By Andrew Oxford and Michelle Ma | Bloomberg
California lawmakers are lining up against Gov. Gavin Newsom’s push to rewrite how the state assigns financial responsibility for wildfires sparked by equipment owned by publicly traded utilities.
A plan backed by Democrats in the state senate wouldn’t limit insurers from suing utility companies to recoup payouts to policyholders, according to a proposal seen by Bloomberg News on Tuesday, Aug. 25.
Newsom’s office had put forward a plan this month that would protect PG&E Corp., Edison International and Sempra, owners of utilities that face the prospect of massive liabilities if their equipment sparks fires, as well as speed up payouts to survivors and tighten safety accountability for utility executives.
Insurance companies argue the plan from Newsom, a Democrat, to limit lawsuits against utilities for so-called subrogation claims will drive up premiums for homeowners already smarting from years of rising rates and dwindling options for coverage.
Also see: SoCal Edison’s compensation program driving interest, but lags behind litigation claim numbers
The Los Angeles County Fire Department found in early August that Southern California Edison equipment sparked the January 2025 Eaton fire, which killed at least 19 people and destroyed more than 9,400 structures. Edison, which denies wrongdoing, faces thousands of survivor claims as utilities seek to limit mounting wildfire liabilities, setting up a fight over how those costs should be divided among utility shareholders, ratepayers, insurers, taxpayers and fire survivors.
Newsom has made reshaping wildfire liability one of the key legislative priorities at the end of his second and final term, pushing lawmakers in the Democrat-majority houses to strengthen the state’s mitigation and fire recovery amid a warming climate.
Also see: Wildfire survivors to Newsom: ‘No backroom deals with utility companies’
A separate plan from Democrats in the state assembly had previously left the issue untouched, signaling neither chamber of the state’s legislature will support the governor’s proposal as lawmakers prepare to adjourn next Monday.
Newsom spokesperson Anthony Martinez wrote in an emailed statement that the governor’s office was “reviewing the proposals, and we are working with both the Assembly and the Senate on a solution that puts survivors first.”
Spokespeople for PG&E, Edison and Sempra did not respond to a request for comment.
The senate plan does offer some help to utilities, such as largely barring insurers from selling subrogation claims to hedge funds. Utilities have long complained about the practice, though the senate plan would allow the state’s insurance commissioner to grant exceptions.
The proposal would also raise the bar for people outside the immediate zone of danger seeking to file lawsuits against utilities for emotional or other non-economic damages from wildfires.
Utilities would face new penalties and potential limits on rate increases under the state senate’s plan. The proposal calls for eliminating bonuses and other compensation for the CEOs of utilities that are found to have sparked wildfires and require utility regulators to consider only raising rates in line with inflation when weighing rate requests. The state’s Public Utilities Commission would still have the option of accepting higher rates proposed by utilities.
The state’s investor-owned utilities have warned that inaction on subrogation and other liability-limiting measures could impact their capital allocation plans and result in credit rating downgrades.
“If the legislature does not act, or if they act and don’t actually solve the problem, then we’re going to have to take action,” PG&E’s Chief Executive Officer Patti Poppe said on a July 23 call with Wall Street analysts.
Insurance industry advocates, however, have argued that barring insurer lawsuits for subrogation claims would increase rates statewide anywhere from 10% to 20%, according to analysis from the American Property Casualty Insurance Association.
Opposition to Newsom’s plan has brought together a diverse coalition of fire survivors, insurers, consumer advocates, trial lawyers and local government groups, who have painted it as a utility bailout.
In a letter to legislative leaders earlier this month, the coalition urged lawmakers to reject any proposal that shifts wildfire costs away from utility shareholders, arguing that eliminating subrogation would not help Californians avoid the costs of utility-caused wildfires.
“They would simply receive the bill in a different form through higher insurance costs,” the coalition wrote.