Culminating months of debate over how to respond to massive wildfires that swept California last fall, destroying thousands of homes, Gov. Jerry Brown on Friday signed legislation that will make it easier for utility companies to pass on their liability costs to customers and bolster the state’s forest management efforts.
“Wildfires in California aren’t going away, and we have to do everything possible to prevent them. This bill is complex and requires investment – but it’s absolutely necessary,” Brown said in a signing message for Senate Bill 901.
The measure emerged from concerns that PG&E, whose equipment has been found responsible for causing at least a dozen fires in wine country last year, could be forced into bankruptcy by its legal responsibility for the property damage. The company faces up to $15 billion in liability, according to estimates from stock analysts.
Utilities and electrical workers spent millions urging lawmakers to change state law, under which a company typically must provide compensation for property damage if its equipment, such as a downed power line, causes a fire, regardless of whether any negligence is proven.
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But that sweeping change was dropped amid pushback from the homeowners insurance industry, which feared it would no longer be able to sue utility companies to recover payouts to policyholders. It argued that such a shift amounted to a “bailout” that would leave insurance companies holding the bag, leading to higher premiums or no coverage at all in fire-prone areas.
SB 901 instructs the California Public Utilities Commission, when assessing damages, to determine whether a utility company behaved responsibly, complied with new plans to prevent fires or if extreme conditions exacerbated the destruction. It allows the commission for the first time to split costs between ratepayers and utility shareholders based on its findings.
In the case of the 2017 wildfires, state regulators would also have to consider PG&E’s “financial status” and limit costs that ultimately fall on shareholders to the maximum amount the utility can pay without harming customers or affecting its ability to provide service. Any excess costs that the commission determines PG&E shareholders cannot afford could be tied into bonds that are paid by ratepayers over time, a strategy that all utility companies could use to finance recovery costs for future fires under certain conditions.
The measure also designates $1 billion in cap-and-trade money, over five years, to the removal of dead trees and brush that fuel blazes, and creates an exemption in California logging regulations for small landowners to remove trees from their property.