State legislature passes key legislation creating $21 billion in wildfire-recovery funding for utilities

The California Legislature passed significant legislation Thursday intending to stabilize the state's beleaguered energy marketplace, while also providing 2017 fire survivors leverage to resolve damage claims against PG&E through its bankruptcy proceedings.

The state Assembly voted 63-8 to pass the bill, following approval by the state Senate Monday night.

Gov. Gavin Newsom plans to sign into law the measure known as AB 1054 at 10 a.m. Friday. The wildfire prevention and safety package is a critical bill based on a proposal unveiled in late June by the governor to try to gird the state's utilities against financial wreckage from future infernos.

“The rise in catastrophic wildfires fueled by climate change is a direct threat to Californians,” Newsom said in a statement Thursday after the bill's passage.

The bill was rushed through the Legislature this week, before lawmakers leave Sacramento for a monthlong summer recess and as the 2019 wildfire season heats up.

Northern California lawmakers were successful ensuring the measure included provisions to apply pressure on embattled Pacific Gas and Electric Co. for 2017 and 2018 fire victims, who continue pursuing their liability claims with the bankruptcy judge handling the utility's Chapter 11 case. The state's largest utility sought bankruptcy protection in January, citing an estimated $30 billion in liabilities from blazes the past two years. They include the 2017 Tubbs fire that devastated parts of Sonoma County and the Camp fire last year that killed 85 people and torched Paradise in Butte County. The fire last year is the deadliest in California history.

The legislation contains caveats precluding PG&E from participating in a wildfire insurance fund until it resolves those earlier claims and exits bankruptcy by June 30, 2020, with a reorganization plan neutral to ratepayers.

Southern California lawmakers were concerned about Standard & Poor's credit-rating agency downgrading the creditworthiness of the parent companies of San Diego Gas & Electric and Southern California Edison - the state's other two large investor-owned utilities - that likely would lead to sharp increases in ratepayers' monthly electricity bills.

The bill would provide at least $21 billion of wildfire recovery funding to provide compensation to victims of future blazes sparked by utilities' equipment, such as downed power lines. The liability concerns from such wildfires have become a major concern for power companies, especially those owned by shareholders like PG&E. Cal Fire has deemed PG&E's equipment responsible for causing 17 of 18 of the Northern California wildfires that broke out in October 2017, with the notable exception of the Tubbs fire that destroyed 4,600 homes mostly in Santa Rosa.

Half of the recovery money, or $10.5 billion, would come from continuing the $2.50 monthly surcharge that has been added to ratepayers' electricity bills since the 2001 energy crunch. The other $10.5 billion would come from either a liability fund that would allow the investor-owned utilities to tap a credit line and then repay the money, or a wildfire insurance fund the power companies would contribute to themselves. After the governor signs the bill, the power companies will have 15 days to decide whether to participate as fund contributors.

The utilities will prefer the insurance fund backstop option because it comes with protections, such as capping the amounts they would have to reimburse the fund, said Patrick McCallum, a Sacramento lobbyist and co-chairman of wildfire victims group Up from the Ashes. The group is fighting for local residents who are competing with PG&E lenders and other creditors to get more compensation through the utility's bankruptcy court proceedings.

“The legislation gives us tremendous leverage in putting major pressure on PG&E to step up and put forward a proposal to adequately compensate victims,” said McCallum, who lost his Santa Rosa home in the 2017 Tubbs fire. “And if they don't do that, there would be serious consequences for them financially and their shareholders.”

The conditions placed on PG&E was not enough to satisfy Assembly member Marc Levine, D-San Rafael, the only local lawmaker to vote against the legislation.

Levine called the bill a slap on the wrist to PG&E, which also was responsible for a 2010 gas pipeline explosion in San Bruno that killed eight people. Levine said PG&E has failed to upgrade aging towers west of Sausalito carrying a major power line. The Wall Street Journal reported this week that 28 of the towers in that Marin County area have been in place since 1921.

“Its hard not to see this bill as a reward for monstrous behavior. They (PG&E) haven't done the work. They should not be rewarded,” Levine said in an interview, while also expressing sympathy for local fire survivors.

State Sen. Bill Dodd, D-Napa, disagreed with that sentiment. He noted the legislation requires PG&E and the other shareholder-owned utilities to invest a combined $5 billion over three years on fire-prevention upgrades, such as tree trimming, burying power lines underground and replacing wooden utility poles.

“I know this is not perfect,” Dodd said of the wildfire legislative package, “but it is the best solution we have at this time.”

Assembly members Jim Wood, D-Healdsburg, and Cecilia Aguiar-Curry, D-Winters, also voted for the bill.

“It's a huge step forward,'' yet the Legislature needs to do more to protect people from catastrophic fire damage in an era when risks of infernos are greater statewide, Wood said during the Assembly debate on the legislation.

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.