By Blanca Begert, POLITICO
WE HAVE A DEAL — Things moved pretty quickly today. Around 2:00 p.m., Gov. Gavin Newsom put out an executive order urging Insurance Commissioner Ricardo Lara to take swift regulatory action to stabilize California’s insurance market.
By 3:30 p.m., the insurance commissioner was holding a press conference on a new agreement the state reached with wildfire insurance companies to — hopefully— bring them back to California.
The details will be familiar to anyone who was following the negotiations over wildfire insurance in the legislature, where a deal failed to materialize by the end of the session.
Here’s the deal: Insurance companies that want to operate in California will be required to increase their presence in disaster-prone areas to at least 85 percent of their market share elsewhere in the state when they file to update their rates. They will also have to bring on policyholders from the state’s FAIR Plan, the insurance plan of last resort, that has been taking on an increasing share of the riskiest policies in the state, thus skirting insolvency.
In exchange, companies will be allowed to use forward-looking catastrophe modeling when they set their rates, models that consumer advocates have objected to in prior negotiations on the grounds that they will lead to higher insurance costs by pricing in increasing wildfire risk. Companies may also be allowed to incorporate the costs they pay for reinsurance in California, to hedge against their own risk, in the rates they charge.
“We are in really uncharted territory, and we must make difficult choices,” said Lara.
The insurance commissioner’s office is currently in the process of developing how exactly the new models can be used for rate setting. New rates would still be subject to the department’s approval. Lara expects to have all the new rules in place by December 2024.
Lara emphasized the fact that the plan, agreed to by insurance companies, will expand coverage in disaster-prone areas where people currently can’t even get an insurance company to call them back.
But the devil is in the details. Here are some of the questions raised at the press conference, the answers to which are still pending:
Will forward-looking rate models cause insurance prices to skyrocket?
Lara didn’t give a direct answer here. “It’s going to allow us to modernize the way we look at risk,” he said, adding that the advanced models, which he previously has resisted, will reflect a more accurate picture of risk and incorporate steps that homeowners have taken to harden their homes against fire. “It works both ways,” he said.
Are there any guarantees that the insurance companies will come back because of this deal?
Again, Lara offered no guarantees. But he said insurance companies have agreed to this plan, and he’s working to get the modeling regulations in place so insurers can refile under the new rules.
Did you need the governor’s order today to do any of this?
“The executive order allows us to move quickly as we set the regulations and allows us to make sure that as we’re moving forward, we have that sense of urgency,” said Lara.
The plan will also streamline the rate review process and increase the coverage limit of the state’s FAIR Plan for commercial buildings like homeowners associations and affordable housing developments.
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A message from the American Lung Association in California:
Climate change is a public health emergency. The climate crisis puts health at risk, amplifies health disparities and threatens clean air progress. Despite decades of air quality progress, 98% of Californians live in areas impacted by unhealthy air, with lower income communities and people of color experiencing greater health burdens. California dominates the list of the nation’s most polluted cities. See how your city ranks at StateOfTheAir.org. Learn more.
NOT SO FAST — A group of 55 climate and environmental organizations is asking Newsom to veto an oil-backed bill that’s currently sitting on his desk.
The bill in question, SB 842 by Steven Bradford (D-Gardena), slipped through the California Legislature at the eleventh hour last week as a “gut-and-amend” to an unrelated bill. Backed by the Western States Petroleum Association, it adds a new layer of review to the Energy Commission’s process for regulating refinery shutdowns, requiring it to consult with the Department of Industrial Relations and additional industry and labor stakeholders.
The bill, first reported by our Debra Kahn, targets SBX1-2, Newsom’s price-gouging legislation signed earlier this year, which, in addition to requiring new data reporting from the state’s oil companies, also gave the California Energy Commission oversight over the scheduling of refinery maintenance outages. In the past, these outages have corresponded with reduced supplies and higher gas prices — particularly when multiple refineries are out at once.
Industry groups have argued against the state having a say in when refiners perform maintenance, raising concerns that an involved approval process could threaten workers’ safety.
But environmentalists and consumer advocates are saying the new bill weakens the CEC’s authority to protect consumers from gas price spikes by making it too cumbersome to assess and control refinery maintenance periods.
“The bill, which was initially a homelessness initiative, was gutted and amended at the last minute, and as a result was able to slip by under that radar,” said a coalition of opponents in a letter sent to Newsom today. “In order for the Price Gouging Penalty to hold the oil industry accountable as promised, your regulators need to have freedom from restriction as they combat increasing gasoline prices.”
Signatories included Consumer Watchdog, California Environmental Voters and California Environmental Justice Alliance Action.
Newsom has until Oct. 14 to decide whether to sign or veto the bill.
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THE HEAT PUMP IS HERE – Washington Gov. Jay Inslee, a Democrat, praised California’s two most recent governors for their work on climate change during an appearance in New York on Thursday.
In 2017, Inslee and former California Gov. Jerry Brown helped form the U.S. Climate Alliance, a group that now includes 25 governors from states with the majority of the country’s population and economic activity. At an alliance event in Manhattan, Inslee joined the governors of New York and Maine to announce a plan to install 20 million heat pumps by 2030.
Heat pumps can run on clean power and cool homes without burning natural gas. Inslee said he remembered when he and Brown had the idea for the alliance. “He said, ‘I dunno if this is going to work,’” Inslee recalled. “I said, ‘The day will come when we get 20 million people heat pumps, Jerry’ — and here we are today.”
Inslee, who is considered among the nation’s most climate-friendly governors, said he was “proud” of Newsom for a speech earlier this week at the United Nations. Newsom told world leaders they must be clearer that “this climate crisis is a fossil fuel crisis.” – Ry Rivard
A message from the American Lung Association in California:
BLUE-COLLAR GREEN JOBS — California lawmakers and agencies are under pressure from labor to make sure the state’s transition to a carbon-free energy system comes with high-quality, good-paying jobs.
A University of California, Berkeley, Labor Center report out Wednesday measures the state’s progress so far, finding California has put in high labor standards for large, publicly funded construction projects such as utility-scale solar and multifamily housing development.
But policymakers haven’t held blue-collar sectors such as electric vehicle manufacturing, truck driving and building decarbonization to the same standard, according to the report.
“In manufacturing, services and operations, we have a lot more work to do,” said Sam Appel, one of the report’s authors.
Of $32 billion in state climate spending through 2026 identified in the report, about $12.7 billion lacks workforce standards, it says. More than $9 billion is for manufacturing of zero-emission cars, trucks, boats and infrastructure, and about $2 billion is for residential solar, storage and building decarbonization. The report suggests policymakers, including agency heads, raise standards in those areas.