CA panel wants to strengthen public services against fire claims



"This is part of the state's DNA," says Governor Gavin Newsom on climate change and fire risks

Governor Gavin Newsom announced on April 12, 2019 that a group of experts had concluded that California should amend its forest fire liability legislation, to better protect PG & E and protect the environment. 39; other utilities against claims of $ 1 billion.

Governor Gavin Newsom announced on April 12, 2019 that a group of experts had concluded that California should amend its forest fire liability legislation, to better protect PG & E and protect the environment. 39; other utilities against claims of $ 1 billion.

Gavin Newsom said California should consider drastic changes to California legislation on Friday to give failing utility companies, geographers and bankruptcies increased legal protection against liabilities of up to billions of dollars.

After publishing a wide range of proposals emanating from a "strike force" created two months ago, Newsom has refrained from approving what is probably the most controversial recommendation: a reshuffle costs that would likely require money from insurance companies and taxpayers, potentially reduce the damage done to forest fire victims and their lawyers. Until now, the Legislature, upset by the forest fires attributed to PG & E, has shown little eagerness to let the utilities free themselves from the damage caused by forest fires and explicitly rejected a similar recommendation last year.

But Newsom, calling for swift action by the legislature, said changes to the liability laws should be considered.

"Everyone wants everyone to pay for it," Newsom said, showing a slide showing the billions of damage caused by forest fires in the past two years. "We are all in the same boat … We all have a burden and a responsibility."

The working group wrote: "No stakeholder has created this crisis and no stakeholder should bear all the costs. Any real plan must spread the costs of forest fires in a way that spreads the burden widely among stakeholders, including utilities (taxpayers and investors), insurance companies, local governments and lawyers. "

The news of a possible change in the standards of liability has pushed up the share price of PG & E Corp. $ 3.95 per share, at $ 23.08.

Newsom and its panel, however, critically criticized PG & E, pointing out that the electricity company was responsible for numerous fires and other disasters over the years. Newsom was urged to consider "the municipalization of some or all of PG & E's activities" – government takeover – or to split the public service into smaller and potentially safer parts.

But the task force, made up of Newsom's internal advisors and officials from Cal Fire, the Public Utilities Commission, and other agencies, gave little detail on any of these ideas. Nor did it provide a concrete plan to deal with the immediate crisis of society: forest fire commitments, estimated at $ 30 billion since 2017, and the 2018 camp fire, which led to Bankruptcy of PG & E shortly after Newsom took office in January.

Newsom said that "all options are on the table" of the future of PG & E if the company does not cooperate with the state. "The state has suffered because of their negligence."

PG & E, in a prepared statement, said it "accepted calls for change" and would work with the governor and others to "make the energy system safer".

The working group emphasized that PG & E and other public services should be held accountable for their role in forest fires. It recommended changing the way the Public Utilities Commission regulates companies by linking the pricing process and the profitability of the company to fire safety performance.

At the same time, he also said that it was time to consider ways of transferring more costs to others, while recognizing that any effort would involve enormous complications, particularly in the insurance sector.

According to the group of experts, insurance companies are already raising rates and refuse to renew home insurance policies in California's fire-prone regions. Changes in liability legislation could make insurers even more reluctant to offer coverage in fire zones. Insurers are already suing PG & E to recover the more than $ 8 billion in claims they face from the only camp fire.

"Transferring more of the direct financial burden of forest fires on insurance companies could also affect the cost and availability of property insurance" in high-risk areas, the report said. group of experts.

And Newsom, without adopting any specific proposal, acknowledged that it would not be easy to make major changes to the Legislative Assembly.

"These are difficult things. It's sausage making, "he said, before indulging in a coup for his nemesis, Donald Trump:" Unlike the President of the United States, I am not a dictator. He nevertheless asked the legislature to "do something big. "Before the end of the July 12 session. He added that the political climate had probably changed after the devastation of the campfire, which had led to the bankruptcy of PG & E and left other major public services grappling with heavily degraded credit ratings.

"It's a completely different world," he told reporters at a news conference at the Emergency Services Office's operations center near Mather Business Park.

The panel offered many ideas on variable costs. One would be the creation of a state-run "forest firefighting fund" to help utilities cope with the immediate costs of mega-fires, allowing them to pay the claims faster to the victims. The fund "would create a buffer to absorb a significant portion of the costs of forest fire liability that could otherwise be passed on to taxpayers," the panel wrote.

The fund would be financed by a "substantial contribution" from the utility shareholders. However, the insurance industry should play a key role in the smooth operation of the program as it should "accept a ceiling" on the amount that carriers could recover from utilities when they request a refund.

Instead, the group of experts suggested that utilities benefit from increased legal protection against fire-related liabilities – an idea likely to turn into a major battle in the assembly. legislative.

By adopting SB 901 last year, legislators have given more flexibility to the Public Utilities Board to allow utilities to pass fire costs onto taxpayers. But they refused to adopt the broader legal reforms sought by the companies and are now recommended by the Governor's strike force.

Senator Bill Dodd of Napa, author of SB 901, reacted to the announcement made on Friday stating that he was ready to "partner and fine-tune a set of reforms aimed at protecting the public." 39; State in this "new normality". "

Specifically, Newsom is urged to seek changes to the legal doctrine known as "reverse conviction".

Under the current system, the reverse conviction commits the California utilities if their transmission cables or other facilities cause a fire, whether the companies have been negligent or not. The Public Utilities Board may allow utilities to charge these costs to taxpayers – if the utilities have acted "conservatively" – but the process may take years and, in the meantime, the financial situation of the utilities may deteriorate quickly. Wall Street has already lowered the credit ratings of the other two California utilities, Southern California Edison and San Diego Gas & Electric, and Newsom's task force has warned that they risk going bankrupt if the law does not change.

Replacing the current legal model with what Newsom called a "fault-based standard" would reduce the burden on public services, but make it more difficult for insurers and fire victims to be compensated.

Dario de Ghetaldi, a Bay Area lawyer representing the fire victims who sue PG & E, called the idea "stupid".

"It puts the burden on all innocent people … who have been damaged," he said.

A representative of the insurance industry said that the right of owners to recover damages should remain a top priority, but did not comment directly on the proposals of the working group. "We are ready to work together to solve these difficult problems," said Jeremy Merz, vice president of the American Property Casualty Insurance Association.

Some of the recommendations presented on Friday are consistent with initiatives already taken by Newsom, such as the redeployment of National Border Guard troops to help with firefighting and collaboration with the federal government to manage forests in a more manageable way. agressive. The commission urged the state to consider a financing mechanism to help homeowners improve their homes' fire resistance – a day after McClatchy's investigation revealed that homes built to modern fire standards were far more likely to survive the devastating November fire.

Newsom quoted McClatchy as saying that more old homes needed to be renovated.

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