Fire Insurance | San Bruno Blast: PG&E Backs Bid To Bill Public
September 15, 2010 – 1:56 am
(09-13) 19:43 PDT SAN FRANCISCO –State regulators will take their first look today at a proposal backed by Pacific Gas and Electric Co. that would require customers to pay all costs of catastrophic fires, such as last week’s gas-line explosion in San Bruno, that exceed a utility’s insurance coverage.
It’s not clear whether the plan, if approved by the state Public Utilities Commission, would trigger a PG&E rate increase to help pay the utility’s cost from Thursday’s disaster. In a filing Monday with the U.S. Securities and Exchange Commission, the utility said it has $992 million in fire insurance and a $10 million deductible, and “believes that most of the costs related to the San Bruno event will be covered.”
Even if the company has enough insurance, however, the proposal would make rate hikes more likely if PG&E caused fires in the near future.
Under current rules, utilities in California can seek a rate increase if the costs of a disaster exceed their insurance coverage. But the PUC can veto the request and force utility shareholders to pay the bill.
The new proposal would require utility customers to bear the uninsured costs of catastrophic fires. It is titled a “wildfire expense balancing account,” but the application defines “wildfire” to include any uncontrolled fire, urban or rural, that is larger than an acre and destroys houses or other buildings.
San Diego Gas & Electric Co. introduced the proposal in August 2009 in response to fires in 2007 that caused more than $1 billion in damage. The utility intended to address “wildfires in Southern California caused by extreme weather conditions,” said a spokeswoman for the company, Stephanie Donovan.
But Nicholas Sher, a lawyer in a Public Utilities Commission staff division that opposes the plan, said the San Bruno explosion and fire “would fit within the wildfire definition.”
He also said the proposal would allow utilities to charge its customers for the costs of past fires – possibly including San Bruno.
A PUC commissioner and a hearing officer will preside over today’s session in San Francisco, the first step in a process that could lead to a commission vote next spring or summer.
PG&E and California’s other investor-owned utilities say the change is needed because disaster insurance is becoming more
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