California Enacts Laws Targeting Property and Other Wildfire Cost Mitigation
Customers Including Commercial Users to Pay Into $21 Billion Fund for Utility Liabilities
California Gov. Gavin Newsom has signed into law legislation creating a user-backed fund to help utilities pay for damage caused by wildfires, after blazes sparked by faulty electric utility lines and equipment caused extensive damage to commercial and residential properties in the state during the past year.
Passed as Assembly Bill 1054, the measure aims to provide investor-owned utilities up to $21 billion to pay for damage for fires connected to their equipment starting this summer if they meet certain criteria. That includes access to a $10.5 billion wildfire fund, with the ability to take out loans from a separate $10.5 billion "liquidity fund," both to be supported through an existing charge on customers’ monthly bills that is being extended by 15 years beyond its current 2021 expiration date. The state’s investor-owned utilities, which include Pacific Gas & Electric Co., Southern California Edison and San Diego Gas & Electric Co., can contribute to the fund in exchange for receiving a cap on their obligation to reimburse the fund after a wildfire.
Newsom also signed into law the companion Assembly Bill 111, which creates a committee to oversee the new wildfire fund.
Originally sponsored by Assemblyman Chris Holden, D-Pasadena, the criticized AB 1054 was opposed by some consumer advocates who contended the utilities should bear most of the financial burden for fires caused by their equipment. Vocal supporters were led by Newsom, who cited issues including recent threats by credit agencies to downgrade the state’s power companies if the state did not move by July 12 to address liability risks posed by potential future fires. Lowered credit ratings can prohibit borrowing or increase borrowing costs for utilities, which can be passed on to customers through higher monthly bills. The law is also aimed at preventing the utilities from filing for bankruptcy after a wildfire following PG&E's filing for bankruptcy protection in January after the state's recent fires.
AB 1054 recently passed the California Assembly by a vote of 63-8 and the state Senate by a 31-7 vote. In signing the bill into law July 12, Newsom said it will address safety and accountability concerns while also keeping energy costs in check, after several serious wildfires hit the state in the past few years.
"The rise in catastrophic wildfires fueled by climate change is a direct threat to Californians," Newsom said in a statement, adding that strengthening the state’s wildfire prevention, preparedness and mitigation efforts will be a top priority of his administration.
Newsom also announced the appointment of Marybel Batjer as president of the California Public Utilities Commission, the state's lead regulatory agency in the sector. "I am confident she will protect the best interest of all Californians by challenging utilities to embrace reform while providing safe, reliable and affordable service," the governor said.
Last fall’s Camp Fire in Northern California and the Woolsey Fire in Southern California killed almost 90 people and caused about $18 billion in damage to more than 19,000 structures, including hundreds of commercial properties.
A California state agency concluded electric transmission lines owned by Pacific Gas & Electric, which serves thousands of commercial utility customers in Northern California, caused the Camp fire, the deadliest such fire in the state’s history. Utility firms and their opponents have long been at odds over who should pay for wildfire mitigation efforts, which PG&E recently told regulators would cost the utility as much as $2.3 billion this year.
PG&E is required to exit bankruptcy and settle its claims before it can participate in the new wildfire fund.
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