Sempra Energy's San Diego Gas and Electric Co. (SDG&E) has been relatively unaffected by the unprecedented wildfires in California, but it seems no less vulnerable to the liabilities.
SDG&E was hit in 2007 by a huge rate disallowance that it is still appealing. The company is currently trying to apply the lessons learned as it fights off current threats of credit rating downgrades related to the state's overall wildfire vulnerability, CEO Jeff Martin said during an earnings conference on Tuesday.
"From SDG&E's standpoint, we do not think a strict liability standard” through inverse condemnation “is the correct standard for investor-owned utilities (IOU)," said Martin. Under inverse condemnation, California utilities may be held liable for wildfire damage caused by their equipment, regardless of negligence.
Martin said whether or not a regulatory or legislative solution is pursued this year in California, there needs to be a defined path for timely cost recovery of fire costs for regulated utilities.
Earlier this year, SDG&E submitted a state-mandated plan for wildfire preparedness, which included its plans to harden infrastructure, improve vegetation management, add aerial assets like helicopters and increase the number of weather stations. The utility plans to have 60 weather stations in its high-fire-risk areas, Martin said.
Martin was complimentary of Gov. Gavin Newsom’s administration for hitting the ground running on wildfire issues. San Francisco-based Pacific Gas & Electric Co. in January declared bankruptcy related to the wildfire losses, which credit ratings analysts said could impact other state utilities.
"I'm encouraged by the leadership the governor is showing and how quickly he has looked at the problem holistically with a fresh view,” Martin said. He added that "a lot of the right activities are underway."
Martin claimed that SDG&E has the "best fire prevention program in the country," and it deserves a "higher -- not lower -- credit rating as a result." He said there needed to be timely rate relief for utilities that "are managing their systems correctly."
A veteran energy industry insider told NGI that the buzz around the state Capitol in Sacramento was "about doing something, but what that might be is unclear” regarding wildfires.
For 4Q2018, net earnings were $148 million, compared with $131 million in 4Q2017. For 2018, the combination utility earned $669 million, versus $407 million in 2017.