that SCE had “not pointed to any evidence to
support its implication that the [CPUC] would not allow [SCE] adjustments to
In stark conflict with Barham and Pacific Bell, the CPUC held below that
recovery processes, and denied recovery to SDG&E on the ground that SDG&E
26
(31App11840, 11844–11847.) The CPUC’s own members acknowledged the
order solidifies the conflict with Barham and Pacific Bell. The order does not deny
that Barham and Pacific Bell extended inverse condemnation liability to privately
owned utilities on the assumption that the resulting costs would be recoverable
through ratemaking. But it does not mention or resolve the conflict with those
princip[les] of inverse condemnation did not bar its prudent manager analysis
under section 451” did not exceed its powers or violate the law. (Order, p. 2.)
This Court’s review is required to address this conflict, which the CPUC’s
27
B. The Decision Below Errs In Its Construction Of Public Utilities
Code Section 451
This Court’s review is also needed to harmonize Barham and Pacific Bell
with section 451 of the Public Utilities Code, which authorizes utilities to recover
“just and reasonable” costs. (Pub. Util. Code, § 451; see also Pacific Tel. & Tel. Co.
v. P.U.C. (1965) 62 Cal.2d 634, 647 [CPUC has power to “disallow[] expenditures
that [it] finds unreasonable”].) Under any proper construction of that provision,
it is “just and reasonable” for ratepayers to bear the costs of a privately owned
prudence or fault.
inverse condemnation costs when Barham and Pacific Bell imposed those costs
upon privately owned utilities on the express premise that they would be able to
28
at p. 925, citation and quotation marks omitted.) Requiring SDG&E alone to bear
head: Rather than spreading the costs incurred by a small group to a large group
allowed SDG&E to recover a portion of the payments at issue here in rates under
FERC’s jurisdiction. (See In re San Diego Gas & Elec. Co. (2014) 146 FERC ¶ 63017
[2014 WL 713556].) Like the CPUC, FERC is statutorily required to permit only
charges that are “just and reasonable.” (16 U.S.C. § 824d(a).) FERC found
SDG&E’s inverse condemnation payments just and reasonable. FERC ruled that
the settlement payments were “rational and prudent” and therefore recoverable
because “SDG&E would likely have been held responsible for such costs
avoided facing considerable litigation risk and disposed of the claims for
29
significantly less than the amount demanded by the claimants.” (In re San Diego
Gas & Elec. Co., supra, 146 FERC ¶ 63017, pp. 66112–66113.) Moreover, FERC
expressly stated that it would have reached this conclusion even if SDG&E’s
conduct of its operations had not been found prudent. (Id. at p. 66112.)
Ignoring FERC’s decision, the Fourth District asserted that the CPUC was
required to apply the prudent manager standard because “no legal authority
authorized it to forgo its obligation under section 451.” (Order, p. 2.) Section
451, however, requires that costs be “just and reasonable,” not that they satisfy
the “prudent manager” standard, and while the CPUC uses that standard to
determine whether costs are just and reasonable, it has recognized that section
451 does not always require application of the “prudent manager” standard. In
considering hazardous waste cleanup expenses, for example, the CPUC found
that a utility had not shown the reasonableness of its expenses under the
“prudent manager” standard. (See In re S. Cal. Gas Co. (1992) 46 CPUC.2d 242,
244.) But, rather than denying all recovery, the CPUC requested comments on
procedure may not be the best vehicle for determining rate recovery of Hazwaste
30
cleanup expenses” because it is difficult to prove the reasonableness of
hazardous waste expenses. (Id. at p. 247.) Moreover, when utilities and the
prudence review, the CPUC adopted it. (In re S. Cal. Gas Co. (1994) 54 CPUC.2d
391, 397 [ruling the procedure “fair to both shareholders as well as ratepayers”].)
manager” standard, which would resolve the conflict between the decision
would raise serious constitutional questions under the Takings Clauses of the
California Constitution (Cal. Const., art. I, § 19, subd. (a)), and the United States
Constitution (U.S. Const., 5th and 14th Amends.). Construing section 451 as the
Court of Appeal did thus would violate the classic canon that statutes should be
31
construed to avoid, not create, constitutional problems. (See, e.g., People v.
