To make sure its utilities survive climate change, California needs liability law reform
By Carolyn Kousky, executive director of the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania
When PG&E filed for bankruptcy protection in January, several observers declared the electric utility the first casualty of climate change. But as much as global warming is to blame for PG&E’s financial woes, state policy is equally responsible.
California has a legal regime, practically unique in the country, that holds utilities strictly liable for all property damage associated with wildfires if their infrastructure is found to be a cause of ignition — whether the utility was negligent or not.
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The courts have interpreted a wildfire started by utility equipment as just such a “taking,” allowing property owners to seek compensation for damage through a doctrine known as “inverse condemnation.” Unlike in a tort case, in an inverse condemnation lawsuit, utilities have to pay even if they are not at fault.
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Reform would not let utilities off the hook for negligent behavior or eliminate incentives for risk reduction, which are both addressed by American tort law. It could simply change the law to recognize that while there are steps that utilities can and should take to lower wildfire risk — insulating wires, hardening poles and de-energizing lines in high wind conditions — utilities cannot refuse to hang wires in high-risk areas. Nor do utilities have authority over land use patterns or development practices that increase such risks.
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