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Mina Kim: Welcome to Forum. I’m Mina Kim. Governor Gavin Newsom says the sweeping package of climate and energy bills he signed into law last week will, quote, “save money on your electric bills, stabilize gas supply, and slash toxic air pollution, all while fast-tracking California’s transition to a clean, green, job-creating economy.” But will it?
The package approves new oil drilling, expands the wildfire fund, and extends the state’s cap-and-trade program, among other things. We dig into the details this hour with Ethan Elkind, director of the Climate Program at the Center for Law, Energy, and the Environment at UC Berkeley School of Law. Welcome, Ethan.
Ethan Elkind: Hi, Mina. Good to be back with you.
Mina Kim: Yeah. Good to have you with us. Also with us is Guy Marzorati, correspondent for KQED’s California politics and government desk. Hey, Guy.
Guy Marzorati: Hey. Great to be with you.
Mina Kim: So, Guy, can we step back for a second? Can you describe in broad strokes some of the forces at play that were driving this big energy policy overhaul?
Guy Marzorati: Yeah. Broad strokes—California is in the middle of this energy transition. We’re in a place where few states or localities have been before, trying to navigate this situation where, as you mentioned, the governor, Democrats, and state leaders are pushing us toward more clean and renewable energy.
At the same time, demand for fuel is declining, but it’s still there. People are still driving. This is still a balancing act that needs to happen, and we’re also experiencing damages from climate change. This is no longer something that California is looking toward the future on—we’re experiencing tremendous wildfires that are destroying homes, driving up insurance prices, and driving up electricity prices.
So those are kind of the tectonic forces shaping this debate. Heading into this legislative year, a few urgent things pushed the conversation around energy bills forward. One was the big wildfires in Southern California, which posed tremendous liability risk to Southern California Edison, one of the state’s big utilities.
You had two refineries in the last year announce plans to close. You had this landmark cap-and-trade program nearing expiration, which raised red flags about its future. And then you had a federal government in Washington that is less and less interested in pursuing these kinds of endeavors—to put it kindly. So you add all that up, and it put a unique urgency around this conversation.
Mina Kim: Yeah. Ethan, Guy touched on a lot, but is there anything you’d add?
Ethan Elkind: No, I think Guy summarized it well. I’d add that this is the first year of a two-year legislative session. Elections will be held next year, and often you see more politically risky, controversial votes happen in the first year, when elected officials don’t have to go before voters.
But I think Guy is absolutely right. Affordability concerns loomed large. Democrats got a strong wake-up call from last year’s election, which many interpreted as a complaint about high costs. You also see people like Ezra Klein and Derek Thompson coming out with their “abundance agenda,” which resonated in Sacramento. Abundance ultimately equals lower prices. That’s a big challenge, especially in California, where we face not just high energy prices but high housing prices too.
So I think that informed a lot of what we saw. But as Guy mentioned, much of this legislation needed to happen anyway because of looming deadlines and factors like wildfires.
Mina Kim: Yeah. Guy, I was reading that negotiations at the time were intense, and Newsom was going in and out of rooms at the Capitol. Paint a picture for us.
Guy Marzorati: Yeah. It really got down to the wire—so much so that they had to extend the legislative session by a full day. It was supposed to end on a Friday, but lawmakers hung around in Sacramento until Saturday to finish.
That’s because the state has a rule that once you finalize a bill, it has to be in print 72 hours before a vote. So the real deadline Newsom and lawmakers were working on was midweek, and yes, it took them into the late night, past midnight.
There were videos of Newsom huddling with Assembly Speaker Robert Rivas and Senate Pro Tem Mike McGuire to hash this deal out. One lawmaker told me, “This was like five planes flying in the air. We had to land all five. Either all of them were gonna land or none were gonna land.”
So in many ways, this package came together because of all the different pieces that were in it.
Mina Kim: Yeah. So many different pieces passed at once—that is pretty remarkable. You touched on some of them. Can we start with utilities? What’s in there related to utilities, and why were utilities willing to come to the state for help?
Guy Marzorati: A big piece is replenishment of the state’s wildfire fund. This is the fund utilities tap into if their equipment sparks a wildfire and they face tremendous liabilities. The urgency this year was the Eaton Fire in Altadena, which threatened Southern California Edison with potential liability that could have wiped out the fund.
