As Sen. Bill Dodd walked out of the state Capitol in the early hours of Saturday, he said he had a great sense of relief that the Legislature averted an impending disaster by approving a bill that helps Pacific Gas and Electric Co. withstand the costs of last year’s devastating wildfires while protecting victims of the blazes and utility customers.
It was a balancing act, the Democratic senator from Napa said after months of furious lobbying over whether lawmakers were going too far in helping PG&E with what critics called a bailout for a utility that has been accused of putting profits before safety.
In the end, lawmakers easily approved SB901 in a 29-4 vote in the Senate and 49-14 in the Assembly, just ahead of Friday’s midnight deadline that ended the legislative session. Under the bill, the state would dedicate $1 billion over five years to fire-reducing efforts such as clearing brush and setting prescribed fires. SB901 also eases restrictions for clearing drought-killed trees from the state’s forests and toughens financial penalties against utility companies that violate state rules.
But it was the PG&E aid that left some consumer advocates seething.
The bill heads to Gov. Jerry Brown, who is considered likely to sign it.
“Let me make one thing clear. If we don’t provide a debt-stabilizing mechanism for the utilities, in this case PG&E, the corporation will certainly face higher borrowing costs, which will translate into significantly higher rates, or this company may very well face bankruptcy,” said Dodd, who led the committee that crafted the legislation.
And if the utility were to fall into bankruptcy, Dodd said, fire victims who are uninsured or underinsured would not be able to rebuild their lives.
“We quite frankly cannot allow that to happen,” he said.
With the bill, lawmakers said PG&E — California’s largest utility — could withstand the potential $17 billion liability from the fires. But it didn’t necessarily represent a win for the utility.
After last fall’s devastating wildfires, PG&E began lobbying for a change to state liability rules that hold utility companies liable for damage from blazes started by their equipment, even when they follow all safety laws. Brown backed the plan, but legislators abandoned it two weeks ago, saying it was too complex and contentious to resolve in the session’s final days.
The new bill, however, offers PG&E significant protections.
It would let PG&E use a type of state-authorized bond to pay off the more than 200 lawsuits filed against the company over the fires. PG&E’s customers would repay those bonds bit by bit on their monthly bills, provided that regulators with the California Public Utilities Commission determine that the company acted reasonably in maintaining its equipment before the fires. In cases where the commission determines the utility did not act reasonably, PG&E and its shareholders would have to cover the cost.
But there would be a limit to how much PG&E would pay. The bill calls for the PUC to conduct a bankruptcy stress test, determining how much of a financial blow PG&E could withstand. Any costs beyond that would be passed on to ratepayers.
The San Francisco company estimates customers would pay an extra $5 per year for every $1 billion in bonds issued.
PG&E said in a statement that the bill “is a commonsense solution that puts the needs of wildfire victims first, better equips California to prevent and respond to wildfires, protects electric customers and preserves progress toward California’s clean energy goals.”
Mark Toney, executive director of The Utility Reform Network consumer group, called it a shortsighted bailout.
California fire investigators have blamed PG&E’s equipment for starting at least 16 of the fires that erupted during a fierce windstorm on Oct. 8. In 11 of those instances, investigators found evidence the company broke state safety laws.
The California Department of Forestry and Fire Protection has yet to release its report on the most devastating of the blazes: the Tubbs Fire, which charred Santa Rosa and killed 24 people.
Sen. Hannah-Beth Jackson, D-Santa Barbara, said the Legislature’s goal was to ensure the state was doing enough to prevent fires and protect victims. But because California needs the utility’s energy, the state can’t “push PG&E off the cliff,” she said.
“This is a balanced measure,” Jackson said. “It is not perfect, but it keeps us going forward.”
Critics considered it a giveaway to a company with a dubious safety history. The fatal 2010 explosion of an old PG&E natural gas pipeline beneath San Bruno led to a $1.6 billion fine from state regulators and a felony conviction for the company from a federal court jury.
State Sen. Jerry Hill, D-San Mateo, said the Legislature set out to craft legislation to aid victims of last year’s fires, make sure PG&E customers didn’t shoulder the costs, and help prevent more fires.
“Of those three things, they’ve done one,” Hill said. “On the other two, they’ve gone in the opposite direction of where they said they’d go.”
Hill said PG&E could have done far more to improve the safety of its electrical system and instead focused on profits for its shareholders.
“Shouldn’t we focus on requiring PG&E to improve the safety of their electrical system that they have been neglecting all these years?” Hill said. “Instead, this bill rewards their bad behavior.”
But the bill won support from some of the same people who blocked PG&E’s efforts to change liability laws. The group Up From the Ashes, which represents homeowners and lawyers suing PG&E, described it as a fair compromise.
Patrick McCallum, a lobbyist with the group who lost his home in the fires, said the bill “ensures that victims of last year’s deadly utility-caused fires are compensated, future fires are prevented and utility rates are stabilized without putting PG&E in a position of potential bankruptcy.”