By Malcolm Maclachlan, DAILY JOURNAL
Assembly and Newsom proposals would reshape wildfire compensation, insurance regulation and utility liability, but consumer advocates say the plans risk another bailout and are being rushed through without adequate scrutiny.
California lawmakers are racing to reach an agreement on a sweeping wildfire package that would overhaul wildfire victim compensation, insurance rules, utility accountability and prevention efforts.
But critics say proposals from the Assembly and Gov. Gavin Newsom could amount to another bailout for insurers and utilities — and that such important legislation should not have been left to the final days of the legislative session.
The Assembly’s Wildfire Crisis Working Group has outlined a four-part framework aimed at making the state’s wildfire system more durable after years of catastrophic losses, rising insurance costs and pressure on utilities.
The proposal, as outlined in a PowerPoint presentation dated last Friday, would create a faster compensation process for wildfire survivors while preserving major claims for property loss, wrongful death and serious injuries. It would also seek to curb hedge funds and private equity firms from buying survivors’ insurance claims. Other provisions would target the insurance market, including reforms to the FAIR Plan and steps intended to stabilize private coverage.
The framework also includes provisions aimed at holding utilities accountable, requiring CEOs and other top utility executives to forfeit compensation after a utility-caused wildfire. It would also impose mandatory wildfire penalties, with escalating sanctions for repeated safety failures that could ultimately place a utility into receivership.
But Jamie Court, president of Consumer Watchdog, said the plan as outlined would effectively amount to a new round of bailouts for utilities.
“This will codify regulations that were excoriated for allowing insurance companies to raise rates and not deliver on additional coverage to homeowners,” Court said when reached Thursday. “The plan is for the Legislature to cement the rules so that the next insurance commissioner doesn’t have a chance to undo them.”
Court has also been a critic of the current commissioner, Ricardo Lara. On Thursday morning, he distributed figures that he said show Lara’s failed Sustainable Insurance Strategy (SIS), regulations have resulted in $562 million in increased rate requests and only 10,000 new homeowners’ insurance policies. Lara’s office did not respond to a request for comment.
A draft of Newsom’s plan has also been in circulation. Both proposals reference a long list of related bills already in print, but those bills do not yet contain many of the proposals’ most significant provisions. Newsom’s plan also proposes to “repeal the 2028 sunset on the SB 254 Continuation Fund and cap fund-covered claims at $6B per event.”
SB 254 was a bill introduced last year just before the legislative deadline that, among other things, authorized billions in new funding, with both the state and private utilities such as Pacific Gas and Electric Co. and Southern California Edison Co. paying in.
The bill ran more than 80,000 words. Joy Chen, executive director of Every Fire Survivor’s Network, an advocacy group for more than 10,000 Eaton and Palisades fire survivors, said that is the wrong way to write important legislation.
Now, Chen said, lawmakers are poised to do it again. Because of the Legislature’s 72-hour-in-print rule, amendments implementing a wildfire insurance plan would have to be in print by midnight Friday for lawmakers to vote on them before the legislative session ends Monday.
Chen joked that she expects to see bill language at the “11th hour and 55 minutes.” She called on lawmakers to set the proposals aside and return to them in January, at the beginning of a new session.
“A bill gets better, ideally, over the course of the eight months,” Chen said. “The way they’ve done it now, because the governor didn’t want to let anybody see the secret bill, he just wanted to introduce it in August and force everyone to vote yes.”
Newsom’s office did not respond to a request seeking comment. January will also bring a new cast of players, including a new governor and insurance commissioner. The race for insurance commissioner pits two Democrats against each other in the general election, Sen. Ben Allen and Jane Kim, a former San Francisco Supervisor who has been endorsed by U.S. Sen. Bernie Sanders.
Chen said a key goal of extended hearings would be to force the question of whether utilities need financial help from the state to remain solvent. Her group has been pushing its own proposal. The group says PG&E, Southern California Edison and Sempra Energy have been reporting billions in profits and dividends while paying their CEOs more than $16 million annually.
The group also points to PG&E’s 2019 Chapter 11 bankruptcy amid billions of dollars in wildfire liabilities, arguing that “the electricity kept flowing.”
“If these three companies really, truly are in a financial emergency such that this huge multibillion dollar bailout must happen right now and cannot wait until January, then fine, bring them to the state legislature, let them testify under oath about the real financials,” Chen said.
