California

Will utility rates go up? What California’s $26 billion wildfire plan means for you

California Gov. Gavin Newsom signed off on a $26 billion plan on Friday to address the state’s ongoing wildfire threats.

The comprehensive plan, which sped through the Capitol in less than a week, aims to offer a timetable for reimbursing past wildfire victims following PG&E’s decision to declare bankruptcy earlier this year.

It also establishes a new panel called the California Catastrophe Response Council to oversee a fund of up to $21 billion, with costs split evenly between ratepayers and shareholders of the state’s largest investor-owned utilities. Utilities will be allowed to dip into the fund to pay out victims’ claims. If they are found to have acted recklessly, they’ll have to reimburse the fund.

The new law takes effect immediately, and is quite complex. But these are the most important things you need to know:

Will my utility bills go up?

When California experienced an energy crisis in 2001, the state imposed a $2.50-a-month charge on customers of investor-owned utilities. That fee was set to expire next year. But under the new law Newsom signed, it will be extended another 15 years.

Lawmakers have boasted your utility bill won’t go up. While it’s true you won’t see increases to your monthly rate, you’ll still pay the state an extra $450 for electricity over the next 15 years.

The Sacramento Municipal Utility District said its customers will not be affected and do not currently pay the monthly surcharge.

Are we bailing out PG&E?

The law Newsom signed does not bail out PG&E, given the state won’t take over the company’s power lines and directly pay the company money for its assets.

San Diego Gas & Electric and Southern California Edison will have two weeks to agree to participate in the $21 billion fund lawmakers have created. Newsom said he expects the companies to agree to the terms, which also requires the two companies and PG&E to pay $5 billion in order to access a fund of up to $21 billion, with PG&E contributing the greatest share of the burden. Separately, PG&E must exit bankruptcy by next June and meet a series of safety requirements.

PG&E said in a statement it will continue “working with the new CPUC (California Public Utilities Commission) President, the governor, and all stakeholders on shared solutions to California’s ever-growing risk of wildfire,” while “keeping customer rates and bills as low as possible.”

What’s being done to prevent wildfires in the first place?

Critics worry the bill Newsom signed does little to address wildfire prevention. Lawmakers will continue working on solutions when they return to Sacramento in August after a month-long summer recess.

Assemblyman Jim Wood, D-Santa Rosa, supported the proposal, despite concerns it did not go far enough. He sent Newsom a letter last month urging him to add more money to help fireproof homes. He introduced a bill this year that called for $1 billion to fireproof homes, but that funding was later stripped from his proposal.

At a press conference on Friday, Newsom said he respected Wood’s efforts but urged people to remember the funding he approved in the budget to address the problem, such as $127 million for federal air tankers and helicopter replacement and $236 million for wildfire prevention and recovery efforts. The budget signed this year also provided $10 million for Camp Fire recovery and $32 million to support local governments who lost property tax revenue.

“I tell my kids, ‘Focus on what you have, not what you don’t have,’” Newsom said. “Often, it’s a good thing to do. ... He’s absolutely right about the need to do more.”

Newsom said more plans will come out in coming months, including fireproofing efforts. “We are committed to doing a lot more on home hardening,” he said.

He added that issues related to insurance and emergency management would also be discussed in August.

Why the rush to get this passed?

For the past week, lawmakers have scurried to get a bill into Newsom’s hands.

Credit ratings agencies threatened to downgrade investor-owned utilities in California to junk bond status if action were not taken by July 12 — the final day on the legislative calendar before a recess. Newsom outlined this timeline in an April 12 news conference. He told reporters at the time that he wanted to “get something big done” before the break.

On Friday, Newsom said that the origin of that deadline emerged in March after his office sat down with the ratings agencies “in order to push back their determination of whether or not to downgrade two of our investor-owned utilities.” He said he had a private meeting between the agencies and Democratic leaders to “encourage them to give us some time.”

Despite the calls for immediate actions from ratings agencies, Newsom said it was important to get something done by July 12 for a different reason.

“We are in the middle of our wildfire season,” Newsom said. “It wasn’t because of a deadline by the ratings agencies.”

Bryan Anderson is a political reporter for The Bee. He covers the California Legislature and reports on wildfires and transportation. He also hosts The Bee’s “California Nation” podcast.
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