SACRAMENTO, Calif. - California lawmakers on Thursday hastily approved complex legislation to overhaul the state's method of paying for utility wildfire damages at the urging of Gov. Gavin Newsom, who has sought to calm Wall Street concerns about liability.
The Assembly sent AB 1054 to the governor's desk with a 63-8 vote, three days after the Senate approved the proposal. Newsom is expected on Friday to sign the bill, which his administration says will create a fund of at least $21 billion that power companies can use to pay damages from blazes linked to their equipment.
"AB 1054 will pave the way for very important changes in how we address wildfires in California," said Democratic Assemblyman Chris Holden. "The package provides certainty for customers whose contributions are fixed by the bill. It provides certainty for the markets to protect the utilities and provides certainty to fire victims."
Some who voted against the bill said lawmakers were going too far to help the utilities and PG&E, which has admitted that its equipment likely caused the Camp fire, which in November killed more than 80 people in Butte County.
"It is hard to see this bill as something other than a reward for monstrous behavior," said Assemblyman Marc Levine, a Democrat. "Our efforts should make public safety paramount."
The bill's passage marks an early legislative victory for Newsom in working with legislative allies in the Capitol to earn support for controversial legislation.
The governor swiftly moved the bill through the Legislature in response to threats from credit ratings agencies to downgrade the state's power companies if lawmakers failed to act this week. The proposal will go into effect immediately with Newsom's signature, but money will not be deposited into the fund until later this summer.
Newsom commended lawmakers for moving the bill forward.
"I want to thank the Legislature for taking thoughtful and decisive action to move our state toward a safer, affordable and reliable energy future, provide certainty for wildfire victims and continue California's progress toward meeting our clean energy goals," Newsom said.
Newsom's proposal offers two different models of wildfire funds to help utilities pay for claims. Both options would extend an existing fee on electricity bills to generate $10.5 billion from ratepayers.
One option offers the utilities the $10.5 billion as a line of credit to pay for costs that exceed insurance coverage for wildfire damages. A utility that borrowed from the fund would later be required to repay the loan if regulators decide the company failed to properly manage its system to prevent the fire.
A second option would require utilities to match the $10.5 billion from ratepayers to establish a fund of at least $21 billion. In order to access the money, utilities would have to earn a first-of-its-kind annual safety certification before the onset of wildfire season. To receive the certification, companies would be required to tie executive compensation to safety performance, create a safety committee on its board of directors and be implementing their wildfire mitigation plans.
A power company that obtained safety certification before wildfire season would be allowed to dip into the wildfire fund, which would act as a second insurance policy for the utilities. The companies would only have to pay it back, up to a cap, if they behaved unreasonably to cause a fire.
The safety certification would also shift the burden of proof away from a utility, requiring outside groups to intervene in regulatory proceedings and raise serious doubt that the electrical corporation operated its system reasonably before a wildfire.
San Diego Gas & Electric, Southern California Edison and Pacific Gas & Electric have 15 days after the bill is enacted to signal their intent to spend the $10.5 billion to join the fund. Under the model, PG&E would be responsible for paying more than 60% of the total. Edison would pay nearly one-third and SDG&E would cover about 4%.
An initial contribution of $7.5 billion is due from the utilities in the first year. SDG&E and Edison would have to provide their share of the money within 60 days of the bill's enactment. PG&E in particular won't be required to contribute an initial contribution until the San Francisco company emerges from bankruptcy no later than June 30, 2020, according to the governor's office.
After the first year, the utilities would be required to pay $300 million in aggregate per year.
The state would deposit an initial contribution of $2 billion after the utilities pay their portion and an administrator of the fund would later determine when to add the additional money, the governor's office said.
Several lawmakers expressed concern over the last week about efforts to move such complex legislation so quickly. Others repeated the need to focus on wildfire prevention and efforts to harden homes to reduce the danger of devastation.
"We still have other work to do," said Democratic Assemblywoman Autumn Burke. "This is not the end of the conversation, but this is a pivotal part in the conversation and this was something that cannot be pushed aside anymore because we have seen the cost of inaction and the devastation."
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