Lawmaker squeezes utilities as special session declared ‘dead’

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Hello and welcome back to Capitol Confidential! 

Happy Wednesday. 

It’s that sweet spot post-election when many lawmakers, staffers and others whose lives are dictated by the legislative calendar are taking a breather. In under one month we’ll see a brief influx of activity at the Capitol as the new Legislature is sworn in. Though some tight races are still up in the air, we’ve largely got a handle on the new legislative class — including several new faces.

With a special session to tackle wildfire liability reforms looking increasingly unlikely, lawmakers, utility companies, wildfire survivors and other stakeholders are tussling behind the scenes in preparation for the next session. 

A brief refresher:

The mammoth issue of how Californians shoulder the burdens of increasingly deadly and costly wildfires was left unresolved when legislators left Sacramento in early September. Gov. Gavin Newsom had attempted to push through a massive overhaul of wildfire liability in the waning weeks.

Newsom’s initial proposal, which made its rounds in closed-door meetings but never in a public setting, attempted to broker a deal that would shield utility companies from soaring costs from wildfires caused by their power lines and electrical equipment. The governor has argued that the state needs a better process to manage the ballooning costs of wildfires, as utilities risk depleting the state’s Wildfire Fund, which draws on utility and ratepayer money to help pay for utility-sparked wildfire costs. 

Without that aid, utilities would be left to manage those costs alone — a scenario independent experts have warned they are not equipped to handle, and could lead to yet another utility bankruptcy and higher rates for customers. 

But the plan, largely supported by investor-owned utility companies like PG&E and SoCal Edison, rallied widespread pushback. Lawmakers wanted more time. Some wildfire survivor groups and several legislators representing fire-struck areas expressed anger over a proposal that they saw as a bailout for utilities. Insurance companies raised their own objections to provisions of the proposal that would bar them from suing utilities to recoup the cost of claims, siding with consumer advocacy groups and wildfire survivors who warned it would raise insurance rates and harm survivors' abilities to receive financial restitution.

So, the plan died, as did a dramatically watered-down deal that Senate lawmakers hoped could act as a first step. Assembly leaders, including Speaker Robert Rivas, D-Hollister, refused to vote on the bill, calling it a half-measure that failed to adequately address the fundamental issue, kicking it to the next session. 

Utility companies were not pleased. The following day, PG&E said it will defer $2 billion in connections to new renewable-energy projects and housing developments after the Legislature’s impasse, and loudly pushed for a special session. Southern California Edison, the second-largest investor-owned utility, warned in an Oct. 29 earnings call they may also pull back on investments.

Last week, Sen. Sasha Renée Pérez, D-Pasadena, sent a letter to the California Public Utilities Commission to demand it look further into PG&E and Southern California Edison’s investment rollbacks and internal funding. 

Pérez called the decisions to delay or reduce investments troubling in the letter, and warned that Californians’ access to electricity should not be used as a bargaining chip.  

“The Legislature must not be pressured to roll back utilities’ financial accountability for wildfires through threats to withhold the investments needed to serve our communities,” Perez said. “The Commission must therefore act immediately to ensure that sufficient financial resources are available and prioritized for service.”

She demanded that the CPUC "immediately examine both companies’ stated funding constraints,” stop the two largest investor-owned utility companies from making dividend payments to their holding companies and send funds to utilities to ensure they continue to meet their service obligations to customers.

The same day as Pérez’s letter, the CPUC released a report ordered by Newsom earlier this summer when he directed it to examine the effects of the wildfire deal collapse on the companies. The report repeated much of what is already known. The agency said the status quo poses “significant financial risks to electric utilities, their customers, and the state’s broader economy,” and noted a drop in utilities’ credit ratings. 

In response to the report, PG&E reiterated its desire to see discussions continue.

“California’s ability to maintain a safe, reliable and affordable energy system depends on utilities attracting investment at the lowest possible cost for customers,” spokesperson Lynsey Paulo said in a statement. “Durable wildfire reform is needed now to reduce financing costs, improve affordability and continue progress on the state’s energy goals.” 

Meanwhile, Joy Chen of Every Fire Survivor’s Network – a group representing wildfire survivors that emerged as a formidable voice against Newsom’s proposal this summer — declared victory this week, saying time is up for any special session. 

“Dead,” Chen wrote in an email. “Congratulations, everyone. It took an awful lot of us making noise to get this kind of quiet.”

Even in the frantic hours after the compromise wildfire bill was punted by Assembly leaders, lawmakers and legislative staff cast a special session as unlikely. In the few months since, Newsom has continued to hedge, and most lawmakers expressed cautious doubt the outgoing governor would call the Legislature back. Some legislators suggested any special session would just replicate the same crunched timeline that fueled the original deal collapse. 

But it hasn’t been all quiet – the Assembly Committee on Utilities and Energy held a trio of hearings in October on wildfire liability issues — signaling an eagerness to return to the table as soon as the Legislature resumes.

More than a week out from Election Day, we have a nearly complete picture of the new Legislature. 

Not counting, however, the Republican leadership.