California approves bill to limit utility liability for wildfires, but not CAISO expansion
California state legislators put in a lot of work last week to advance a number of policy priorities impacting utilities, working right up to midnight on Friday, when the 2018 legislative session ended.
While a number of bills were approved, including a 100% renewable portfolio standard (RPS) by 2045, one of the key policy priorities of Democratic Gov. Jerry Brown did not reach the Senate floor.
State term limits have prevented Brown, who served 16 non-consecutive years as governor, from seeking reelection. As this year’s legislative session came to an end, Brown voiced strong support for two controversial measures: to address costly utility wildfire liability and to integrate the California Independent System Operator (CAISO) into a larger Western regional power market. Only the former passed, with amendments.
Win: Utility wildfire liability
In July, Brown put forward a proposal regarding how the state handles wildfire liability for utilities, which would have marked a major victory for Pacific Gas & Electric (PG&E) and other California investor-owned utilities (IOUs). PG&E had already raised the potential for bankruptcy earlier this summer based on its potential liability stemming from the deadly 2017 wildfires.
Two weeks ago, legislators had abandoned one of the most controversial portions of Brown’s proposal: changing utility fire liability rules and the state’s interpretation of “inverse condemnation.”
California courts use a “strict liability” interpretation of the doctrine that holds utilities accountable for wildfires caused by their equipment, even if a company is not found negligent. Despite the change, opponents continued to view the vehicle for Brown’s proposal, SB 901, as a “bailout” for utilities.
“Although efforts to address inverse condemnation with respect to utility wildfire liability seem to have failed this legislative session, it does appear that many California lawmakers still want to limit the level of potential utility wildfire exposure,” Paul Patterson, a financial analyst in the energy sector at Glenrock Associates, wrote Utility Dive via email. “However, the level of such exposure could also in large part, be left up to the California Public Utilities Commission,” or CPUC.
Without fully addressing inverse condemnation, SB 901 still addresses IOU exposure to wildfire damage liability in eight provisions, ClearView Energy Partners LLC noted, including: creating conditions that would allow IOUs to file with the CPUC and recover some costs retroactively (from the 2017 wildfires); establishing a new standard for determining “just and reasonable” costs that IOUs seek to recover going forward for wildfire incidents starting in 2019; and expanding requirements for IOU wildfire mitigation plans.
On Friday, the Assembly voted 49-14 in favor with 17 absent votes and the Senate voted 29-4 with 7 absent votes. “The high level of absentee legislators may reflect the controversy surrounding the bill,” Timothy Fox, Vice President at ClearView, wrote in the analysis.