By Levi Sumagaysay, CALMATTERS
This story has been updated to include reaction from legislators and utility representatives.
After nearly a month of intense closed-door negotiations, California lawmakers on the last day of session killed a compromise bill that failed to insulate investor-owned utilities when they cause catastrophic wildfires.
Gov. Gavin Newsom and the utilities had fought to significantly reduce utility companies’ liability. Last week Newsom struck a compromise with Senate and Assembly leaders that would have imposed no limits on fire survivors’ compensation or lawyers’ contingency fees for individuals’ lawsuits. It also would have retained insurance companies’ ability to sue utilities to recoup their costs for claims, and would have barred private equity firms from investing in insurance claims. The utilities’ stocks plunged after the deal was reached. But the Assembly did not take up the bill on Tuesday, effectively killing it.
“The proposal before us does not yet deliver the relief, accountability or meaningful reform that Californians deserve,” Assembly Speaker Robert Rivas said in a statement on Tuesday, referring to “hundreds of hours” spent on the effort in the past few weeks.
Newsom had hoped the bill would address his concerns over rising electricity rates and the potential for another utility bankruptcy in California in the event of more catastrophic wildfires. He hinted to reporters Monday night at the Capitol that he’s “here until January” and wasn’t done with his effort.
“I know we all hate utilities, so no one wants to defend a utility, but you’ve got to deal with reality,” Newsom said. “This thing’s not going to get better on its own.”
In a statement Tuesday, the governor said: “The reforms in this bill, while important, did not address the underlying structural problems driving this crisis, as the initial market reaction this week demonstrates. The only solution is to return to fix the entire problem, not part of it.”
The high-profile campaigning in the past few weeks cost the state’s investor-owned utilities dearly. Pacific Gas & Electric and Southern California Edison stock plummeted and San Diego Gas & Electric shares fell as well in the past few days as Wall Street investors digested what some analysts called a “Sacramento strikeout” for utilities.
The chief executives of PG&E and Edison wrote to Senate President Pro Tem Monique Limón and Rivas on Monday, telling them that the utilities had collectively lost $20 billion in market value since Thursday. They warned of possible waning investments and financial risks that “will have cascading impacts” on the state’s economy and climate ambitions. They mentioned the possibility of higher electricity rates.
One senator, Sasha Renée Pérez, the Democrat who represents Eaton Fire survivors, on Tuesday said she was concerned the deal fell apart because lawmakers were reacting to utilities’ concerns about their stock prices.
“We as a legislature do not write legislation in response to how the stock market is performing,” she said. “Our focus and our priority needs to be on the safety of Californians, on protecting fire survivors when they’re impacted by these devastating events.”
The compromise legislation, Senate Bill 492, was seen as a victory for some Los Angeles County fire survivors, consumer advocacy groups and insurance companies, all of whom urged the governor and lawmakers not to “bail out” utilities and shift costs to them.
“It’s tragic the way this all played out,” said Jamie Court, president of advocacy group Consumer Watchdog. “They negotiated a deal, and renege when the utilities didn’t like it.”
“We have invested hundreds of hours to fight back the utility bailout and the attacks on victims’ rights,” said Joy Chen, executive director of Every Fire Survivors Network. “If the speaker says his focus is on survivors, then we would expect that those attacks don’t come back in any legislation that comes out of any special session.”
Other senators were caught off-guard by the bill’s abrupt death.
“I think for our house, the votes and the members were there,” said Limón, a Democrat representing Santa Barbara. “So there certainly is a sense of disappointment.”
Sen. Ben Allen, a Democrat who represents Palisades Fire survivors, said he was surprised that the Assembly failed to take up the deal.
“I think everyone agrees the package could have been more comprehensive,” Allen said, adding that there isn’t a “magic bullet” for balancing the concerns of special interests and survivors.
“This negotiation forced the Legislature to balance competing forces, like the long-term success of our electricity grid, how it impacts the insurance market, fire survivors (and) communities,” he said.
Assembly leaders pledged to hold hearings in the fall to continue developing the wildfire policies. Assemblymember Cottie Petrie-Norris, an Irvine Democrat, said while SB 492 included provisions to expedite victim compensation payout and mitigate wildfire risks, “we don’t want to get this rushed.”
“We don’t want to get it wrong and have unintended consequences that are going to hurt the people that we are here to represent,” she said. “I don’t know why (the governor’s office) came to us in August with the proposal. You’ll have to ask them.”
PG&E and SDG&E did not immediately respond to requests for comment Tuesday after the bill died.
“Californians need a durable, comprehensive policy that puts wildfire survivors first, protects communities and strengthens the safety, resilience and reliability of the energy system,” said David Eisenhauer, a spokesperson for Edison.
There were hints Monday night that the deal was in trouble. Lobbyists and some lawmakers lamented that decreased investor confidence in the utilities could lead to higher borrowing costs, which could mean utility job cuts and less investment in critical energy infrastructure.
“Workers got screwed, ratepayers got screwed, lawyers and insurance companies win,” said Scott Wetch, a lobbyist for the California Coalition of Utility Employees and the State Association of Electrical Workers, at an Assembly Utilities and Energy committee hearing before the bill was killed.
“It is a big disaster that we were not able to come up with that structural reform,” said Assemblymember Jacqui Irwin, a Democrat representing Thousand Oaks.
Assemblymember John Harabedian, a Pasadena Democrat, on Monday called the Wall Street reaction “hysteria.”
“The market had false expectations,” he said at the hearing. “Folks miscalculated exactly what could get done” in the last few weeks of the legislative session, he added.
On Tuesday, Harabedian said he realized during the Monday hearing that “no one seemed to be happy” with the bill. “So why are we doing this?”
Yue Stella Yu, Maya C. Miller, Nadia Lathan and Kate Wolffe contributed to this report.
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