Governor Gavin Newsom's proposed legislation aimed at reforming wildfire liability for utility companies is encountering significant opposition from a coalition of stakeholders who warn it could lead to higher insurance rates across California. The proposal could allow private utility companies to reduce their liability for wildfires sparked by their equipment.
A coalition comprising insurers, local governments, fire survivors, attorneys, and consumer advocates has urged state lawmakers to reject the plan. They argue that the proposal would cap the compensation fire victims and insurers can recover from utilities, while shifting costs to homeowners' insurance, local governments, state taxpayers, and affected communities. The coalition has titled their campaign "Wildfire Recovery Reform: Survivors First."
"Wildfire survivors should not be asked to subsidize utility shareholders. Families who have lost loved ones, homes, businesses, and livelihoods because of utility-caused fires deserve full compensation and a clear path toward recovery," the coalition stated in an Aug. 11 letter to the legislature.
Utility equipment has been identified as the cause of seven of the world's 20 most expensive wildfires, all of which occurred in California, according to the coalition. Existing regulations hold utilities accountable for disasters caused by their equipment.
Newsom's administration contends that the current system is broken and unfairly burdens taxpayers and ratepayers, while insurance companies and hedge funds allegedly force survivors to fight for compensation. The governor's office claims the proposal aims to create a more equitable system for all parties involved.
However, critics, including Joy Chen, who leads the Every Fire Survivors Network, have characterized the plan as a "multibillion-dollar bailout for big utilities" funded by victims. Chen expressed concern that the proposal would redefine payout eligibility by establishing narrow "zones of danger," potentially leaving individuals outside these zones ineligible for compensation even if their homes were affected by smoke.
State Senator Ben Allen has also voiced concerns, sending letters to the CEOs of PG&E and Southern California Edison. Allen stated he was "deeply troubled" by reports that the utility executives had indicated on recent earnings calls that they might prioritize stock buybacks over infrastructure upgrades if the state did not provide a bailout. Allen reminded the companies that wildfire liability is a critical component of their operating licenses in California and emphasized the necessity of reliable utility services for residents and businesses.
The proposed legislation comes as California's wildfire liability fund is nearing depletion. This depletion has been exacerbated by payouts to victims of last year's Eaton Fire, which was attributed to sparks from an inactive Southern California Edison transmission line. The coalition's stance is that the state should not transfer these costs to consumers and homeowners, particularly when utility equipment is the root cause of the disasters.