California Governor Wants Wildfire Fund to Help Utilities

By and | June 21, 2019

California Gov. Gavin Newsom is pressing lawmakers on a wildfire fund that may be financed through bonds to help utilities pay for the catastrophic blazes their power lines keep igniting, according to people familiar with the proposal.

Newsom is proposing a so-called liquidity fund that could be seeded by at least $10 billion in Department of Water Resources bonds, said the people, who asked not to be named because the discussions are private. The administration may also ask utilities to contribute about $7.5 billion in equity, the people said.

The bonds would be backed by a charge that utility customers have been paying since the 2000-2001 energy crisis, they said. The fund is part of a larger plan to address the mounting costs of intensifying wildfires that may be presented as soon as this week and is subject to change, the people said.

Newsom has been pressing for lawmakers to act since utility giant PG&E Corp. went bankrupt in January to deal with an estimated $30 billion in wildfire liabilities — stemming largely from the November Camp Fire that was ignited by one of its power lines. The blaze, the state’s deadliest, killed 85 people and destroyed the Northern California town of Paradise. The governor has called on the legislature to pass a bill by July 12 as ratings companies threaten to downgrade Edison International’s Southern California Edison and Sempra Energy’s San Diego Gas & Electric.

Nathan Click, a spokesman for the governor, declined to comment, saying details of the proposal will be released in the coming days.

PG&E surged as much as 16%, the most intraday since April 12. Edison was up as much as 2.6%.

As part of the larger plan, Newsom is also pressing for regulatory changes that would make it easier for utilities to recover the costs of wildfire damages from their customers. Based on the changes that have been discussed, companies may be allowed to charge ratepayers for their expenses unless they’re proven to have acted imprudently, people with direct knowledge said.

Meanwhile, Edison on Thursday warned that it may need to shut service to 6,500 customers across the high desert as gusty winds, hot temperatures and dry conditions raised the risk of wildfires in its territory. PG&E similarly shut power to hundreds of homes and businesses earlier this month to keep its own lines from sparking fires.

Former state assembly member Mike Gatto said Newsom has the potential to push the legislation through by mid-July. “I can’t imagine the legislature would want to break for the recess in the height of the summer wildfire season and not solve this issue,” said Gatto, who led the utility committee while in office.

It’s possible a second, larger catastrophic wildfire fund that power companies could tap to pay damages to victims may be established, but utilities would have to be willing to contribute to it, they said.

PG&E, Edison and Sempra have all supported the idea of a fund, but PG&E has largely blamed a state legal doctrine known as inverse condemnation for its collapse. The doctrine holds power companies liable for claims from fires sparked by their lines, even if they weren’t negligent. A California commission recommended that the doctrine be changed, but Newsom and legislative leaders have signaled that they won’t immediately take up the issue.

“The governor has been signaling maybe we should expect a fund instead of changes to inverse condemnation,” said Kit Konolige, a utility analyst with Bloomberg Intelligence.

“The idea of having state-backed bonds has been raised as a way to deal with what are hopefully relatively rare and big exposures like the liabilities from the wildfires,” Konolige said.


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