EXHIBIT B

Case: 19-30088 Doc# 4486-2 Filed: 10/25/19 Entered: 10/25/19 20:22:43 Page 1

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Transcription of Audio Recording 

from the November 30, 2017 Commission Voting Meeting 

[Start recording] 

Speaker One: 

... , Commissioner Randolph, presiding. 

Comm. Randolph: 

Thank you. I am presenting to you Item 40, the proposed decision addressing SDG&E' s 

request for cost recovery from the wildfire expense memorandum ac~ount. 

First, I'll address what this proposed decision determines. It denies recovery in rates to 

San Diego Gas & Electric of costs related to three wildfires that occurred in San Diego County in 

October 2007. The three fires-the Witch, Guejito and Rice-caused two deaths, injured dozens 

of firefighters, and damaged and destroyed homes, other buildings, and property in San Diego 

County .. 

Legal proceedings following an event like this necessarily take a long time to conclude. 

The 379 million dollars in costs that were presented to us by the utility in this application are 

what remained after trial court proceedings, settlements, insurance payouts, and a certain amount 

of recovery granted by FERC. 

Our examination applies the prudent manager's standard to the very fact-specific 

questjon of how SDG&E managed its facilities before and during the fires. To give you a sense 

of how fact-specific our determination is, the determination in the Witch Fire turns on SDG&E's 

actions in response to four fauhs th'at occurred between two poles along the transmission line on 

October 21, 4007; the determination in the Guejito Fire turns on SDG&E's inspection of a 

communications lashing wire and its distance to a 12KV line; and the determination in the Rice 

Fire turns on SDG&E's actions to monitor and trim a fast-growing tree. 

In each of these instances we undertook the core analysis and weighing of the evidence 

provided by-the parties, as is required of us in our ratemaking and cost allocation role. There's 

no dispute that each of the fires was caused by SDG&E's facility-facilities and, in each 

·instance, we find that SDG&E did not meet its burden to show that it acted as a prudent manager. 

On that basis, the PD denies recovery of the 379 million dollars in rates. 

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I also would like to take a moment to point out what this PD is not. It's not a final 

statement about the overall applicability of the doctrine of inverse condemnation to investorowned utilities. In this proposed decision, I felt strongly that we cannot abdicate our ratemaking 

authority and cost allocation responsibility. Once those costs have been determined, it is our 

responsibility to make a prudent manager review. In this instance, it caused for allocating the 

proposed costs to shareholders, not its rate payers. 

The proposed decision is also not a statement about the current state of SDG&E's 

management of its system or its wildfire readiness. As I have stated publicly in the past, 

SDG&E has taken innovative steps to become an industry leader in this area and has improved 

its weather identification system in order to better manage its wildfire risk. But this case has 

nothing to do with the current management of their system. Instead, it is a snapshot in time and a 

fact-driven analysis of the utility's preparation for and response to the 2007 incidents. 

Last, I know that the tragic Northern California fires that happened last month are on 

many peoples' minds. This proposed decision is not about those fires or the facts that may be 

relevant in those instances. Again, this proposed decision is specific to the 2007 incidents and 

the facts of that case. We know that, as a State, we need to confront the increased risk and 

severity of wildfires in light of climate change. Some of that work is coming in the form of 

President Picker's leadership on updates to our general orders related to the more accurate fire 

threat maps that will be coming before this Commission next month. Some of that work will 

come in the form of continued state agency efforts to adapt to climate change, and some of that 

work will need to require policymakers to grapple with the challenging issues related to the costs 

of this increased risk. But those issues are not part of the review of the 2007 wildfires. 

I would like to thank my commissioner colleagues for your extensive and highly engaged 

deliberation as we worked through the facts and analysis of this PD. I would like to thank the 

two Administrative Law Judges, Sasha Goldberg and Pat Tsen, who managed this case and were 

willing to go back and conduct a close analysis.and answered questions from my office and other 

offices. I'd like to thank ALJ management, Jeanne McKinney and Chief Administrative Law 

Judge Anne Simon, for their work on this case. My former advisor, Leuwam Tesfai, worked 

very hard on this while she was in my office, and I thank her for her efforts, as well as those of 

my Chief of Staff Rachel Peterson, who took over after Leuam went to the Legal Division. 

