Wildfire liability talks resume, raising special session questions

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Hello and welcome back to Capitol Confidential! 

We’re four days out from Election Day. 

But for many members of the Legislature, they’re already focusing on two massive policy issues hanging over their heads like a sword of Damocles: AI regulations and wildfire liability reform. 

They also happen to be the two issues Gov. Gavin Newsom has indicated could prompt a special session – a possibility that he’s neither outright confirmed or denied.

This week, many lawmakers returned to an otherwise sleepy state Capitol to hold intersession hearings. One, as I wrote in Wednesday’s newsletter, was an AI oversight hearing held by the Assembly Committee on Privacy and Consumer Protection.

The others were held by the Assembly Committee on Utilities and Energy, discussing wildfire liability reform.

When the wildfire liability reform effort crashed and burned in the last week of the legislative session this summer, several Democrats pledged it would not be the end of the discussion. 

During the last day of session, Assembly Democrats refused to take up a vote on a watered-down bill that sidestepped nearly all of the substantive issues central to the state’s crisis over paying for catastrophic wildfires. It had no mention of capping how much utility companies are on the hook for paying when their equipment is found to cause a fire, and did not address Newsom’s desire to end subrogation or place limits on how much local governments can claim from utility companies.

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 have drawn from billions in ratepayer funds to pay out damages.

The hearings this week and last marked the first public meetings since the wheeling and dealing fell apart. 

Assembly Member Cottie Petrie-Norris, D-Irvine, chair of the committee, described the hearings as a way to “give the Legislature a common set of facts before we act again,” though whether that will be in a special session or sometime next year is still unclear. 

One throughline from all three hearings: lawmakers have an incredibly large and consequential task ahead of them. One of the hearings even had an apt name, calling the current state of wildfire liability a “tipping point.” 

Dan Dunmoyer, president of the California Building Industry Association, used the term “cataclysmic” in his testimony, calling PG&E’s work deferments and investment delays a “crisis” he’s expecting to impact the building industry in roughly 60 days. 

Leuwam Tesfai, executive director of the California Public Utilities Commission, or CPUC, called reform “necessary” and “urgent,” warning the status quo is untenable.

“Future fires are likely to bankrupt and further downgrade electric utilities,” she said. “Further increasing rates and threatening the state's ability to provide safe, reliable electric service.”

Representatives of the insurance industry also expressed alarm, as did groups representing California ratepayers, independent wildfire and energy experts and utility companies themselves. 

“Over three hearings, one thing became crystal clear: every dollar of wildfire risk lands on Californians,” Petrie-Norris said in a statement. “The only question is whether we pay for it on our electric bills, our insurance premiums or in our community’s recovery.”

She added her focus is to try to lower costs and ensure money goes “to survivors not corporations.”

In the wake of the compromise bill’s collapse on the last day of session, Newsom requested that the CPUC monitor the market and credit rating response to the legislative session ending without structural reform. Its report on the effects of the deal’s collapse on investor-owned utilities is due Nov. 1.

Tesfai said the CPUC is working “expeditiously” to get the report out on time. Tesfai avoided specifics but told lawmakers the report will include many of the same recommendations it made at the beginning of the year. The report was mandated by SB254 by Sen. Josh Becker, D-Menlo Park.

CPUC’s top recommendations included expanding the California Wildfire Fund, a $21 billion reserve funded 50-50 by utility ratepayers and shareholders to pay the costs of utility-sparked wildfires, and proposing local governments also pitch in. Other recommendations included replacing the fund altogether with a catastrophic event fund buoyed by the state and increasing mitigation efforts by pulling money from the general fund or Cap-and-Invest proceeds. 

Since the deal collapse, the state’s largest investor-owned utilities have been sounding the alarm, warning a lack of reform is affecting their credit rating. PG&E announced it will defer $2 billion in connections to new renewable-energy projects and housing developments, prompting several Democratic lawmakers to question whether the move is politically motivated. 

Representatives for PG&E and SoCal Edison have loudly advocated for a special session, while lawmakers have been more mixed on the idea. 

In the hours after Dolores Huerta’s death on Wednesday, tributes to the trailblazing figure of the farmworker’s movement poured in from nearly every Democratic leader in the state and nation. 

Former presidents sung her praises, as did California’s most powerful federal lawmakers. 

But especially here in California, Huerta’s legacy struck a deeply personal chord with many Democratic state lawmakers, officials and labor leaders. Her more than six decades of work, including her co-founding of the National Farm Workers Association, later known as United Farm Workers, had left its mark in many corners of Democratic politics.