With clock ticking, California lawmakers reject key parts of Newsom’s wildfire plan

With only days left in the legislative session, lawmakers refuse to back several of Gov. Gavin Newsom's controversial proposals for reducing how much for-profit utility companies must pay after causing a wildfire.

Assembly and Senate lawmakers oppose the governor's proposals to limit survivors' compensation for pain and suffering, curb reimbursements to insurance companies for massive payouts to homeowners when power lines spark a fire and limit how much local governments can recoup for incinerated infrastructure, according to legislative sources and internal memos obtained by CalMatters.

Those are among the most contentious parts of a high-stakes package of wildfire policies Newsom has been negotiating behind closed doors at the end of his final legislative session as governor.

Neither the governor's office nor leaders in the Senate and Assembly have released the text of the proposals they are negotiating, setting the stage for them to potentially push through a complex package of policies with little public hearing in the final days of the session that ends Aug. 31.

Newsom's office has not responded to inquiries about lawmakers' opposition to parts of his proposal. If they can't reach an agreement by Friday, the legislative deadline to publish bills before they get a vote, they would punt the issue of rising utility liabilities to the next governor.

At a press conference last week, Newsom said he's open to amending his proposal but insisted some reforms must be made.

"I feel very strongly that we need to move on this," he said.

Newsom is concerned, his staff says, with ensuring

fire victims' damage claims get paid faster while freeing utilities from other lawsuits that could shake investors' confidence in the companies' financial standing and lead to higher power bills for customers. But opponents, including local governments, wildfire survivors, consumer advocates and insurance companies, argue the plan helps utilities escape accountability.

Though any changes they make would apply only to future wildfires, the negotiations have stoked the anger of a group of Eaton Fire survivors who traveled to Sacramento this week to protest the proposals. Earlier this month, state and Los Angeles fire officials found investor-owned utility Southern California Edison responsible for the January 2025 fire, which ignited under a decades-old decommissioned Edison transmission tower. The blaze claimed 19 lives and destroyed 9,400 structures.

"My job is not to ensure that we're increasing profits for shareholders for these companies," Sen. Sasha Renee Perez, a Democrat who represents Altadena, said at a rally with the group on Tuesday. "And we certainly, as a Legislature, are not going to negotiate with companies that want to act like terrorists."

Lawmakers diverge

Perez was referring to a report that executives of Pacific Gas & Electric and Edison have told Wall Street analysts the companies plan to take unspecified actions to protect their shareholders if lawmakers do not pass laws this year helping them reduce their financial responsibility after fires.

Newsom and Democratic lawmakers agree on a proposal that would curb utility CEO bonuses after a destructive fire and increase fines for utilities with safety violations. Sources familiar with the negotiations said a Senate proposal would go further, targeting utility profits by directing regulators to scrutinize company spending and to consider limiting rate increases in line with inflation.

Lawmakers also agree with Newsom on improving community wildfire mitigation projects and using future insurance taxes to pay for home hardening. And they generally agree on limiting fees for attorneys who represent victims and other plaintiffs in suing utilities for damages after a fire, though the Senate plan would also curb fees for the utilities' attorneys.

But neither Senate nor Assembly leaders agree with Newsom on eliminating subrogation — the right of insurance companies to recoup their costs for claims from utilities or other corporations responsible for a fire — according to memos of the Assembly's counterproposals and Senate sources familiar with the negotiations.

The insurance industry has been vocal about the possible effects, arguing it would increase insurers' costs and lead them to raise their rates.

'A massive new strain'

Sen. Ben Allen, a candidate for insurance commissioner and Democrat whose district includes the Pacific Palisades, which also experienced a deadly fire last January, said killing subrogation to try to address one problem (high electricity rates) could create another problem (even higher insurance rates).

"I fear we will create a massive new strain on the insurance system that could break basic questions of affordability for Californians," Allen told CalMatters. It could also exacerbate problems in the state's already challenging insurance market, he said.

Lawmakers are aligned with the governor on limiting the number of middlemen who are entitled to benefit or profit after a disaster, or at least capping how much they can get. Lawmakers in both chambers want to bar insurers from selling their claims and subrogation rights to hedge funds. The Senate plan would still allow it if insurers get approval from the insurance commissioner, which smaller insurers might seek if they need cash quickly to pay claims after a fire.

Assembly leaders also are pushing back on Newsom's proposal to reduce the amount local governments can recover from utilities after a wildfire by limiting claims to the depreciated value of burned infrastructure, rather than the full cost of rebuilding it. The proposal had sparked outrage from the California State Association of Counties, the League of California Cities and groups representing school districts.

Under pressure from the powerful California Professional Firefighters union, Newsom appears to be backing away from that effort.

On Monday, the union wrote Newsom a letter supporting his overall package and thanking him for "adjustments to ensure that local governments are not unduly impacted by this proposal." Newsom spokesperson Anthony Martinez did not respond to an inquiry about that proposal.

A fraught proposal

Newsom's office, lawmakers and the utilities (via their Wildfire Victims First campaign, which includes few fire victims) say their motivation is ensuring fire survivors' damages are prioritized over other plaintiffs. That means determining which survivors are most deserving, which is among the most emotional and fraught of Newsom's proposals.

The governor would limit survivors' damages for pain and suffering to those who lost a family member or suffered an injury. Other survivors would only get to make a non-economic damages claim if they were in the burn perimeter and had to flee, with a cap of $150,000 per person to avoid overdrawing from the state's wildfire fund, which is paid for by utility customers and shareholders.

In response to survivors' objections, the Assembly's proposal would expand eligibility for those non-economic damages without caps, while the Senate plan would not limit eligibility and instead raise the legal bar for survivors outside the perimeter to prove the fire caused their trauma.

But a month of protests by Eaton Fire survivors opposing Newsom's plan shows choosing how to prioritize victims remains complicated. Their group, Every Fire Survivors Network, objects to anything seeking to differentiate among fire victims.

"We are the real wildfire survivors," a few dozen of them chanted outside the governor's mansion Monday night, where Newsom was hosting state lawmakers for an end-of-session reception.

Gayle Nicholls-Ali's house in Altadena burned down, and she is starting to rebuild. Her son's home, around the corner, was not destroyed but has smoke damage. He and his wife have been living in a donated RV on the property, waiting for his insurance company to approve his claims so they can begin repairs.