A bill to reform the way the state and its utilities cover the cost of wildfires is racing through the California Legislature like, well, a wildfire, in an effort to meet an entirely manufactured deadline. Legislators need to slow it down or Californians could get burned.
Assembly Bill 1054 would make necessary and important changes to the way victims of catastrophic fires started by downed or sparking lines are compensated; its goal is to protect the solvency of the state's three largest power companies without unfairly burdening ratepayers. The bill must pass quickly as peak fire season nears. But, for heaven's sake, it doesn't have to pass this week.
This complicated, multibillion-dollar legislation emerged only about two weeks ago, as a result of Gov. Gavin Newsom's appeal to lawmakers to adopt recommendations from his wildfire strike force report before legislators started their a monthlong recess Friday. Newsom set the deadline in response to a threat from Wall Street to downgrade the state's investor-owned utilities if legislation wasn't passed by that day. That was already not enough time to digest all the details. But then the bill was heavily amended last Friday.
Facing the governor's deadline, the bill blazed through its first two committee hearings and a Senate floor vote in just a few hours on Monday, despite concerns raised by wildfire victims, business lobbyists and consumer advocates. Some senators admitted they didn't fully understand or like all the details of the 98-page bill, but felt they had no choice but to meet the timeline.
They do have another choice, though. And we hope the Assembly, which is the next stop for this bill, makes it: Say no to being rushed by Wall Street into the hasty adoption of a complex law that puts Californians on the hook for billions of dollars. Credit downgrades can be pricey, but as Newsom himself said last week, if the Legislature shows it is making good-faith effort toward reform, the credit rating agencies will probably take that into account.
This wildfire legislation seeks to create a new way to fairly allocate the costs of wildfire damage caused by power equipment. The state's largest fires in the last two years have been sparked by electrical lines and equipment, and the resulting financial costs have already forced the state's largest investor-owned utility, Pacific Gas & Electric, into bankruptcy. Without serious reform, the state is heading for another energy crisis.
The bill seems mostly sensible. It would set up a $21-billion wildfire recovery fund for victims of future fires. (It would not apply to last year's catastrophic Camp and Woolsey fires.) The fund would be paid into equally by ratepayers (by extending a $2.50 monthly charge on their bills that was levied during the last energy crisis) and by shareholders of investor-owned utilities.
In addition, the measure would tie any increases in compensation for a utility's executives to the company meeting measurable safety metrics. It would prohibit utilities from making a profit from the $5 billion in safety upgrades that ratepayers will have to fund. It would create a wildfire safety division within the California Public Utilities Commission, which has admitted it doesn't currently have the resources to enforce fire safety, and a Wildfire Safety Advisory Board to focus on wildfire safety prevention.
Importantly, the bill would change the standard now used to determine whether utilities are negligent when power equipment starts fires, aligning it with the generally used national standard.
Ideally, the bill would have removed the strict liability standard that requires utilities and their ratepayers to pay for damage caused by their equipment, even if there was no negligence involved. But as Newsom made abundantly clear, that change was not on the table this year.
AB 1054 represents a compromise, and a mostly a good one. But we're uncomfortable with the quick turnaround, especially because there have been few public hearings or other public discussions of the last-minute amendments. Among other things, we'd like to know why the annual wildfire mitigation plan provision was revised so that the plans extend for three years rather than one. And why this bill is an appropriate place to make it harder for public utilities to expand or add protections for electrical workers.
These are questions that deserve the kind of thorough examination and discussion they aren't likely to get if the bill is slammed through the Legislature this week. California deserves better than a slapdash ending to such a far-reaching new law.
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