condemnation costs would violate the state and federal Takings Clauses by
forcing SDG&E “alone to bear public burdens which, in all fairness and justice,
should be borne by the public as a whole.” (E. Enters. v. Apfel (1998) 524 U.S. 498,
522 (plur. opn.), citation and quotation marks omitted; see Holtz, supra, 3 Cal.3d
privately owned utilities presumes the ability to spread “the costs of a public
Johns River Water Mgmt. Dist. (2013) 570 U.S. 595, 614 [fee connected with permit
for use of specific property]; see also Brown v. Legal Found. of Wash. (2003) 538
U.S. 216, 232 [interest on specific fund]; Webb’s Fabulous Pharmacies, Inc. v.
32
Beckwith (1980) 449 U.S. 155, 163–164 [same]; Ponderosa Tel. Co. v. P.U.C. (2011)
ratepayers].)
examine three factors: (1) “’[t]he economic impact of the regulation on the
claimant’”; (2) “’the extent to which the regulation has interfered with distinct
balances the “’benefits and burdens of economic life to promote the common
good.’” (Lingle v. Chevron U.S.A. Inc. (2005) 544 U.S. 528, 538–539, quoting Penn
Central Transp. Co. v. New York City (1978) 438 U.S. 104, 124.) Those factors are
privately owned utilities because Barham and Pacific Bell imposed inverse
condemnation liability on them only on the express assumption that the resulting
33
costs would be recovered from ratepayers. (Pacific Bell, supra, 208 Cal.App.4th at
pp. 1407–1408; Barham, supra, 74 Cal.App.4th at pp. 752–753.) And, far from
independent judgment on the law and the facts” where a CPUC order is
challenged on constitutional grounds (Pub. Util. Code, § 1760), the order simply
For all these reasons, this Court’s review is necessary to secure uniformity
of decision.
Review should also be granted for the additional reason that the conflict
between the decision below and the decisions in Barham and Pacific Bell creates
34
Pacific Bell subject privately owned utilities to inverse condemnation’s expansive
strict liability on the assumption that resulting costs will be recovered through
ratemaking. But at the same time, the CPUC and Fourth District orders below
hold that recovery for inverse condemnation costs will be denied to privately
owned utilities unless they can satisfy the restrictive requirements of the CPUC’s
liability” rule under which damages are imposed without regard to fault. (Bunch
v. Coachella Valley Water Dist. (1997) 15 Cal.4th 432, 440.) Moreover, this liability
under inverse condemnation, a defendant may be held liable for “any physical
35
injury to real property proximately caused by a public improvement as
deliberately designed and constructed, whether or not that injury was foreseeable,
and in the absence of fault.” (Marshall v. Dept. of Water & Power, supra, 219
costs is severely restricted. Privately owned utilities are not allowed to recover
all costs that they incur, but only those costs “prudently incurred by competent
management exercising the best practices of the era, and using well-trained, well-
informed, and conscientious employees who are performing their jobs properly.”
CPUC’s satisfaction that it has met this requirement (31App11784), a burden that
“rests heavily upon a utility” (In re Southern California Edison (1990) 37 CPUC.2d
488, 499).
condemnation while barring recovery of the costs of that liability under the
36
condemnation liability ever faces a similar dilemma—to the contrary, they may
recover such costs unilaterally through the power of coercive taxation or their
peril that threatens grave harm to the California economy and underscores the
condemnation liability will increase the cost of insurance and eventually may
2 Sempra Energy, Annual Report (Form 10-K), Feb. 27, 2018, at p. 51, at
<https://investor.sempra.com/static-files/c53628aa-4b86-47d7-b91a-
14e4e8bbc2bd> [as of Nov. 24, 2018]; CPUC Webinar on Impacts of Climate
Change and Resulting Resiliency Challenges (C.P.U.C. Feb. 7. 2018), at 48:26-
48:42, at <http://adminmonitor.com/ca/cpuc/other/20180207/> [as of Nov. 24,
2018] [noting difficulty in obtaining insurance].)
