Cost Of Wildfires Could Get Passed On Under California Lawmakers’ New Proposal

California lawmakers have released a proposal to improve the state’s preparedness and response to wildfires — and to soften the financial cost of those fires on electric utilities.

Assembly and Senate members have spent the past month searching for a compromise agreement that would protect utilities — who argue liability costs could drive them to bankruptcy — and mitigate future wildfire threats, as the length and severity of fire seasons increases.

The outline of bipartisan legislation released on Friday calls for utilities to prepare detailed fire-safety plans for their equipment, while directing the state public utilities commission to consider how much of a wildfire caused by utility equipment was out of the company’s control.

The commission could allow utilities to pass those costs along to ratepayers.

The legislation would also allow utilities to pay off the costs of fires over multiple years as bonds, funded by ratepayer fees. But it would bar company executives from receiving compensation from wildfire fees.

“There are going to be impacts to ratepayers. There is just no other way around it, and we need to be honest about that,” said Assembly Republican leader Brian Dahle. “But we are going to make sure that the investors have a heck of a lot of skin in the game. … But at the same time, we need to make sure that they’re still in business.”

The plan does not address court liability for fires under a mechanism known as “inverse condemnation,” where utilities can be held accountable for fires started by their equipment, regardless of whether they were negligent or diligent in its care.

The International Brotherhood of Electrical Workers, the union that represents utility employees, argued that without addressing that component or the cost of last year’s wildfires, the legislation would still leave the companies exposed, potentially ruinously.

“If this conference report comes out next week and doesn’t address the 2017 issue, you are going to see, very likely, a downgrading of PG&E to junk bond status,” said Scott Wetch, the lobbyist for IBEW. “That’s going to cause a liquidity issue almost immediately and put pressure toward bankruptcy.”

Ratepayer advocates pushed back, saying the outlined protections for utilities still unduly shift costs onto customers. They used the word “bailout.”

“Any provision that makes ratepayers the insurance of last resort, while PG&E shareholders pay nothing and reap the financial benefits, needs to be rejected by the Legislature,” wrote Becky Warren of the Ratepayer Protection Network, which primarily represents large agricultural interests.

Other sections of the bill would seek to shift more resources to firefighters. While the outline contains no dollar amounts, it proposes extending a bump in fire prevention and management spending this year over multiple years. The money, more than $200 million, came from the state cap-and-trade program. Lawmakers would also expand fire agencies’ ability borrow resources from other regions, which is called mutual aid.

Conference committee staff still must draft specific bill language, which which lawmakers warned could shift their support, depending on the details.

The Legislature adjourns at the end of the month, putting increased pressure, and a tight deadline, on lawmakers to come to an agreement.