By Timothy Darragh, BESTWIRE
July 11, 2019
The California Assembly is considering legislation to create a wildfire insurance fund to help utilities manage costs associated with increasingly widespread fires.
The fund, according to the bill, could be as large as $21 billion and would reduce the costs to ratepayers in addressing utility-caused catastrophic wildfires.
The bill would create the fund by a combination of state-issued bonds of $10.5 billion and a similar amount contributed by the utilities. An alternative would use only funds from the bonds.
While the fund would be created with public and investor-owned utility monies, it is considered important to many of the top property-casualty insurers in the United States, which have billions in economic interests, including claims, with bankrupt PG&E Corp. (Best’s News Service, March 22, 2019).
The senate passed the measure this week, and Gov. Gavin Newsom has asked the Assembly to act on it by Friday, the last day before the summer recess.
The fund would be open to PG&E if it has exited bankruptcy by June 30, 2020, it said.
Backers said the fund would stabilize credit ratings of the state’s major electric utilities, staving off higher borrowing costs.
“We have no good choices but this bill presents a unique opportunity to get our utilities back to investment grade status, with no increase in electric rates,” Assemblyman Chris Holden said in a summary of the bill. “This bill will also double-down on safety by establishing a new comprehensive oversight division and advisory council for all utilities in the state – investor and publicly owned. The investor owned utilities will also be held to account by tying executive compensation to safety; investing a minimum of $5 billion in their lines and poles, without profit; complying with wildfire mitigation plans; and passing a safety culture assessment; all as conditions of participating in the insurance fund established by this bill.”
Consumer Watchdog is fighting the bill, saying it lowers the standards for what passes as recoverable costs.
“The details give the Public Utilities Commission power to bond endlessly, without the legislature’s approval, should ratepayers have to bear the burden of ‘recoverable’ costs for fires,” said President and Chairman Jamie Court. “The problem is the legislature is weakening the standard by which ratepayers can hold utilities accountable for not being prudent managers and starting fires. So ratepayers will pay in more instances than the past.”
Besides creating the fund, the bill encompasses many of the recommendations included in a strike force report and in a recent state law addressing wildfires, the summary said. They include establishing a new process for utilities to recover costs related to catastrophic wildfires by amending the prudency standard, authorizing financing of specified costs, including wildfire safety mitigation and bolstering and changing to electric utility wildfire safety oversight by creating a state Wildfire Safety Advisory Board, it said.
(By Timothy Darragh, associate editor, BestWeek: [email protected])