California lawmakers failed to agree on wildfire liability changes, leaving a system that the state's utility regulator said could hinder funding for reliable service and raise electric bills.

Here's what to know

Under California law, utilities are liable for all wildfire damage caused by their equipment, even when their conduct was reasonable and consistent with their wildfire plans, according to Firehouse.

Gov. Gavin Newsom sought changes that included limiting or eliminating subrogation, the process insurers use to recover payouts from utilities. Lawmakers resisted key provisions of his proposal, which insurance industry lobbyists and other groups portrayed as a utility bailout.

Newsom requested the California Public Utilities Commission's assessment on Sept. 1, after negotiations collapsed. 

The agency concluded, "Until the whole-of-society steps needed to meaningfully reduce wildfire risk occur, the existing system that places tens of billions of dollars in wildfire costs on utilities and utility ratepayers and threatens further tens of billions of dollars in costs is not sustainable and increasingly harms the state's ability to provide safe, clean, reliable, and affordable electricity service."

More background

Customers can face higher electricity rates when wildfire risk makes it more expensive for utilities to borrow. Severe wildfire risk damages utilities' credit ratings, and the resulting borrowing costs can also complicate investments in safe, reliable service.

According to the commission's report, a state fund intended to keep utilities solvent is also expected to fall short of covering claims from future fires. That leaves both customers and people seeking compensation after devastating blazes facing financial uncertainty.

A California utility said it would postpone spending on dozens of renewable energy projects and connections for new customers, according to Firehouse. The $2 billion deferral followed lawmakers' failure to reach an agreement the company supported. The delay would save interest costs.

What's being done?

The commission recommended changing the liability system, improving support for large and small utilities, and strengthening investor-owned utilities' creditworthiness.

Representatives of PG&E and Southern California Edison are pressing for legislative action. Firehouse reported that passing a measure before Newsom leaves office would require the governor to call a special session.

Jamie Court, president of Consumer Watchdog, argued that shareholders should bear responsibility when utility negligence causes fires. He also criticized the commission's oversight of California's three for-profit utilities.

Anthony Martinez, a spokesperson for Newsom, emphasized the need to protect fire victims' financial security.

"This report continues to underscore what remains at stake," he said. "The state must work to secure long-term durable solutions, stabilize electricity rates and ensure fire victims are never again turned into unsecured creditors in a bankruptcy proceeding." 

Where can I learn more?

California's fight over wildfire costs also involves utility bills, survivors' compensation, and insurance oversight. 

• A Southern California utility's customers could pay hundreds of millions more after wildfire legislation stalled.

• California wildfire survivors urged leaders to stop utility fires, not just debate who pays.

• California wildfire survivors condemned Newsom's veto of insurer accountability bills.

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