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

Jul. 12--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 caveatprecluding 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.

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