Key Takeaways:
California lawmakers gutted Gavin Newsom's wildfire liability overhaul, leaving utilities exposed to billions in potential damages and sending their shares lower.
California lawmakers rejected Gov. Gavin Newsom's proposal to cap utilities' wildfire liabilities, leaving PG&E, Southern California Edison and San Diego Gas & Electric exposed to potentially billions in damages and sending their shares down sharply.
The final compromise "is one of the most consequential pieces of legislation for victims and survivors of wildfires that we've ever done," said state Sen. Josh Becker, a Menlo Park Democrat and co-author of the bill.
The 96-page measure, published Saturday, blocks hedge funds and private equity firms from profiting on wildfire claims, restricts utility executives from collecting bonuses after a blaze that damages 500 or more structures, and creates a program to speed payments to survivors. Newsom dropped plans to end insurers' right to sue utilities to recover payouts, cap noneconomic damages for some victims, and shift infrastructure costs to local governments. Utility stocks fell Friday as the chances of a broader deal faded.
The rejection leaves the $21 billion wildfire fund created in 2019, plus the $18 billion added last year, as the main backstop for utility-caused fires. Wildfire charges already add about $41 a month to the average PG&E bill and $27 for Southern California Edison customers, according to a state report released this spring.
The fight caps a session in which Newsom, in his final year as governor, sought to reorder a liability system that has pushed California's three investor-owned utilities to the edge of financial distress. The utilities have caused at least seven of the state's 20 most destructive fires, according to the California Department of Forestry and Fire Protection. PG&E's equipment sparked the 2018 Camp Fire, which drove the company into bankruptcy and left many survivors unable to recover the full cost of rebuilding.
The last time lawmakers confronted a similar liability crisis was in 2019, when they created the $21 billion fund financed equally by shareholders and ratepayers. That framework proved insufficient after last year's Eaton Fire, which killed 19 people and destroyed about 9,400 structures in the Los Angeles area. More than 11,000 households have sued Southern California Edison, which investigators said caused the fire through electrical arcing on an out-of-service transmission line; the utility denies negligence.
Wildfire survivors who opposed Newsom's original plan celebrated the concessions. "Survivors from across California came to Sacramento and asked our elected representatives to stand with the people whose homes, communities and lives have been devastated," said Joy Chen, executive director of Every Fire Survivor's Network. "They listened."
The bill, introduced as an urgency measure after negotiations ran past Friday's midnight deadline, requires a two-thirds vote in both chambers. The session was extended to Tuesday to satisfy a 72-hour print rule. Republican Sen. Roger Niello questioned whether three days was enough to evaluate changes to a system that directly affects fire-scarred communities.
PG&E criticized the final measure, saying it "does not adequately address the financing risks created by California's current wildfire liability framework" and would not give financiers the long-term assurances needed to attract affordable investment. Edison International boosted CEO Pedro Pizarro's compensation to $16.6 million last year, up 20%, despite the deadly Eaton Fire.
Newsom, who had argued the status quo could push utilities into bankruptcy and leave victims "chasing crumbs in bankruptcy court," acknowledged the compromise fell short of his goals. "This system needs full structural reform — not a partial one," he said, urging the Legislature to build on the progress next year.
This article is for informational purposes only and does not constitute investment advice.
