By J.D. Morris, SAN FRANCISCO CHRONICLE
July 10, 2019
California lawmakers are on the cusp of approving a landmark bill to shield the state's major electric companies from future wildfire costs and reshape key aspects of how those utilities are regulated, a sweeping endeavor that could become law by Friday after less than a week of public debate in the Legislature.
Gov. Gavin Newsom's office spearheaded the bill, AB1054, which aims to create a new fund of at least $21 billion to compensate victims of wildfires caused by power lines, require utilities to get annual safety certifications and shift the standard regulators follow when deciding whether an electric company can make its customers pay for fire costs.
Despite its complexity and long-term consequences, the bill has sailed through the Legislature. It was approved by the Assembly's Utilities and Energy Committee on a 10-1 vote Wednesday — two days after it passed through the Senate. The bill heads next to the full Assembly floor, after which only Newsom's signature would be required for it to take effect immediately.
Assemblyman Phil Ting, D-San Francisco, cast the lone vote against the bill on Wednesday, citing concern that one component could make it harder for cities to take over utility power lines — a step San Francisco is actively considering.
Some Assembly members wondered whether they needed more time. But one of the bill's authors, Assemblyman Chad Mayes, R-Yucca Valley (San Bernardino County), stressed that it built on work the Legislature conducted last year as lawmakers prepared to pass another wildfire bill.
"When folks say this thing is being rushed, I do take a bit of issue with it," Mayes told his colleagues.
Lawmakers need a two-thirds majority to ultimately approve the bill. Patrick McCallum, a lobbyist for wildfire victims who supports AB1054, said earlier Wednesday that he was confident backers could get enough support to see the bill through.
"We're working hand in hand with the governor's office, and the governor is actively engaged," he said. "It's all hands on deck."
The new law would be pivotal to the fortunes of Pacific Gas and Electric Co., which is currently in bankruptcy protection largely because of fires started by its equipment, and Southern California's two major investor-owned utilities, which face potential credit rating downgrades if lawmakers don't act fast enough to curb the companies' wildfire risks.
Customers of those companies would be impacted, too, in part because they would pay an expected $10.5 billion into the new wildfire fund through the extension of a charge on their monthly bills that would otherwise expire.
Regulatory changes included in the bill also could affect customers.
When companies seek permission from the California Public Utilities Commission to pass fire costs along to customers, the bill would have the agency presume the power provider acted reasonably if it has a valid safety certification. That would be a more favorable standard for utilities than what regulators currently follow, though if another party, such as an advocacy group, can raise "serious doubts," utilities would have to prove their conduct was reasonable.
Some of the most frequent critics of PG&E and other utilities have not stood in the way of the bill, including The Utility Reform Network, which advocates for consumers.
Mark Toney, the reform network group's executive director, said the bill is "nowhere close to perfect," but his organization is supporting it as the best legislative proposal to address an urgent set of problems. Toney said he likes that the bill would have utility shareholders contribute $10.5 billion into the fund and that investors could not profit from billions of additional dollars in safety upgrades the legislation would demand.
He further praised the bill's efforts to hold PG&E accountable by preventing the company from accessing the fund unless it exits bankruptcy and resolves its wildfire claims by June 30, 2020, while keeping the impact on ratepayers neutral.
Toney's group will continue fighting for ratepayer protections as the bill is implemented, he said. Yet he acknowledged that the bill was a lot for lawmakers to pass in such short order.
"It's an expression of the power of Wall Street, and their ability, through the rating agencies, to exercise tremendous influence over the process," Toney said.
The risk is particularly acute for Southern California Edison, which could precipitate an "economic crisis" if it's reduced to junk bond status, a situation in which "the options on the table become worse" for consumers, Toney said.
But Loretta Lynch, a former president of the utilities commission, called the bill a bad deal for ratepayers, in part because of a provision that she said would give regulators more power to authorize bonds to pay utilities' fire costs. Other aspects of the bill would weaken the commission too much, she said.
"This bill neuters the (commission) statutorily, so it cannot be the watchdog it is meant to be," Lynch said.
The bonding provision also concerns Consumer Watchdog President Jamie Court, who fears it would give regulators a "blank check" to oversee bond issues without enough consumer safeguards.
But Court does not oppose the bill — he's neutral. He would prefer the Legislature take more time.
"I'm hoping for the best, but the speed with which this is being rushed through makes me worry," he said.
Newsom has been grappling with the issue of utilities and their wildfire risks since about the same time voters chose him to be California's 40th governor.
The Camp Fire started Nov. 8 — days after Newsom's election — and though the state did not officially declare PG&E responsible for the historic inferno until May, the utility's role was apparent early on. PG&E then decided to file for bankruptcy protection because of its wildfire liabilities during Newsom's first month on the job in January.
When the governor made his first State of the State address in February, he said he had assembled a team of advisers to study policy recommendations in the wake of PG&E's bankruptcy filings and the wildfire-related pressure facing the Southern California utilities. Those advisers developed a report that helped form the basis for the current legislation.
"It's not just a process that started over the last few weeks," said Newsom spokesman Nathan Click.
And the Legislature won't be done with the work if it passes AB1054 this week. It will also need to consider companion legislation that would create related new functions in the state government, including a council to oversee the wildfire fund and an office within the Natural Resources Agency that focuses on the safety of energy infrastructure.
Newsom won't be done, either. He has yet to announce who he wants to be the next president of the utilities commission, whose president, Michael Picker, plans to step down this year.
Court called it "probably the most important appointment this governor will ever make" — and whoever fills it will play a key role determining how many of the wildfire bill's changes play out.
J.D. Morris is a San Francisco Chronicle staff writer. Email: [email protected] Twitter: @thejdmorris