What should strict liability look like for wildfire costs?

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Governor Newsom, the Assembly Speaker and Senate Pro Tem have publicly opposed eliminating the strict liability doctrine applicable to utilities for allocating responsibility for wildfire costs.

Maintaining inverse condemnation better assures wildfire victims that they will receive at least some compensation for their damages. However, there needs to be a limit on the types of damages that can be collected if the utilities are allowed to pass through those costs to ratepayers will little review.

Punitive damages are intended to incent the bad actor to fix the problem. But if that bad actor–the electric utility in this case–is shielded from most or all of the punitive damages, then they will have no incentive to change their behavior. Why should they if what they are doing now is costless?

Only if utility shareholders must bear 100% of all punitive damages and the proportion of damages attributable to negligence should the remaining costs be passed through to ratepayers in this situation. Only in this way can California derive the benefits of privately-owned utilities. If these conditions are unacceptable to shareholders, then the only alternative is public ownership so that ratepayers can reap both the benefits and risks of asset ownership.

 

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