Gov. Newsom seeks $18 billion for utilities’ wildfire fund as California faces future blazes

By Eliyahu Kamisher and Mark Chediak Bloomberg California Governor Gavin Newsom is circulating a legislative proposal to shore up a state fund for utilities that s at hazard of being depleted following the deadly wildfires that struck Los Angeles County in January The plan would channel an additional billion to the wildfire fund almost doubling the current commitments mentioned people familiar with the matter Electricity ratepayers would contribute half the money through a monthly fee while the other half would come from three utility companies that benefit from the fund Edison International PG E Corp and Sempra the people reported Related Articles Value of homes impacted by California wildfire totaled almost billion Berkeley s new accessory dwelling unit strategy aims for balance Mercury to seek new home insurance rates using California s danger modeling system California s property insurance apocalypse Specific progress no immediate relief Opinion Inmate firefighters exposure their lives saving California They deserve better pay Newsom s proposal is emerging as a feasible lifeline for the utilities amid uncertainty over liability linked to the Los Angeles fires Investors dumped Edison shares amid worries that the company would be discovered liable for one of the blazes potentially draining the fund and leaving utilities without a cushion if another disastrous fire hits the state We continue to work with the legislature on procedures that will stabilize California s Wildfire Fund to promotion the recovery of wildfire survivors and to protect California utility consumers even as wildfires become bigger and more destructive due to atmosphere change Newsom s office noted in a report The proposal is still in draft form and could be subject to change stated the people who requested not to be named because the discussions are private The California Wildfire Fund was established in after liabilities drove PG E into bankruptcy State lawmakers created the billion fund to help stabilize utilities finances and limit shareholder losses The state s investor-owned utilities can tap into the fund to cover fire-related damages exceeding billion The fund presently has more than billion in assets according to the state While no cause of the Los Angeles fires has been determined casualties have filed multiple lawsuits against Edison alleging that its equipment started the Eaton fire one of the conflagrations With insured losses from that blaze estimated to be as much as billion contends from it jeopardy exhausting the wildfire fund if Edison is uncovered to be responsible Shares of Edison which operates the region s largest utility in Southern California Edison have tumbled more than since January The possible draining of the fund has also triggered a selloff of PG E shares even though the company isn t connected to the Los Angeles-area blazes Southern California Edison spokesperson David Eisenhauer revealed the utility looks forward to working with the governor or legislators on any proposals PG E declined to comment Sempra s SDG E utility didn t forthwith respond to a request seeking comment Edison rose in after-market trading PG E climbed The Eaton fire and Palisades fire killed people and destroyed structures causing as much as billion in economic losses Under Newsom s plan the fund s new sunset date would be instead of declared the people familiar with the discussion The statute would also require state agencies to conduct a evaluation examining how to spread the cost of utilities wildfire risks across a broad swath of California taxpayers Newsom is also pushing to cap the amount insurers can obtain from the fund through subrogation suggests which give them the right to compensation from a utility detected liable for fire damage the people stated Newsom s office believes that power providers are being overly generous in settling such declares which are often purchased by hedge funds that intend to seek bigger payouts from utilities one of the people commented The measure under discussion may be met with opposition Utility executives have called for replenishing the fund to fall on California ratepayers not company shareholders Insurers may also contend that capping the amount of money they can obtain from the fund through subrogation indicates will force them to raise rates or limit policies in the state which has already seen an exodus of private coverage in wildfire zones The governor s office believes that utilities are contributing to the rapid depletion of the wildfire fund by agreeing to overly high settlements of subrogation asserts one of the people explained Newsom s office believes settlements should be around cents on the dollar but they at present can top cents the person announced Last month the California Earthquake Authority which administers the wildfire fund described the rising transactions around subrogation maintains as opportunistic profit-driven speculation It s unclear when Newsom s legislative proposal would be introduced by a lawmaker in the state legislature The legislature reconvenes from summer recess on Aug More stories like this are available on bloomberg com Bloomberg L P