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California Passes a $21 Billion Wildfire Victims' Fund to Protect Utilities From Damage Claims

California Governor Gavin Newsom signed the bill into law Friday, changing how the state will pay for wildfire damage.
PG&E crews repair power lines that were destroyed by the Camp Fire on November 21st, 2018, in Paradise, California.

PG&E crews repair power lines that were destroyed by the Camp Fire on November 21st, 2018, in Paradise, California.

California Governor Gavin Newsom on Friday signed a bill to protect the state's utilities from wildfire liability claims. This marks a change that many people knew was coming after the state's largest utility, Pacific Gas and Electric Company, filed for bankruptcy earlier this year. The utility company, which serves approximately 16 million people, owns equipment that was linked to last November's Camp Fire, which killed 85 people and caused $7 billion in damage.

The new law provides investor-owned utilities in the state, including PG&E, with access to a $21 billion victims' compensation fund they can use to pay for damage linked to their equipment in the future. While some of the money in the fund will come from the utilities themselves, an additional $10.5 billion will be paid by the utility companies' customers through an existing $2.50 surcharge on their bills. The charge was supposed to expire next year, but will now be extended for an additional 15 years.

Critics say the new legislation serves the interests of utility company investors on Wall Street, since the fund makes it less likely the utilities will go under from mounting costs associated with wildfire claims. But the Chico Enterprise-Record reports that it could also help current victims, speeding up compensation for wildfire victims who already have claims with PG&E because the new law requires the Northern California utility to finalize its bankruptcy by next year.

Patrick McCallum, a lobbyist for a group of California wildfire victims and lawyers, says the legislation might even help future victims with claims get more money because the fund will give participating utilities more stability, increasing the companies' value to investors, according to the Chico Enterprise-Record.

And the fund isn't a free-for-all for utility companies: It comes with some restrictions before they'll be allowed to tap into it. Utilities will have to spend $5 billion on safety upgrades and participate in a new annual safety certification. Also, utilities will only have access to the fund in situations where their equipment causes more than $1 billion in property damage.

Emily Moon explored the conversation over who should have to pay for the damage caused by wildfires for Pacific Standard in January:

[T]his argument has no clear winner. If PG&E gets out of costs due to climate change, the burden falls to either insurance companies, homeowners and business owners, public agencies, or all of the above, explains Sean Hecht, co-executive director of the Emmett Institute on Climate Change and the Environment at the University of California–Los Angeles.

As California passes this new legislation intended to protect utility companies, there are still no obvious answers to the question of who should foot the bill for the destructive fires that California is increasingly facing.

But as insurance companies have been forced out of business, and utilities have looked at raising rates to cover the escalating costs of wildfire claims, the new law represents the state government's attempt to find a solution in a time of record-breaking wildfire damage.