37
and the rates charged consumers will rise as a result. 3 Indeed, according to a
increases the costs of capital for privately owned utilities. When the CPUC issued
the order below denying SDG&E recovery, market analysts commented that
and warned that the utilities would experience a “material increase in their cost
“negative,” noting that the CPUC’s decision denying SDG&E rate recovery
3 Cal. Assembly Comm. on Utils. & Energy (Feb. 26, 2018), at 1:04:2-
1:04:58 (testimony of CPUC President and Commissioner Michael Picker) at
<http://assembly.ca.gov/media/assembly-utilities-energy-committee-
20180226/video> [as of Nov. 24, 2018].
4Howard, Utilities to fight climate risk via insurance upgrades (Nov. 14, 2018)
2018 CQFENRPT 1672.)
5 Arnold, CPUC Denies SDG&E Wildfire Recovery; Notes “Incorrect
Premise”of IC Doctrine (Nov. 30, 2017) Deutsche Bank, at p. 3.
38
would cause “higher regulatory risk for investor-owned utilities in California
due to inverse condemnation exposure and the uncertainty that they will be able
downgraded privately owned utility PG&E and its parent PG&E Corporation
because the CPUC decision in this case “exposes a utility to a significant risk of
not recovering wildfire costs.”8 Following the CPUC’s decision, another analyst
wrote that California utilities were “uninvestable right now” because there were
“too many unknowns and significant risk.” 9 More recently, SDG&E’s credit
7 Rating Action: Moody’s Changes San Diego Gas & Electric’s Rating Outlook
to Negative From Stable (Apr. 11, 2018) Moody’s Investors Service, at p. 1, at
<http://www.moodys.com/research/Moddys-changes-San-Diego-Gas-Electric-
rating-outlook-to-negative-PR_38074> [as of Nov. 24, 2018].
8 Shipman and Grosberg, Research Update: PG&E Corp. and Subsidiary
Downgraded to “BBB+’ on Contingent Liabilities; Still CreditWatch Negative,
RatingsDirect (Feb. 22, 2018) S&P Global Ratings, at p. 3; see also Smyth et al.,
Fitch Downgrades PG&E Corp v. and Sub. To ‘BBB+’; Places on Ratings Watch
Negative (Feb. 26, 2018) Fitch Ratings, at <https://www.fitchratings.com/
site/pr/10021816> [as of Nov. 24 2018]; Rivas, PG&E: It’s Like Sticking a Fork in a
Socket (Jan 2, 2018) Barron’s, at <https://www.barrons.com/articles/pg-e-its-like-
sticking-a-fork-in-a-socket-1514920990> [as of Nov. 24, 2018].
9 Yamamoto, Market Notes: Tuesday, December 12, 2017 (Dec. 12, 2017), at
<https://investitute.com/activity-news/market-notes-tuesday-december-12-2017/>
[as of Nov. 24, 2018].
39
rating was downgraded on the ground that “the application of strict liability
owned utilities have suffered plunges in their stock prices in the aftermath of
California’s economy. Such utilities are vital to the lifeblood of the State. They
employ more than 40,000 California workers and provide electric power to over
10 San Diego Gas & Electric Company: Update following downgrade to A2 stable
(Sept. 10, 2018) Moody’s Investor Services, at p. 1, at
<https://www.moodys.com/research/Moodys-downgrades-San-Diego-Gas-
Electric-to-A2-from-A1--PR_388482> [as of Nov. 24, 2018].
11 See Penn & Eavis, California Utilities May Be on the Hook for Billions in
Wildfire Damages, N.Y. Times, supra [noting the sharp decline in PG&E’s stock
price in light of the Camp Fire, and noting further that “[s]hares of the parent
companies of the state’s other investor-owned utilities—Edison International,
which operates Southern California Edison, and Sempra Energy, which owns San
Diego Gas and Electric—also dropped earlier this week as wildfires spread in
both Northern and Southern California”].
