Push to Overturn California Wildfire Liability Shift Likely Doomed at Ninth Circuit

All three judges hearing the appeal of a bid to prevent California from shifting liability for wildfires from utilities to taxpayers said federal courts lack jurisdiction in the case. 

FILE – In this Sept. 9, 2020, file photo, taken with a slow shutter speed, embers light up a hillside behind the Bidwell Bar Bridge as the Bear Fire burns in Oroville, Calif. (AP Photo/Noah Berger, File)

(CN) — An effort to prevent the state of California from reforming the way it holds utilities accountable for wildfires started by their equipment appears doomed at the Ninth Circuit, with a panel of judges indicating they shouldn’t even be hearing the case at all

Donald Trump-appointed U.S. Circuit Judge Ryan Nelson told plaintiffs during a Monday morning hearing that a law that denies federal courts jurisdiction over matters that affect the rates established by state utilities means a lower court judge was correct in tossing a case that challenged California’s recently implemented law covering utilities and wildfires.

“You haven’t shown why these claims belong in a federal court and that’s your burden,” Nelson told the plaintiffs’ attorney Michael Aguirre during the remote hearing conducted by Zoom. 

Aguirre argued Assembly Bill 1054 was created after a series of secret meetings between Pacific Gas & Electric executives and Governor Gavin Newsom and staff, and was quickly passed and implemented without the input of ratepayers and voters. 

“This is about corruption,” he said. “These decisions were not made at CPUC, but in the meetings PG&E attended with other state officials.”

AB 1054, signed into law by Newsom in July 2019, created a fund to pay wildfire victims, altered the standards by which utilities are judged to have created wildfires and established explicit wildfire mitigation actions that utilities must undertake. 

Aguirre said the law shifts the financial burden of wildfire costs to taxpayers and ratepayers while financially exonerating investor-owned utilities that many accuse of failing to undertake basic maintenance for years to steer larger profits to investors. 

The attorney said California taxpayers are going to be on the hook for $10.5 billion over the next 17 years at a time when PG&E will be guaranteed profits by the new legislation. 

“They are making customers pay for damages that PG&E caused,” he said. 

Nelson and his colleagues on the panel said Aguirre had a good case but couldn’t clear one looming legal impediment — the Johnson Act. The 1936 federal law does not allow federal courts to interfere in matters connected to a state’s right to set utility rates. 

Because the California Public Utilities Commission eventually ratified the rate changes included in AB 1054, federal courts have no jurisdiction, the panel said.

“The relief you are asking for is to not have to pay the rate,” U.S. Circuit Judge Dani Hunsaker, also a Trump appointee, said at one point. “If that is the case, how do you get around the Johnson Act.”

Aguirre said the Legislature that passed the law, not the CPUC, meaning the rate hikes associated with the law are immaterial to the central legal question at the heart of the case. 

“It’s not a rate order, it’s a statute,” Aguirre said. 

“In a vacuum, you have a good technical argument,” Nelson said, but added he didn’t see how the court could get past the Johnson Act. 

Chris Nolan, arguing for the CPUC, noted that the plaintiffs had ample opportunities to raise disagreements. 

“The plaintiffs had nine opportunities to contest over the course of several different hearings,” Nolan said. He also contested Aguirre’s claims of secrecy, noting there were opportunities to participate in the process in writing or by providing oral comments. 

Nelson also noted that Aguirre doesn’t necessarily need to bring the claims in federal court as he still has recourse to state courts. 

“There is no option in state court,” Aguirre said. “This is a one-party state.”

While the panel showed sympathy for Aguirre’s argument, they ultimately said they are bound by the law. 

“We are required to look at the case law,” said U.S. Circuit Judge Mary Murguia, a Barack Obama appointee.

However, Nelson did say he thought excluding federal courts by citing the Johnson Act had its limits, as it could encourage utilities to bring up rates as a way of avoiding legal accountability. 

“I am quite concerned about the implications of the argument you are making here,” Nelson told Nolan.

The panel did not indicate when it would issue a ruling.

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