Newsom Signs Wildfire Liability Bill, Utility Customers to Pay $10.5 Billion Into New Fund

Gov. Gavin Newsom signed a complex wildfire liability bill into law Friday morning.

The passage of AB 1054 is a big win for Newsom, who was elected governor just days before PG&E equipment sparked the Camp Fire, which raged across Butte County, killing 85 people. Just weeks later, the utility entered into bankruptcy protection. 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.

Under the plan, utilities and ratepayers will pay into a fund that utilities could access if a fire caused by their equipment resulted in more than $1 billion in property damage. The bill also imposes several safety conditions before utilities could participate in the system, such as not allowing PG&E to fully participate in the fund until it exits bankruptcy. If its equipment is found to have caused a fire before then, the utility would not be able to fully access the fund.

Before signing, Newsom defended himself against critics who complained that the bill was rushed through the Legislature. Newsom responded that people have been working on crafting a wildfire liability plan since before he took office and have been working on such legislation for "arguably, two or three years."

"My participation in this process began the day after I got elected," he said. "Someone whispered to me there was a fire in Northern California... and no sooner did they whisper in my ear, an hour later they said there was a fire in Southern California."

Newsom said that he wanted to pass the legislation before lawmakers started their summer recess and before fire season gets into full swing.

"There is some mythology that the bill itself just came out of thin air a few weeks ago in a short timeline," Newsom said. "This was a long process. A very inclusive process."

Newsom proposed creating a new wildfire insurance fund in late June. The heart of the legislation was introduced just before the July 4 weekend. Legislators also wanted to avoid a further downgrade of San Diego Gas and Electric and Southern California Edison's bond ratings.

Supporters maintain the fund will help get fire victims money faster and provide financial stability to utilities.

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.

What Happens Next?

AB 1054 lays out two options for how the fund would work. Both versions rely on an initial $10.5 billion contribution from ratepayers through extending a fee from the 2001 energy crisis and PG&E's first bankruptcy.

What differs between the two models is how the investor-owned utilities would pay into the fund.

The first model would give utilities a line of credit to pay for costs beyond what insurance would cover for wildfire damages. A utility would have to repay that loan if the California Public Utilities Commission determined that the fire was caused by negligence.

The second option would allow utilities to contribute $10.5 billion to match the ratepayer contribution. That would create a $21 billion fund. Under this plan, utilities have 15 days to announce whether they will contribute. The three major investor-owned utilities — San Diego Gas and Electric, Southern California Edison and PG&E — would have to contribute $7.5 billion total into the fund within the first year. However, PG&E would not have to pay the initial contribution until the company emerges from bankruptcy, while SDG&E and Edison would have to contribute within 60 days of opting in.

The bill also creates a new California Wildfire Safety Advisory Board, which would examine utility wildfire plans and make recommendations around fire safety to a new division within the CPUC that would focus specifically on wildfires. It also increase the amount the CPUC can fine utilities for safety violations.

Newsom also announced that the current secretary of the California Government Operations Agency, Marybel Batjer, will become the new CPUC president. The current president, Michael Picker, announced in May that he would step down.