40
than three-quarters of the territory of the State.12 They also play an important
renewable energy, meaning that the financial health of privately owned utilities
for inverse condemnation while the CPUC is permitted to deny recovery of the
unreimbursed costs of that liability, their increased costs of capital and insurance
41
These problems will only get worse as wildfires (and wildfire litigation)
Department of Forestry and Fire Protection (“Cal Fire”) have warned that recent
trends “’reflect a major shift in wildfires, one … seen over the past 10 years”
They also have cautioned that fire season could now persist year-round. 15 Thus,
as the Chief Justice recognized earlier this year, the State is facing an “onslaught”
of wildfire cases,16 and the recent Camp and Woolsey Fires will likely generate
the future. By the end of this century, temperatures in the United States are
14 Pamer & Espinosa, KTLA5 News, ‘We Don’t Even Call It Fire Season
Anymore ... It’s Year Round’: Cal Fire (Dec. 11, 2017) at < http://ktla.com/
2017/12/11/we-dont-even-call-it-fire-season-anymore-its-year-round-cal-fire/> [as
of Nov. 24, 2018].
15 Ibid.
16 Tani Cantil-Sakauye, C.J., State of the Judiciary Address to a Joint
Session of the California Legislature (Mar. 19, 2018) at <https://newsroom.
courts.ca.gov/news/2018-state-of-the-judiciary-address> [as of Nov. 24, 2018].
42
expected to rise another 3.5 degrees Celsius,17 or over 6 degrees Fahrenheit. The
not linear, meaning that each degree increase in temperature may herald a much
of the twenty most destructive wildfires in California since 1932, five occurred in
2017, and thirteen after 2000, including the five largest. 19 As Governor Brown
solution has not been forthcoming. Although the Legislature recently passed
43
legislation concerning wildfire cost recovery (Stats. 2018, ch. 626, §§ 26–27, 32), it
proposed. The Legislature thus left the legal whipsaw squarely in place. 21
The new legislation instead expressly disclaims any change in civil liability
standards. (See Pub. Util. Code, § 451.1, subd. (c), added by Stats. 2018, ch. 626,
§ 26 [“This section shall not affect any civil action, appeal, or other action or
the commission in its decisions” (id., § 451.1, subd (a)(12)), and even then only for
Accordingly, this Court should grant review because of the profound harm
the decision below threatens to California businesses, consumers and the State’s
21 See, e.g., Nikolewski Governor Brown Backs Liability Changes for California
Utilities in Wildfires The San Diego Union-Tribune (July 25, 2018) at
<http://www.sandiegouniontribune.com/business/energy-green/sd-fi-wildfire-
hearing-20180724-story.html> [as of Nov. 24, 2018]
44
economy in the face of the mounting onslaught of wildfire-related inverse
The decision below also warrants review because Justice Patricia Benke,the
acting presiding justice who entered the order summarily denying SDG&E’s
petition for review, had previously sued SDG&E in one of the disputes leading to
the request that the CPUC denied. SDG&E had no opportunity to request her
recusal before the Court of Appeal because her participation in the case was not
apparent until the order issued, and the order became final immediately upon
filing. (See Cal. Rules of Court, rule 8.268, subd. (a)(1) [prohibiting petitions for
rehearing from immediately final orders]; see also Kaufman v. Court of Appeal
(1983) 31 Cal. 933, 940 [Supreme Court may review failure of appellate justices to
recuse].)
On October 14, 2009, Justice Benke and her husband sued SDG&E alleging
that they lost their house in the Guejito Fire as a result of SDG&E’s negligence
45
action.22 The Code of Judicial Ethics requires justices to recuse themselves when
“the circumstances are such that a reasonable person would doubt the justice’s
prior suit against a party in matters relating to the suit before the justice is
plainly one of those circumstances. (See Johnson v. Mississippi (1971) 403 U.S. 212,
215–216 [requiring recusal of judge sued by party in prior civil action]; see also
Lesko v. Valley Presbyterian Hosp. (1986) 180 Cal.App.3d 519, 529 [requiring recusal
he is determining”].)
Especially as Justice Benke not only acted as the presiding justice and
entered the decision below but did so in a conclusory summary order, her failure
to recuse was prejudicially unfair and should be reviewed. (See Aetna Life Ins.
