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Xcel Energy's Prolonged Legal Fight Following Texas's Worst Wildfire


Benjamin Hughes

March 9, 2024 - 15:24 pm


Battling the Blaze: Xcel Energy's Legal Struggles in the Aftermath of the Texas Wildfires

The Devastation of the Smokehouse Creek Fire

In the wake of the catastrophic Smokehouse Creek Fire that ravaged through Miami, Texas, Xcel Energy Inc. finds itself enveloped in a legal battle that may persist for years. The Texas Panhandle has been scarred by wildfires that have left a path of destruction, including over 1 million acres of charred earth and at least two fatalities. These images of desolation underscore the severity of the situation as lawsuits amass against the utility provider.

A destroyed home following the Smokehouse Creek Fire in Miami, Texas.

Drawing parallels from the experiences of utility companies in states like California and Oregon—which have faced legal challenges for fires sparked by downed power lines—Xcel is predicted to be embroiled in this legal dispute well into 2027. This follows the pattern indicating that litigation related to such massive blazes typically unfolds over at least a three-year period.

The litigation saga for Xcel began when it was served with the initial lawsuit over what has now been termed the most devastating wildfire in Texas history. Financial experts from RBC Capital Markets have projected the liabilities arising from the Smokehouse Creek Fire to be under $3 billion.

As investigators in Texas have been quicker than those in other states to identify the cause of the Smokehouse fire, implicating power lines connected to a fractured wooden utility pole, this speedy determination does not necessarily equate to a swift resolution in court. Xcel is concurrently conducting its investigation even as legal proceedings commence.

The Lingering Shadow of Litigation

On a fateful Thursday, Xcel publicly acknowledged its equipment's likely involvement in the disastrous fire but continued to deny any form of negligence. The lawsuit, which was filed on March 1st, accuses Xcel of negligence due to a failure in the proper inspection and maintenance of utility poles and seeks an undisclosed amount in monetary damages.

Read More: Xcel Pole Linked to Smokehouse Fire Appeared ‘Decayed’

The financial and legal perils that Xcel now faces are anticipated to develop over a lengthy period, potentially months to years, according to Moody’s Ratings. The company has approximately $500 million in insurance coverage, which is expected to address the economic demands from the wildfire. However, the potential for financial exposure persists due to Texas’s lack of a liability cap for non-economic losses, as indicated by Moody’s.

Simultaneously, Xcel faces the daunting task of defending against over 300 lawsuits stemming from a 2021 fire in Boulder County, a Denver suburb labeled Colorado’s most destructive fire. With such a significant legal workload, Xcel is grappling with an extensive and complicated legal landscape.

It remains uncertain whether victims from the Panhandle can harness a legal strategy that bypasses the requirement to prove negligence. This method, successfully employed by fire victims in California to obtain compensation from PG&E Corp. following a string of disastrous fires in the state's northern regions, may offer an expedited route to recompense.

Read More: Huge Texas Blaze Shows Power-Line Fires Are a Widespread Threat

In an effort to facilitate rebuilding for those affected, Xcel has incepted its own claims procedure for individuals who have borne losses to their properties or livestock. The company's statement indicates a commitment to reviewing and settling as many claims as swiftly and amicably as possible over the upcoming weeks or months.

As the company and claimants brace themselves for a protracted period of legal engagement, lawyers are actively canvassing the Panhandle in an attempt to represent affected residents. The process of discovery—the phase where facts are unearthed and shared—alone can span two to three years, particularly in complex cases involving multibillion-dollar damages and a large number of plaintiffs.

"The process is inevitably lengthy," declares Michael Wara, an attorney and the director of the climate and energy policy program at Stanford University. Xcel has refrained from commenting on the expected duration of their impending legal endeavors.

An Uncertain Legal Journey

A recent lawsuit in Oregon marked a significant turn of events, with PacifiCorp, owned by Berkshire Hathaway Inc., choosing to face a jury’s verdict over a wildfire blamed on their equipment. This decision marked the first instance of such a trial, with the company held grossly negligent for disregarding weather forecasts and failing to deactivate electricity before a windstorm that overturned power lines. Despite being three and a half years into litigation, the tussle over compensation for property owners continues unabated, with potential appeals threatening to prolong the ordeal.

In a divergent path, PG&E circumvented trials in California by filing for bankruptcy protection in 2019 amidst projected liabilities reaching into the tens of billions for a series of devastating fires dating back to 2017 and 2018. Compounded by the specter of inverse condemnation—a principle that holds utility providers liable for damage caused by their equipment without the need to demonstrate responsible operation—the organization negotiated a $13.5 billion settlement with wildfire victims and emerged from bankruptcy the following year.

Although inverse condemnation is not as firmly established in Texas law, Fitch Ratings has clarified that Xcel's local subsidiary is not subjected to this liability principle. Nonetheless, law professor Shelley Ross Saxer from Pepperdine University suggests that inverse condemnation could potentially be a viable approach under the Texas state constitution. Such a legal shortcut might expedite the damage claim process for property owners, reducing the proof required to secure compensation.

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Looking to the Future

As Xcel Energy confronts the aftermath of the Smokehouse Creek Fire and its associated legal fallout, the path forward paints a picture of an intricate tapestry of legal battles and financial considerations. With uncertainties surrounding the legal strategies and outcomes, affected communities, legal teams, and Xcel Energy brace themselves for a turning point that will redefine the dynamics of utility liability and wildfire litigation.

The stage is set for a narrative that extends beyond the immediate ramifications of the wildfires. It questions the regulatory environment and corporate responsibility within which utility companies operate. As the landscape continues to shift under the storm of wildfires and legal skirmishes, one thing remains resolute—the impact on the communities will be measured in years, and recovery will be a testament to their resilience and the effectiveness of the justice they seek.

Conclusion: The Eyes of a Nation

The situation unfolding in Texas and details of the lawsuits against Xcel Energy will be closely monitored, not just by those with immediate stakes, but by a nation keenly aware of the increasing frequency and severity of wildfires. How the utility provider navigates the litigation terrain could set precedents for future cases, as climate change and other factors contribute to the likelihood of similar disasters. As the lawsuit winds its way through the legal system, the resolution will undoubtedly hold valuable lessons for utility companies and lawmakers alike, signaling a need for proactive measures to mitigate such devastating occurrences in the future.

In the heart of this adversity lies the enduring human spirit, rallying to overcome losses and rebuild amidst the ashes left by the Smokehouse Creek Fire. The story is still being written, and the final chapters will reflect not only the outcome of Xcel Energy's legal challenges but the broader societal implications of natural disasters intertwined with human infrastructure and the unwavering resolve to rise above the flames.

This news piece has been brought to you by Bloomberg L.P., reflecting thoroughly on the incidents, implications, and the unyielding journey ahead for those entwined with the effects of the Smokehouse Creek Fire.