The party behind a legal complaint against state agencies over the creation of a $21-billion wildfire fund is making the argument that the California Public Utilities Commission should have held evidentiary hearings on the matter.

The law firm of Michael Aguirre, a high-profile San Diego-based attorney and CPUC critic, in July 2019 filed the lawsuit, which was recently updated with an April 13 supplemental brief that included testimony by former CPUC President Loretta Lynch. Lynch in her declaration backed up the brief's assertion that hearings should have been held as ratepayers were put on the hook for $902 million annually for 15 years.

"The CPUC's denial of an evidentiary hearing relating to the imposition of a nonbypassable charge imposed upon ratepayers in the amount of billions of dollars runs counter to Commission precedent and Constitutional protections that the Commission is sworn to uphold," Lynch said in the declaration, filed in the U.S. District Court for the Northern District of California [3:19-cv-04171-JD].

Lynch in the document argues that no discussion or facts were provided to explain why the CPUC would deny ratepayers an evidentiary hearing to test the evidence and assumptions of a revenue requirement. She said that when she was president of the CPUC during the energy crisis, CPUC members "understood and respected" the need for evidentiary hearings before rates were decided.

The lawsuit alleges that AB 1054 and the creation of the wildfire fund were products of insider negotiations between Pacific Gas & Electric and Gov. Gavin Newsom (see CEM No. 1567). Defendants in the suit, filed on behalf of two ratepayers, are California Department of Water Resources Director Karla Nemeth; members of the CPUC; California Department of Finance Department Director Keely Bosler; and California State Controller Betty Yee.

Attorney Maria Severson in the new brief said the CPUC's failure to provide fair notice and reasonable hearing violated the due-process rights of PG&E's customers. The brief is not to argue the case but to describe the repeated requests for hearings, why they should be held, and how that hearing was denied, the document says.

Ratepayers were allocated half of the total $21-billion fund, with the balance to come from utility shareholders, a loan from the state's Surplus Money Investment Fund, and proceeds from bonds that may be issued by DWR, to be repaid by revenue generated by the ratepayer charge. AB 1054 was rushed through the Legislature last year in reaction to the wildfires and PG&E's bankruptcy. PG&E must exit bankruptcy by June 30 to be eligible to access the fund.

"Utility customers also sought an opportunity to show PG&E and its credit rating agencies, such as Standard & Poor's and Moody's, colluded with PG&E's institutional investors to threaten credit downgrades unless the CPUC imposed the charge upon utility customers," the brief says. It included past public statements from Mark Ferron, a former CPUC member, that the investment community closely watches the CPUC's actions, indicating the commission is aware of the impact of its decisions on credit ratings.

Utility customers were also denied hearings to prove that utility safety mismanagement, not climate change, led to PG&E's financial problems, as well as the opportunity to cross-examine PG&E executives about safety policies, the lawsuit alleges. The brief argues that the 84 felony counts of manslaughter PG&E is charged with in connection with the November 2018 Camp Fire had not led to meaningful safety reforms and that the utility would continue to suffer catastrophic wildfire liabilities in coming years.

"Utility customers would have challenged the CPUC's attempt to minimize PG&E's role in its numerous catastrophic wildfires by its claim that fires were attributable to inanimate objects such as climate change and weather, instead of PG&E's unsafe practices," the brief says.

The decision to create a wildfire fund was made in April 2018 by Newsom's wildfire strike force, a body that included now-CPUC President Marybel Batjer, according to the brief.

California state agencies in a September motion argued that the case should be dismissed for lack of jurisdiction, and that claims are against the state itself and thus subject to sovereign immunity.

"The Complaint in this case seeks to invalidate the entirety of AB 1054 on its face based solely on Plaintiffs' speculative concerns and disagreement with the wisdom of the California Legislature's policy choices," the motion to dismiss says.