California Establishes Fund to Combat Wildfire Threats

15 July 2019 Renewable Energy Outlook Blog
Authors: Jocelyn E. Lavallo Ann A. McAdam Justus J. Britt

On July 11, 2019, the California Legislature passed, and Governor Gavin Newsome quickly signed into law, Assembly Bill 1054, which creates the potential for a $21 billion fund to assist Californian utilities with their liability burdens in the wake of the devastating wildfires of 2017 and 2018. For example, PG&E, which is California’s largest power company, declared bankruptcy in January as a result of its estimated liability from the fires.

In order to access the funds, there are several requirements that the utilities must meet. The bill calls for $5 billion in safety investments, including those related to infrastructure as part of a wildfire mitigation plan. The bill also calls for a new annual safety certification process.

The fund will ultimately come from several sources. The participating investor-owned utilities will be required to pay a portion of the fund before they can access the rest of the $21 billion. Some regional electric companies will be required to pay less than the investor owned utilities for access to the fund. Utility customers will also pay $10.5 billion into the fund through a small fee which was placed on their statements after the 2001 energy crisis. That fee was set to expire in 2020, but as a result of the AB-1054, it will be extended for 15 years.

“The rise in catastrophic wildfires fueled by climate change is a direct threat to Californians," a statement issued by Governor Newsom’s office upon the passage of the bill said. "Strengthening our state’s wildfire prevention, preparedness and mitigation efforts will continue to be a top priority for my administration and our work with the Legislature.”

The legislation comes at the perfect time for at least one utility, as S&P Global Ratings had previously indicated that it might downgrade the Southern California Edison bond rating in the absence of state action before lawmakers adjourned for recess on July 12. Read AB -1054 here

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