Newsom wildfire plan pits insurers against utilities

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The Eaton Fire leaves devastation behind in Altadena on Jan. 17, 2025. Photo by Jae C. Hong, AP Photo

In summary

One of Gov. Gavin Newsom’s final political fights in California is a revival of an old one. As wildfire costs threaten utilities’ financial models, the governor wants to help them pay less for fires.

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In the final few weeks of his last legislative session as California governor, Gavin Newsom is asking lawmakers to help reduce how much profit-making utility companies must pay out after wildfires.

His administration has for weeks floated to lawmakers a wide-ranging but still-vague package of bills to address the spiraling costs of wildfires that has made a slew of different interests unhappy.

Insurance companies have launched an ad campaign against what they call a potential “utility bailout,” that would leave them unable to recover from the power companies the costs of paying homeowners’ insurance claims. Attorneys representing fire survivors and other plaintiffs that sue utilities don’t want to see their fees reduced.

Learn more about legislators mentioned in this story.

Benjamin Allen

Democrat, State Senate, District 24 (El Segundo)

Cottie Petrie-Norris

Democrat, State Assembly, District 73 (Irvine)

Wildfire survivors worry the governor’s proposal would prevent them from being made financially whole for suffering trauma. Local government leaders are demanding that they continue to be paid the full cost to rebuild incinerated infrastructure.

On the other side are the politically influential utilities, who have drawn fury for their equipment sparking several of the state’s most devastating wildfires.

The state’s three investor-owned utilities, Pacific Gas & Electric, Southern California Edison and San Diego Gas and Electric, aren’t in imminent financial danger and last year saw profits rise. But fire costs have contributed to Californians paying the second-highest electricity rates in the country, and lawmakers and Newsom’s office worry that if it becomes harder for utilities to borrow money those bills will continue to climb. The utilities together provide power for about three-quarters of the state.

Newsom and the lawmakers say utilities are held responsible for too much after a wildfire and that bad actors like hedge funds are taking advantage to get a cut. If another devastating wildfire triggers damages too high for a utility to pay, the potentially resulting bankruptcy would make it even harder for victims to collect.

“The status quo doesn’t work,” Newsom said at a press conference last week when asked whether his proposal is in the best interests of fire survivors. “And we’re trying to balance all of those needs in a very familiar process that will unfold over the course of the next few months.”

CalMatters asked the governor’s office whether the timeline Newsom mentioned was correct, considering the legislative session ends in three weeks. A spokesperson said the governor meant “the next couple of months of the legislative session,” and did not respond to whether Newsom will call a special session to address the issue.

As he mulls a presidential run, Newsom has political incentive to push through a deal. Opponents from the right are eager to paint California as unaffordable and lurching through disasters; further rate hikes or the specter of a utility bankruptcy wouldn’t help. But backing the utilities also comes with risks: Anger at the companies remains fresh after Edison was last week found by Cal Fire and the Los Angeles County Fire Department to be responsible for the January 2025 Eaton Fire that killed 19 people in Altadena.

The chair of a key Assembly committee, Democratic Assemblymember Cottie Petrie-Norris, is generally on board with Newsom’s proposals, but lawmakers in the Senate appear less certain. Fire survivors are urging them to slow down and commit to a more public debate.

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“You cannot be ‘there are some bad actors’ and therefore we will have a secret bill,” said Joy Chen, who leads a group of Los Angeles wildfire survivors. “Then your bill is the bad actor.”

A familiar fight

It’s a redux of a bitter fight that has bookended Newsom’s time as...