Opponents of Wildfire ‘Bailout’ Must Show Process Was Unfair

The Camp Fire rages through Paradise, Calif., on Nov. 8, 2018. (AP file photo/Noah Berger)

SAN FRANCISCO (CN) — Opponents of a $13.5 billion “bailout” for California power companies must show the process used to approve a utility bill surcharge for a wildfire insurance fund was unfair to advance their lawsuit against the state, a federal judge ruled Thursday.

Overruling objections from Governor Gavin Newsom and multiple California state agencies, U.S. District Judge James Donato directed opponents of the wildfire fund to file a 15-page brief explaining why a state regulatory proceeding that resulted in a $2.50 monthly surcharge on utility bills was unreasonable.

“This is the first time we’ve been given an opportunity to make the case there was corruption in the process that makes utility customers pay $13.5 billion until 2036,” attorney Michael Aguirre said after a court hearing Thursday.

Aguirre represents Alex Cannara and Gene Nelson, two PG&E customers who claim they were denied due process when the California Public Utilities Commission approved a surcharge to cushion private utilities from the risk of future wildfires in a condensed proceeding between July 26 and Oct. 24, 2019.

The plaintiffs say the CPUC did not hold a single evidentiary hearing to hear testimony from witnesses or cross examination. They claim the abbreviated hearing process violated their right to due process under the 14th Amendment and constituted an unlawful taking of property in violation of the Fifth Amendment.

Hearing arguments on motions to dismiss the lawsuit Thursday, U.S. District Judge James Donato spent much of the time questioning why the plaintiffs filed their lawsuit in federal, rather than state court.

“I’m having trouble seeing why you’re not in state court,” Donato said.

Attorneys for the state of California say federal courts lack jurisdiction to hear cases involving state-approved utility rates under the Johnson Act.

Aguirre countered that an exception applies to that rule when ratepayers are denied a fair hearing.

“If there’s not a reasonable hearing, the Johnson Act doesn’t apply,” Aguire said. “It’s clear there wasn’t a reasonable hearing.”

Representing the state, California Deputy Attorney General Gabrielle Boutin strongly disputed claims of an unfair process. She said the plaintiffs in this case chose not to participate in the process, which included a prehearing conference and opportunities to submit written arguments before and after a proposed decision approving the surcharge was issued on Sept. 23, 2019.

“There was ample opportunity to be heard and the CPUC procedures were followed,” Boutin said.

Donato declined to grant the plaintiffs’ request for discovery on the fairness of the process, but he directed both sides to submit 15-page briefs based on existing evidence and declarations explaining why the CPUC process was or was not fair and reasonable.

Boutin strongly objected to the judge’s decision, arguing that “no dispute of fact” exists as to whether the process was fair. The judge disagreed.

“Go through the CPUC records and tell me why this was okay or not okay,” Donato said.

The $21 billion pool of insurance money, equally funded by ratepayers and private utilities, was authorized in Assembly Bill 1054. That legislation was passed in July last year as investor-owned utilities, including Pacific Gas and Electric, faced unprecedented risk from wildfires sparked by power lines and electric equipment.

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