On Friday, California Governor Gavin Newsom signed a bill that would change the way the state pays for fire damages caused by utilities. As Reuters explained, Credit rating agency, S&P previously warned it could lower its ratings on the state’s two other major investor-owned power providers, Edison International’s Southern California Edison and Sempra Energy’s San Diego Gas & Electric, absent “concrete actions” by policymakers to reduce credit risks posed by wildfires to the state’s utilities.
What’s In the Bill:
- To compensate for the damages resultant of fires sparked by utility equipment (such as downed or exposed powerlines), a $21 million dollar fund will be created.
- To gain access to this insurance plan, utility companies must first pay to get in – $7.5 billion for large investor own utilities and less than that for regional electric companies – while also investing $5 billion in safety upgrades and participating in a new annual safety certification process.
- $10.5 billion is also contributed by ratepayers through extending an additional fee that was set during the energy crisis, supposedly expiring in 2020, by another 15 years. If damages cost up to $1 billion or more, companies may access the fund and will only have to provide repayment if it is deemed that they did not properly maintain and operate their equipment.
What This Means for PG&E: Reuters explained that, “San Francisco-based PG&E will need to pay the most among power providers to support the fund. To access the fund, PG&E will have to submit or have a bankruptcy reorganization plan approved by the end of June 2020 and will need to compensate victims of wildfires in 2017 and 2018 caused by its equipment.” You might recall the utility’s involvement in two of the deadliest wildfires, along with the ensuing legal battle.
The Opposition: Some Bay Area lawmakers have expressed opposition to the bill, most notably Assemblyman Marc Levine when he stated that, “It is hard not to see this bill as something of a reward for monstrous behavior.” According to California law, utilities are liable for fire damage caused by their equipment even if no negligence is involved. This bill, however, allows utility companies to access a pool of funds to pay off the damages if no negligence is proven – a shield for the companies as they face rising uncertainties with more explosive and frequent fires. Despite lingering concerns of accountability, many wildfire victims have accepted the legislation along with Governor Newsom, who praised the bill as being an important step in “Strengthening our state’s wildfire prevention, preparedness and mitigation efforts.”
Why This Matters: Many utility customers see this as a way of them footing the bill for reckless behavior on the part of PG&E despite the fact that this isn’t a bailout as the state won’t take over the company’s power lines and directly pay the company money for its assets. They worry that they are paying for a solution for PG&E and critics of the bill say that it doesn’t do enough to prevent wildfire prevention. However, CA Governor Gavin Newson assures that more legislative solutions for wildfires are coming in the very near future. Either way, this underscores the impact that climate change will have on our legal and political systems going forward and that we’re going to have to rethink how a lot of them function in an effort to limit wildfire damage and deal with reality.