California Legislature Approves Wildfire Bill, Utility Customers to Pay $10.5 Billion Into Fund

California lawmakers just approved a complex bill that would change how the state pays for damages from wildfires caused by utilities, at the urging of Gov. Gavin Newsom.

In a 63-8 vote the Assembly sent AB 1054 to the governor's desk, three days after the Senate approved it. Newsom is expected to sign the bill on Friday, which would create a fund of up to $21 billion to pay for damages linked to fires caused by utility equipment.

Critics say the bill, pushed by Wall Street, is a sweetheart deal for the utility industry.

But Newsom's office says doing nothing would cost ratepayers more in the long run.

Who Pays?

Under the plan, investor-owned utilities would have to pay $7.5 billion initially into the fund in order to access the $21 billion. Three regional electric companies would have to pay less than the larger investor-owned utilities.

Ratepayers would also pay $10.5 billion into the fund. A small fee that was added onto ratepayers' monthly bills after the 2001 energy crisis, and PG&E's first bankruptcy, was set to expire in 2020. Now, the fee would be extended for another 15 years.

Utilities could tap the fund if a fire caused by their equipment resulted in more than $1 billion in property damage. However, they would have to repay the fund if the California Public Utilities Commission found they did not act “prudently” in maintaining and operating their equipment.

The bill also imposes several conditions on the big utilities before they could participate in the insurance system.

The conditions include $5 billion in safety investments, including hardening utility infrastructure, that the companies have already committed to in wildfire mitigation plans the CPUC approved last month.*

The utilities would also have to participate in a new annual safety certification process. That process would be overseen by a new CPUC Wildfire Safety Division and an advisory board that would also have authority over the utility’s wildfire mitigation plans.

Under the bill, PG&E would only be fully reimbursed from the fund after exiting bankruptcy.

Some Bay Area Lawmakers Oppose Legislation

Several Bay Area lawmakers voted against the bill, including Assemblyman David Chiu, D-San Francisco; Assemblyman Phil Ting, D-San Francisco; Assemblyman Ash Kalra, D-San Jose; and Assemblyman Marc Levine, D-Marin. State Sen. Scott Wiener, D-San Francisco, voted against it in the Senate.

Levine said he was concerned that the bill shifts the burden of proof on whether a utility was negligent onto victims.

"I hope the disgraceful past of public safety neglect, and the murder of innocent lives, is not a prologue to further PG&E-related devastation. It is hard not to see this bill as something of a reward for monstrous behavior," Levine said.

Other legislators complained that the bill had been rushed through the Legislature.

Assemblyman Chad Mayes, R- Yucca Valley, was a co-author of the bill, and pushed back against the notion.

"This is not on the fast track as it's been said. I want to remind some of you that it was January of last year that many of us began working on these issues in two different working groups. We spent hours and hours and hours and hours studying this issue," Mayes said.

Earlier this week, several Bay Area mayors also protested the bill, saying that it would make it harder for local governments to buy utility lines.

Big Win for Newsom

The passage of the bill is a big win for Newsom, who was elected governor just days before the PG&E-caused Camp Fire raged across Butte County, killing 85 people. Newsom has been highly critical of the power company. But he also noted the problem of utility-caused wildfires is bigger than just one company.

In a statement following the passage of AB 1054, Newsom said it will provide certainty for wildfire victims and help the state continue to work toward its clean energy goals.

“The rise in catastrophic wildfires fueled by climate change is a direct threat to Californians," he said. "Strengthening our state’s wildfire prevention, preparedness and mitigation efforts will continue to be a top priority for my administration and our work with the Legislature.”

Correction: This story has been updated to reflect that utilities will have to spend $5 billion on safety upgrades.