California Governor Proposes Limits on Utility Wildfire Liability

SACRAMENTO, Calif. — California Governor Gavin Newsom is asking state lawmakers to consider new legislation regarding financial responsibility for wildfires. The governor proposes limiting the amount utilities must pay victims and their attorneys when utility equipment sparks a wildfire.

Newsom stated his administration has engaged in discussions with various stakeholders, including legislators, utilities, consumer advocates, and labor groups. He indicated a goal of delivering a legislative proposal to lawmakers within weeks. The governor emphasized the proposal aims to ensure utility solvency while victims receive compensation.

The governor's proposal emerges as California faces ongoing challenges with wildfires. State law holds utilities strictly liable for damages if their equipment causes a fire, regardless of fault. This legal standard, known as inverse condemnation, allows utilities to pass those costs onto customers through rates. However, recent large-scale wildfires have led to billions of dollars in liabilities for utilities, prompting concerns about their financial stability.

Regulators have previously approved rate increases to help utilities recover wildfire-related costs. For instance, Pacific Gas & Electric received approval in December for a rate increase that will add approximately $32.92 to the average monthly bill for its electric and gas customers. This increase is intended to help the utility recover costs from past wildfires and infrastructure upgrades.

Southern California Edison customers have also experienced rate adjustments. The California Public Utilities Commission approved an increase in November 2023, adding about $4.62 to the average monthly bill for their electricity. This decision aimed to address wildfire mitigation and other costs.

Newsom's office has engaged former CPUC President Michael Peevey to contribute to the discussions. Peevey, who led the commission during a period of significant utility regulation, has participated in multiple meetings regarding the governor's wildfire liability initiative.