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PacifiCorp proposes new ‘catastrophic fire fee’

PacifiCorp has proposed a new customer fee to offset wildfire losses not covered by its insurer amid the likelihood of billions of dollars in pending legal payouts.

In a Feb. 15 filing with state regulators, the company proposed a new “Catastrophic Fire Fund” that would cost around $7.63 per month for the average residential customer in Oregon.

This was part of a request for a 16.9% overall rate increase, which would take effect Jan. 1, 2025, and cost average users $30 monthly.

The overall increase would support added costs in operations, insurance expenses and wildfire planning and management, said the filing.

PacifiCorp’s request remains pending before the Oregon Public Utility Commission.

The Catastrophic Fire Fund would act as a kind of self-insurance, according to  the filing, generating a pool of $3 billion over ten years for wildfire claims beyond those recoverable through insurance. PacifiCorp’s current policy limit for Oregon wildfires is $345 million.

In a statement in the filing, Senior Vice President Joelle Steward said the Catastrophic Fire Fund was modeled after the California Wildfire Fund, created by that state’s legislature in 2019.

The latter generated $21 billion to protect utility companies from insolvency if they caused wildfire damage in excess of $1 billion.

California split costs for the fund evenly between utility companies and their customers, and charged both directly. Requirements were also placed on participating utilities to encourage wildfire safety such as linking executive compensation to the company’s safety record.

PacifiCorp’s proposal is for customers to pay 80% of the fund and for the company to pay the remaining 20%. Costs to customers would vary by state, with a percentage assigned based on PacifiCorp’s assessment of wildfire risks in the six states where it operates.

Oregon ratepayers would be expected to support 32.4% of the customer share of the fund, estimated at $77.7 million annually according to the filing.

While the California Wildfire Fund is a public program, the Catastrophic Fire Fund would be a private account administered by an informal advisory board, said the filing. The board, with six members appointed by each state’s utility regulators and three by PacifiCorp, would advise on which laws apply to which fires and claims, and assess the reasonableness of claims.

The board’s decisions would not be legally binding on states or PacifiCorp, said the filing.

Steward said, without such a safety net, the increasing costs and limitations of insurance coverage for wildfires represents “an existential financial risk.”

“Regardless of a utility’s prudent actions, utilities could face claims in the billions of dollars and may have to reach beyond insurance proceeds to meet those liabilities,” he said. “Such massive claims on utility assets could compromise the financial stability that utilities require to maintain and expand infrastructure to meet both customer needs and state policies.”

Also in the filing, CEO Cindy Crane acknowledged the proposed rate hike “comes at a time when customers are facing increasing prices for all necessities.” She said the overall increase would help keep the company financially stable and able to provide “safe and reliable service at low cost.”

PacifiCorp has been found liable for $175 million in jury awards to 26 plaintiffs in James et al vs. PacifiCorp over the 2020 Labor Day fires. With 5,000 remaining class members, total damages could be in excess of multiple billions of dollars.

Additionally, PacifiCorp settled in 2023 for $604 million between survivors of the Archie Creek Fire and a class of insurance companies.

It has been reported by Moody’s the company is raising at least $3.5 billion for additional settlements and legal costs by suspending investor dividends for five years, worth $700 million annually.

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