So the deal was to have utilities kick in $9 billion and ratepayers another $9 billion to replenish it. Separately, some lawmakers had been working on rules to change utility regulations to lower electricity bills. They saw an opportunity to leverage the wildfire fund replenishment to push those changes.
Utilities have long opposed some of these ideas—especially the state issuing bonds and paying for infrastructure, since that’s how utilities have historically made profits. But lawmakers saw this as leverage: utilities needed the wildfire fund, so they could extract concessions on how infrastructure is financed, which could mean significant savings for ratepayers.
Mina Kim: Yeah. That’s actually what one listener asked. They wrote, “How is this going to help with my PG&E bills?” So, Ethan, can you explain how this translates to cost savings for ratepayers?
Ethan Elkind: We need to look at the bigger picture. Electricity rates have gone up about 50 percent in the last five years. I don’t have to tell that listener—it’s been a major affordability issue.
And high rates undermine our climate goals. We’re trying to convince people to switch from gas to electric vehicles, to get rid of gas appliances and use electric heat pumps and induction stoves. But as long as electricity prices rise, it undercuts the economics.
Rates have been increasing largely because of wildfire costs. Climate change is drying out our hills, creating cycles of drought and heavy rainfall that fuel vegetation growth, which then dries and becomes fuel. Those costs have fallen largely on ratepayers.
So the more we shore up utility finances, the less exposure they have. Plus, this legislation includes reforms to improve cost-effectiveness of wildfire mitigation and infrastructure decisions. Regulators will scrutinize those more closely. All of that should put downward pressure on electricity rates.
I wouldn’t say rates will decrease, but they won’t rise as fast as they would have without these reforms.
Mina Kim: Interesting. Let me thank that listener for writing in and remind everyone that you can join the conversation by emailing forum@kqed.org, finding us on social channels—Discord, Blue Sky, Facebook, Instagram, or Threads at KQED Forum—or by calling 866-733-6786.
What questions do you have about California’s environmental policy overhaul? What excites you or worries you about it? What do you want to know about how it will affect you?
Guy, did utilities make any promises not to pass on certain costs to ratepayers—like if they take on more responsibility for financing infrastructure?
Guy Marzorati: Yeah. One provision in the bill requires utilities to spend $6 billion on wildfire hardening without passing those costs on to ratepayers.
Big picture, the goal was to get wildfire-related costs out of ratepayers’ bills. Right now, utilities pass those costs along, making electricity appear more expensive than it actually is. That sends a false price signal.
So the aim here is to separate wildfire costs from electricity rates. That way, when households are deciding whether to electrify—installing heat pumps, buying EVs—they won’t be deterred by inflated electricity bills.
Mina Kim: I want to dig into the changes for oil and gas companies. We’re coming up on a break, but let’s get started. Guy, what was driving the oil and gas industry to seek help from the state?
Guy Marzorati: Last year, Phillips 66 announced it was closing a refinery in Los Angeles, and this year Valero in Benicia did the same. Together, that was about one-fifth of the state’s refining capacity.
There was real fear that this would lead to price spikes—and concern that it could trigger a domino effect of closures. So this bill reflects a lot of oil and gas industry priorities codified into law.
From the Newsom administration’s perspective, it was about stabilizing the industry. But long-term, demand for fuel in California will keep shrinking. So the question is whether this legislation can stave off that decline.
It does two key things: makes it easier to drill in Kern County by resolving some environmental disputes, and gives the governor new powers to waive tough fuel standards if gas prices spike in the future.
This was controversial among environmentalists, and many Democrats opposed it, but it fit into the broader package where the oil and gas industry argued they needed help to keep doors open.
Mina Kim: Yeah, he even got a shout-out from Shannon Grove.
Guy Marzorati: Absolutely. Shannon Grove from Bakersfield had worked on this issue for a long time. I’d never heard her so complimentary of Democrats as in the final day of session.
Mina Kim: Guy Marzorati is a correspondent on KQED’s California politics and government desk. Ethan Elkind is host of the podcast Climate Break and director of the Climate Program at the Center for Law, Energy, and the Environment at UC Berkeley School of Law. And you, our listeners, for joining the conversation.
