California Leaders Won't Change Utilities' Liability For Now

Don Thompson & Kathleen Ronayne, Associated Press

(AP) — A California commission set up to study wildfire issues recommended Wednesday that the state change a liability standard imperiling major utilities, but Democratic leaders immediately said they won't tackle the hot-button topic for now.

Gov. Gavin Newsom and the Legislature's two leaders said they will push for other changes outlined in the commission report that would make it easier for utilities to recover their wildfire costs if regulators determine that they acted responsibly.

They did not immediately take a position on two other controversial recommendations that would limit or tax new construction in wildfire prone areas. Commissioners said new development should be restricted to areas that firefighters can reach "within a certain maximum time," and proposed a new development fee without providing many details on either proposal.

"New development that will put more lives and property at risk, ought to pay a development impact fee to the State of California to help find risk reduction efforts that will benefit the new development," said a draft report commissioners plan to vote on next week.

California lawmakers created the Commission on Catastrophic Wildfire Cost and Recovery last year on the heels of the destructive 2017 wildfire season. But the state experienced an even deadlier year of wildfires in 2018, including a fire that nearly destroyed the town of Paradise and killed 85 people. Potential liability claims for that and other fires caused Pacific Gas & Electric Corp. to file for Chapter 11 bankruptcy in January.

Now, lawmakers are grappling with how to keep the state's other investor-owned utilities afloat while maintaining low electricity rates and ensuring wildfire victims are paid.

The report criticized California's current strict legal standard, known as "inverse condemnation," that requires utilities to pay for damages from wildfires caused by their equipment regardless of whether they acted negligently.

That standard "imperils the viability of the state's utilities, customers' access to affordable energy and clean water, and the state's climate and clean energy goals; it also, does not equitably socialize the costs of utility-caused wildfires," the report said.

If the state doesn't change the standard, commissioners said California should create a new wildfire risk-sharing fund much larger than what would be needed if utilities faced less liability. Coincidently, the Assembly unanimously voted Wednesday for legislation creating such a fund.

But commissioners warned there are risks.

"Creation of a large fund might go against the overarching need to ensure that the state is not ultimately subsidizing risky behavior from homeowners, renters, federal and local officials, and utilities."

Newsom, Assembly Speaker Anthony Rendon and Senate President Pro Tem Toni Atkins said in a joint statement that the report "makes clear that we must act now to stabilize the energy market and our utilities by addressing the liability faced by utilities after catastrophic wildfires."

But they committed only to "continuing the exploration of the impact of strict liability," while concentrating on other ways to help utilities. They said they "may need to pursue additional changes" if massive wildfires continue to ravage the state.

Former Gov. Jerry Brown also could not persuade lawmakers to address the state's liability standard. Newsom in April urged lawmakers to have a discussion on the standard as he asked for legislation on his desk to address wildfire costs within 90 days.

Pacific Gas & Electric, blamed for causing the Paradise fire, said it is reviewing the report, as did Southern California Edison. San Diego Gas & Electric, the state's other major utility, did not immediately comment.

The draft report is set for a commission vote on June 7. An Assembly committee plans a June 5 hearing on the draft report.

State lawmakers did not immediately stake out positions, saying they will review the recommendations as they try to meet Newsom's request for legislation before their summer break in mid-July.

Senate Majority Leader Bob Hertzberg, a Democrat from Van Nuys, called the report, along with earlier recommendations from a governor's task force, "a launch pad for the many tough discussions to come. It came not a moment too soon."