In a grim forecast to Gov. Gavin Newsom, a public policy analyst warned Wednesday that PG&E’s rates could double if it’s found liable for another round of wildfires on the same scale as the disasters that drove the utility into bankruptcy.
Steven Weissman, a lecturer at UC Berkeley’s Goldman School of Public Policy, is advising Newsom’s office as it expects to roll out a plan Friday for dealing with wildfire costs in an age of global warming and increasing fire risk. Weissman’s three-page memo attempts only to gauge the impact of future fires, not the effect of the $30 billion in potential liabilities PG&E already faces from the 2017 and 2018 wildfires.
The memo is titled “The Massive Cost of the ‘New Normal’ in Wildfires & Climate Change Era” and predicts dramatic rate increases for other companies as well, including Southern California Edison and San Diego Gas & Electric, if mega-fires continue.
“If wildfires persist at the levels we have experienced recently, and all customers of the major electric utilities had to bear the burden, average rates throughout California would have to increase by 50 percent in the first year, alone,” he wrote in the memo to Newsom’s Cabinet secretary, Ana Matosantos. Newsom’s office released the memo Wednesday afternoon.
Weissman said fires in California the past two years caused a total of $36 billion in damages. Last November’s Camp Fire killed 85 people, more than any other in California history, and destroyed most of Paradise.
“The potential impact, if we had these kinds of fires going on year after year, is too much — not only for the ratepayers, it’s too much for the state to take on,” Weissman said in an interview. He said skyrocketing electric bills would harm the state in multiple ways, from its business climate to its efforts to promote electric cars.
Beyond the immediate crisis of PG&E, the prospect of rising wildfire costs is proving daunting for Newsom, the Legislature and the Public Utilities Commission. The Legislature last year provided some buffer for utilities by enacting SB 901, which allows them to charge ratepayers for some of the wildfire liability costs of the 2017 fires, as well as certain “just and reasonable” liabilities generated by fires in 2019 and beyond.
But the law omitted any protections for the 2018 fires. And it fell short of what PG&E and other utilities wanted: broad protection against liabilities in cases where the company’s equipment caused the fire but the company didn’t behave negligently. In the wake of the Camp Fire, which PG&E has said was likely caused by problems at a transmission tower, lawmakers have made clear they aren’t interested in approving a major bailout for the utilities.
The Legislature is, however, considering the creation of a state-run wildfire insurance pool to supplement big utilities’ own insurance coverage. AB 235, introduced in January by Assemblyman Chad Mayes, R-Yucca Valley, would create a Wildfire Catastrophe Fund, financed by participating utilities, to provide “alternative risk financing” to cover wildfire costs.
“In extreme cases, utilities and ratepayers cannot shoulder the financial burden alone. The State of California has a role to play in combating climate change’s impact on wildfire severity,” the bill says. It adds that the program is designed to “quickly and adequately reimburse victims of wildfires.”
Weissman said such a fund could help with short-term costs, but it won’t solve the utilities’ fundamental financial problems. “You still have to find a way to put money into (the fund),” he said.