U.S. Supreme Court Rejects Dispute Over 2007 California Wildfire Payouts

The U.S. Supreme Court on Monday declined to hear a bid by Sempra Energy’s San Diego Gas & Electric Co to recover $379 million from customers related to damages it was forced to pay out in litigation after the deadly 2007 California wildfires that burned hundreds of homes.

After state courts turned away the utility’s challenge to a decision by California regulators to prohibit it from raising utility rates to compensate for the payouts because it had improperly maintained its equipment, the Supreme Court opted not to hear San Diego Gas & Electric’s appeal. The utility had accused state regulators of violating the U.S. Constitution’s bar on the government taking property without compensation.

The court’s action came on the first day of its new term.

The case was being closely watched for its parallels to the catastrophic wildfires that swept through California in 2017 and 2018 that pushed into bankruptcy PG&E Corp, the owner of California’s biggest power utility.

After the 2007 fires, state investigators blamed San Diego Gas & Electric for three of the fires – the so-called Witch, Guejito and Rice wildfires – that killed two people, damaged homes and caused widespread evacuations. The company, which supplies power to the San Diego area, paid out $2.4 billion to settle damages claims, recovering only part of that sum from insurance payments and other settlements.

The California Public Utilities Commission in 2017 rejected the company’s request to raise rates on consumers to recover $379 million, calling the management of its facilities “unreasonable” and “imprudent.”

Under California law and state court rulings, publicly and privately owned utilities must pay for property damage if their equipment caused the fire, regardless of whether or not they acted negligently. They also must get approval to raise rates, a request denied by the commission.

In its appeal to the Supreme Court, the company said that imposing liability and then forbidding cost recovery from customers violated the Constitution. A group of PG&E investors filed a brief with the court supporting San Diego Gas & Electric’s appeal.

The state commission asked the justices to reject the case, in part because California legislators continue to work in potential changes in allocating wildfire liability. For instance, the state in July created a $21 billion fund to help utilities cover liabilities arising from future wildfires caused by their equipment.