Lastly, I'd like to thank my B-K partner Commissioner Peterman and her great advisor, Shannon 

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O'Rourke, for their very close attention to the details of this PD and their work on this. With 

that, I present this proposed decision to you and request your support. 

Comm. Peterman: 

Thank you, Commissioner Ran_dolph, for your comprehens~ve and thoughtful comments. I 

I really appreciate you putting the proposed decision before us in context, given that there are so 

many members of the public who understandably are interested in this proceeding and are 

concerned about the outcome. 

I will also be supporting this proposed decision and would like to thank Judges Tsen and 

Goldberg and Commissioner Randolph and her Chief of Staff, Rachel Peterson, for their 

thorough and thoughtful work: I have taken a lot of time to consider this item and do believe that 

the judges have demonstrated that the conclusions they reached were based on the thorough 

review of the evidence presented by the parties. Based on this, overall, I'm comfortable 

supporting this decision. 

I'm also appreciative of the additional detail the judges provided in the revisions to the 

proposed decision, which I think serve to further substantiate the original findings that San Diego 

Gas & Electric failed to meet its burden to prove it was a prudent manager in the lead up to all 

three fires. 

I also appreciate the revisions to the proposed decision, clarifying that the legal doctrine 

of inverse condemnation does not displace the Commission's reas~nableness review of whether 

SDG&E was a prudent manager in this case. 

And with that, I will be supporting the decisiori. Thank you. 

Comm. Rechschaffen: 

I'm also going to be supporting the decision. I'd like to thank Commissioner Randolph 

and Commissioner Peterman for their excellent leadership here and Judge-Judges Tsen and 

Goldberg for their work. 

As my colleagues have said, this resulted from a very, very careful review, a 

comprehensive review and re-review of the facts here, as appropriate in a case of this magnitude. 

This decision does not hold the utilities to a standard of perfection. That's a strawman, 

that's not what we're doing here. The burden of proof is on SDG&E to show that they acted as a 

prudent manager and, based on a careful review, they, we concluded, the decision concludes they 

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did not meet that burden. 

I want to say just a word about the inverse condemnation doctrine. As the decision 

concludes it really wasn't an issue in the first phase and it's somewhat of a theoretical issue in 

this matter given that no court has held that the doctrine, that San Diego Gas & Electric is strictly 

liable based simply, held that the plaintiffs could plead inverse condemnation, but in any case the 

result here is quite clear: We can't apply a standard that provides an incentive for a utility to act 

imprudently or unreasonably. Not only is that inconsistent with our ratemaking authority, but 

that would send precisely the wrong signals to the utility. We want to encourage and incentivize 

careful, prudent management, and if we ruled that recovery is possible with something less than 

prudent management, we'd send the wrong signal. 

Having said that, it is worth noting that the doctrine of inverse condemnation, as its been 

developed by the courts and applied to public utilities, may be worth re-examining in a sense that 

the courts applying the cases to public utilities have done so without really grappling with the 

salient difference between public and private utilities, which is that there's no guaranty that 

private utilities can recover the cost from their ratepayers, so this is an issue that the legislature 

and the courts may wish to examine and may be called on to examine in the future. 

But having said that, it doesn't change our obligation to rule that the utility can't recover 

unless they acted prudently, so, I'll be supporting the decision, and thank you again for your 

· work on this. 

President Picker: 

So, Commissioner Guzman Aceves and I actually formed a Bagley-Keene Alliance to 

really thoroughly go through the record together and to talk through some of the issues involved 

and we are filing a joint concurrence, so we're going to actually speak to that joint concurrence 

and I'll just lead off. 

Some of ... this is a very important general subject matter area they pointed out when they 

spoke last week about the fire map proceeding. The number of people who are choosing to live 

in areas that we now know to be elevated fire haz.ard or extreme fire hazard is growing, and·that 

area is actually growing as we get more information about the impact of climate change. The 

fuel area is growing from about 31,000 square miles in California to 77,000 square miles in 

California. That's almost42% ofthe,State's land mass. 