Co. v. Lavoie (1986) 475 U.S. 813, 830–833 (conc. opn. of Brennan, J.) [Participation
of a judge with a bias “of which he knows at the time he participates necessarily
46
imports a bias into the deliberative process.”]; see also Ruvolo, California’s
25 Thomas Jefferson L. Rev. 529, 558 [anticipating that California courts will rule
CONCLUSION
The petition for review should be granted and the questions presented
By:
Kathleen M. Sullivan
Daniel H. Bromberg
Jeffrey N. Boozell
Counsel for Petitioner Pacific Gas and
Electric Company
47
CERTIFICATE OF COMPLIANCE
certify that, according to the word count feature of the software used, this
Petition for Review contains 7,144 words, exclusive of materials not required to
Kathleen M. Sullivan
48
EXHIBIT A: COURT OF APPEAL ORDER
49
COURT OF APPEAL, FOURTH APPELLATE DISTRICT Court of Appeal
Fourth Appellate District
FILED ELECTRONICALLY
DIVISION ONE 11/13/2018
Kevin J. Lane, Clerk
By: Michael Hubbard
STATE OF CALIFORNIA
Respondent;
THE COURT:
The petition for writ of review filed by San Diego Gas & Electric Company
(SDG&E) and the accompanying exhibits, the answers filed by real parties in interest
Protect Our Communities Foundation (POCF) and Ruth Henricks, the answer filed by the
California Public Utilities Commission, and the reply to answers filed by SDG&E have
been read and considered by Justices Benke, O'Rourke, and Dato.
1
" ' "[A]ny aggrieved party [to a decision of the Commission] may petition for a
writ of review in the court of appeal . . . ." ' " (SFPP, L.P. v. Public Utilities Commission
(2013) 217 Cal.App.4th 784, 793 (SFPP).) "[W]hen 'writ review is the exclusive means
of appellate review of a final order or judgment, an appellate court may not deny an
apparently meritorious writ petition, timely presented in a formally and procedurally
sufficient manner, merely because, for example, the petition presents no important issue
of law or because the court considers the case less worthy of its attention than other
matters.' [Citation.] We are not, however, 'compelled to issue the writ if the
[Commission] did not err . . . .' " (Ibid.)
"The limited grounds and standards for our review are set forth in section 1757,
subdivision (a). 'No new or additional evidence shall be introduced upon review by the
court. In a complaint or enforcement proceeding, or in a ratemaking or licensing decision
of specific application that is addressed to particular parties, the review by the court shall
not extend further than to determine . . . whether any of the following occurred: (1) The
commission acted without, or in excess of, its powers or jurisdiction. (2) The
commission has not proceeded in the manner required by law. (3) The decision of the
commission is not supported by the findings. (4) The findings in the decision of the
commission are not supported by substantial evidence in light of the whole record. (5)
The order or decision of the commission was procured by fraud or was an abuse of
discretion. (6) The order or decision of the commission violates any right of the
petitioner under the Constitution of the United States or the California Constitution.' "
(SFPP, supra, 217 Cal.App.4th at pp. 793-794.)
" 'There is a strong presumption favoring the validity of a Commission decision.' "
(SFPP, supra, 217 Cal.App.4th at p. 794.) " 'Generally, we give presumptive value to a
public agency's interpretation of a statute within its administrative jurisdiction because
the agency may have "special familiarity with satellite legal and regulatory issues,"
leading to expertise expressed in its interpretation of the statute. [Citation.] Therefore,
"the PUC's 'interpretation of the Public Utilities Code should not be disturbed unless it
fails to bear a reasonable relation to statutory purposes and language . . . .' " ' " (Ibid.)
2
In addition, the exhibits submitted by SDG&E do not support its assertion that the
Commission's findings under section 451 were not supported by sufficient evidence.
Specifically, the record contains substantial evidence showing both that SDG&E's
facilities caused all three of the wildfires at issue, and that SDG&E did not meet its
burden to show that it reasonably and prudently operated and maintained those facilities.
(See Toward Utility Rate Normalization v. Public Utilities Com. (1978) 22 Cal.3d 529,
537 ["The findings of fact by the Commission are to be accorded the same weight that is
given to jury verdicts and the findings are not open to attack for insufficiency if they are
supported by any reasonable construction of the evidence."].)
In sum, SDG&E has failed to demonstrate that the Commission erred on the
claims it asserts. Under these circumstances, we decline to issue the writ of review.
(Pacific Bell v. PUC (2006) 140 Cal.App.4th 718, 729.) The petition is denied. The
application of Southern California Edison Company and Pacific Gas and Electric
Company for leave to file an amicus curiae brief is denied as moot.
BENKE, Acting P. J.