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So, add to that the fact that as people move into these areas, which are growing in the 

severity of the hazard, and we see more and more severe windstorms and lightning storms 

happening more frequently here in California, we also know that those people demand and have 

a right to have both· electric and telecommunications as ·they move into those fire hazard areas. 

So this is becoming an increasingly complex area for us. 

Here, the decision that we have to make is about whether the utility or the ratepayer 

should be responsible for the financial costs associated with these very specific fires. What we 

talk about here may or may not have any precedent on any future fire issues that come before us. 

Um, so, let me just provide a little bit of context about when wildfires and the utility 

infrastructure is implicated, there's been a unique legal framework created by California Courts 

of Appeal, and by the statutory requirements of the Public Utilities Codes, which dictate how 

costs are calculated and allocated between utilities and ratepayers, respectively. 

So, both my Bagley-Keene partner and I, Commissioner Guzman Aceves have concerns 

about this legal framework, and I think other Commissioners here have spoken to that. But 

. despite our concerns, we don't have our authority to change California case Jaw or the Public 

Utilities Code, so we have to apply the law as it stands today. 

We also have some general concerns about how this particular decision treats the Witch 

Fire. An analysis of San Diego Gas & Electric's actions is thorough and the record is welldeveloped by the Administrative Law Judge, we have to really note reluctantly that we find San 

Diego acted in an unreasonable manner in relationship to the Witch Fire. Despite those 

particular concerns, which I'll detail shortly, we defer to the ALJs and to the Presiding 

Commissioner because they spent more time in the process of developing the record and 

participated more in the fact finding, and I think that we have to admit to ourselves that they're 

more well-situated to make the determination. 

Uh, so, generally, this decision concludes that San Diego Gas & Electric didn't meet the 

preponderance of evidence standard that it acted as a prudent manager in response to the three 

fires at issue, I think that Commissioner Randolph detailed that, but in specific context about the 

Witch Fire, the San Diego Gas & Electric Facility involved in the ignition of the Witch Fire was 

tie line 637. Tie line 63 7 is about 14 miles long and runs through a remote back country section 

of the county, and so there weren't any eyewitnesses to. the ignition of the fire. The CalFire 

investigator determined that the fault on transmission line 637 between two poles due to the 

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arcing line led to a dispersed hot particle's landing in the grassy field below the power lines, and 

those particles were determined to have ignited the Witch Fire which then spread the wind. 

A series of four faults occurred on transmission lines 63 7 on October 21st, 2007, so, 

CalFire concluded the Witch Fire ignited after the third fault occurred on transmission line 637 at 

12:23 p.m. SDG&E grid operations became aware of the Witch Fire at 1: 10 and then deenergized the transmission line after the fourth fault at 3:27. They presented evidence and made 

arguments why its actions, most importantly the decision to de-energize the line, was reasonable 

in response to these events. 

So this decision on whether to de-energize power lines in a region in response to a 

catastrophic event such as a wildfire is significant because it has impact on public safety broadly. 

Streetlights, telephones, power at facilities, other infrastructure critical to response in an 

emergency are dependent on electricity. And when a wildfire threatens the electricity grid for a 

specific region, the utility must consider not only the immediate danger of the wildfire, but also· 

the public safety considerations in de-energizing of a specific circuit, and particularly a circuit 

that goes between two substations. Utilities are understandably reluctant to de-energize circuits 

without a compelling rationale. 

Here, they sent an engineer out to check each time. The record reflects that wildfire 

threatened transmission line 637 and SDG&E, however, did not de-energenize until 3:27. This 

decision finds that SDG&E acted imprudently. Under the preponderance of evidence standard, 

the determination of when was the appropriate time to de-energize is a pretty close call, given 

that there are other safety trade-offs. 

Commissioner Guzman Aceves and I believe that the record could support a finding that 

San Diego Gas & Electric acted prudently in most decisions based on the information available 

to it at the time. This is a challenge, as you are depending on engineers and humans who are 

standing there on the ground trying to make the best judgment based on what they can see and 

what they know at the time. 

So, we have concerns about the evidence submitted regarding wind. Developing an . 

evidentiary record regarding wind is challenging, particularly given that we've never really 

i:equired or even seen the need for the kind of detailed meteorology that we now understand is 

required to actually be able to operate safely in these fire hazards. We believe, again, that the 

record could support San Diego Gas & Electric's contention the wind conditions were severe and 

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unprecedented and, if that's the case, again, their decision not to de-energize transmission line 

637 before the start of the fire becomes more complex. So it's less clear that San Diego Gas & 

Electric could have de-energized the line before the third fault based on the information they 

knew or should have known at the time .. 

But, again, despite these concerns that we have, trying to put ourselves into the shoes of 

somebody on the ground at the time of the fire, we have to defer to the conclusion of the AU s 

because, as finders of fact in this proceeding, they're much more well-situated to make these 

factual determinations than we are. 

So. I think Commissioner Guzman Aceves is going to speak to some of the other issues 

that continue to plague us about this. 

Colllm. Guzman Aceves: 

Thank you, President Picker. 

First, I want to start by saying that I do appreciate on this particular point the finding of 

fact specifics in this case, and, um prudent manager, thank you. We did deliberate for a very 

long time, and I personally had a very difficult decision-making process on two of the cases that 

I felt were very close calls. And I greatly appreciate the time that Judge Tsen and Goldberg took, 

and Commissioner Randolph and her staff, in really working through those issues. I will vote for 

the PD, but I want to recognize that these were very close calls. 

As to the issue that President Picker mentipned and our concern with the existing 

overarching legal framework, it is a problem today that the Commission is not allowed to make 

nuanced findings and attribute costs to these multiple contributing factors. In general, we _believe 

that where there are multiple causes in complex situations, the Commission should be able to 

apportion liability based on the utility's contribution to the outcome. In other states, this exercise 

of judgment is allowed. 

Also, as Commissioner Rechtschaffen was saying, given our responsibility to perform 

reasonableness reviews, we cannot and should not be required to pass through all utility-incurred 

costs regardless of whether the utility acted as a prudent manager. 

The law of inverse condemnation is unsettled. The premise that utilities should face strict 

liability due to a perceived ability to socialize costs rests on an incorrect.·premise. We 

respectfully call on the legislature to consider the overarching legal framework with both of these 

issues, including providing the Commission the explicit authority to apportion responsibility in 

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prudency reviews to multiple causes, especially if the imprudence of a utility is a minority factor, 

amongst other factors. 

We stress such a modification should not have an impact on the burden of proof, which 

should remain with the applicant utility seeking to recover costs. This is a two-fold problem in 

terms of legal framework, and I greatly appreciate all the detail that was taken in this decision, 

but I'm more concerned-with the overarching lack of a more comprehensive framework that 

allows us to deal with these very complex situations. So, I do want to reserve the right to file this 

joint concurrence with President Picker. · 

Speaker One: 

Thank you. Um, with-I would ask the clerk to read the roll. 

Clerk: 

Excuse me. For Item 14, Commissioner Guzman Aceves?_ 

Comm. Guzman Aceves: 

.Aye. 

Clerk: 

Commissioner Peterman? 

Comm. Peterman: 

Yes 

Clerk: 

Commissioner Randolph? 

Comm. Randolph: 

Aye 

Clerk: 

Commissioner Rechtschaffen? 

Comm. Rechtschaffen: 

··Yes 

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I. 

Clerk: 

President Picker? 

President Picker: 

Yes 

Comm. Randolph: 

Do the two concurs need to note now their reservation of rights to concur? 

Comm. Guzman Aceves: 

Yes, with the reservation of right to file a joint concurrence. 

President Picker: 

Do I need to also ... I also reserve the right to file a joint concurrence. Thank you. So 

moving on to Item 42, which .... 

[End recording] 

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