The bookends of California Gov. Gavin Newsom’s nearly eight years in office have been defined by a crucial question: Who should cover the cost of damage from wildfires caused by utility equipment?
The most destructive wildfire in state history, a blaze that killed 85 people and destroyed more than 18,000 buildings in Northern California, started two days after Newsom won the governorship in 2018. Investigators determined it was caused by Pacific Gas & Electric equipment. Facing tens of billions of dollars in liability, the giant utility filed for bankruptcy just weeks after Newsom’s inauguration.
Months later, Newsom signed a law creating a $21 billion fund, paid for by utility shareholders and ratepayers, to help utilities pay for wildfire damages if they take certain safety measures.
Now, as the final legislative session of his governorship ends, Newsom is trying to broker a deal with lawmakers aimed at further shielding utilities from financial trouble if their equipment sparks a wildfire. His push comes as another major utility, Southern California Edison, faces claims from the state’s second-most destructive blaze, a 2025 fire that killed 19 people outside of Los Angeles. Investigators ruled this month that it was sparked by one of the company’s transmission towers.
Newsom’s plan could limit the amount electric and gas companies have to pay victims and attorneys. One of the goals is to stabilize the state’s electricity rates, which are among the highest in the nation and have continued to climb in recent years. Utilities have raised rates to pay for wildfire prevention and recovery as climate change has made the blazes more intense and frequent. Six of the state’s 10 most destructive wildfires have been caused by utility equipment.
Newsom says the state needs to act quickly because he expects the wildfire fund to run out soon. His plan would require survivors to get paid by utilities sooner.
“Status quo is not going to work,” Newsom recently told reporters. “It’s not going to work for victims, who consistently are last in line. And that’s at the core of this reform.”
But some of those victims are pushing back. They’ve said Newsom’s plan prioritizes utilities over the needs of fire survivors. Meanwhile, insurance companies are concerned they would foot more of the bill for property damage. A coalition including the state’s major utilities — PG&E, Southern California Edison, and San Diego Gas & Electric — has been urging lawmakers to pass the plan. The last-minute legislative battle could help shape Newsom’s legacy as he considers a run for president in 2028.
Newsom says his plan strikes a fair balance
Under California law, utilities have to pay damages for fires ignited by their equipment, even if a judge doesn’t find them negligent. Home insurers that pay for policyholders’ rebuilding expenses can try to get reimbursed by utilities.
Newsom’s plan could change that by making insurance companies cover more of the cost of property damage. The proposal would also require utility CEOs to forfeit bonuses if their company sparks a wildfire resulting in more than $1 billion worth of damage. And utility shareholders could be fined up to $10 million for violating wildfire prevention requirements, according to the governor’s office, which hasn’t released the full details.
Personal Insurance Federation of California, a group representing property insurers across the state, said insurance rates will increase if the plan is implemented. The onus should remain on utilities to pay, said Rex Frazier, the federation’s president.
“Being responsible for your actions is something that parents tell children,” he said in a statement. “Hopefully the Legislature will tell this to the utilities.”
Fire survivors are also frustrated with the plan, which could limit their payouts. Joy Chen, executive director of Every Fire Survivor’s Network, a group of survivors of the 2025 Los Angeles-area fires, blasted it at a virtual town hall this month.
“This is overall a massive transfer of liability for the three for-profit utility monopolies that have continued to burn down communities across California,” Chen said.
The California Professional Firefighters sent a letter to Newsom on Monday expressing its support for his proposal.
“The stability of the state’s utilities, insurance plans, and recovery funds must all be balanced with ensuring that wildfire victims and impacted communities are able to recover and rebuild,” the union wrote.
The Legislature has until Aug. 31 to pass a plan. If they don’t, Newsom could call them back for a special session.
Democratic legislative leaders say the state needs to address the issue but haven’t specified what a deal could include. Newsom proposed another $18 billion last year to supplement the wildfire fund, which the Legislature approved.
An economist says the state should reduce utility liability
California’s longstanding requirement that utilities cover the cost of wildfire damages regardless of whether they were negligent is based on the fact that they are providing a public service, said Meredith Fowlie, an economist who co-directs an energy institute at the University of California, Berkeley.
But as climate change has fueled more frequent and destructive fires, the state should rethink how to distribute the ballooning costs of recovering from those blazes, she said.
“Utilities can start fires, but they don’t by themselves create catastrophe,” Fowlie said.
Other factors make wildfires turn into catastrophes, such as failing to clear vegetation or upgrade homes to make them more fire-resistant, she said. The question of who should be held responsible — and by how much — is “a critical, core issue that we have not dealt with and is not going away,” Fowlie said.
Newsom says he’s prepared to tackle the issue he’s kept revisiting since he took office.
“I’m not going to walk away and hand a real mess to the next governor,” he said last week.
The tenure of California Governor Gavin Newsom, which has spanned nearly eight years, has been significantly influenced by the question of who should bear the financial responsibility for wildfire damages caused by utility equipment. This debate gained urgency shortly after Newsom assumed office in 2018 when the most destructive wildfire in California’s history erupted, claiming 85 lives and destroying over 18,000 structures. Investigations revealed that this devastating fire was ignited by equipment belonging to Pacific Gas and Electric Company (PG&E), which subsequently filed for bankruptcy due to potential liabilities amounting to tens of billions of dollars.
In response, Newsom enacted a law establishing a $21 billion fund, financed by utility shareholders and ratepayers, aimed at assisting utilities with wildfire damage costs provided they implement specified safety measures. As he approaches the end of his governorship, Newsom is actively negotiating with lawmakers to develop a plan that would further shield utilities from financial liabilities associated with wildfire incidents. This initiative comes as Southern California Edison faces claims related to another significant fire in 2025, which was also attributed to one of its transmission towers.
Newsom’s proposed plan seeks to reduce the financial burden on electric and gas companies regarding payouts to wildfire victims and their legal representatives. One of the primary objectives is to stabilize California’s electricity rates, which are among the highest in the country and have been rising due to increased costs related to wildfire prevention and recovery efforts. Notably, six of the ten most destructive wildfires in the state’s history have been linked to utility equipment.
Recognizing the urgency of the situation, Newsom has expressed concern that the wildfire fund may soon be depleted. He aims to expedite compensation for wildfire survivors, stating, “Status quo is not going to work… it’s not going to work for victims, who consistently are last in line.” However, this approach has faced criticism from wildfire survivors who argue that it prioritizes the interests of utility companies over their needs. Insurers are also apprehensive about bearing a larger share of the financial burden for property damage.
A coalition comprising major California utilities, including PG&E, Southern California Edison, and San Diego Gas & Electric, is advocating for the passage of Newsom’s plan. This last-minute legislative negotiation could play a critical role in shaping Newsom’s legacy as he contemplates a potential presidential run in 2028. Newsom asserts that his proposal strikes a balance between the interests of utilities and the need for compensation for wildfire victims.
Under existing California law, utilities are liable for damages from fires ignited by their equipment, irrespective of negligence findings. Homeowners’ insurance companies that cover rebuilding costs can seek reimbursement from utilities. Newsom’s plan could alter this framework by shifting more financial responsibilities to insurance companies. Additionally, the proposal stipulates that utility executives would forfeit bonuses if their companies are implicated in wildfires causing damages exceeding $1 billion, and utility shareholders could face fines for failing to adhere to wildfire prevention regulations.
The Personal Insurance Federation of California, representing the state’s property insurers, has voiced concerns that the proposed changes would lead to increased insurance rates. Rex Frazier, the federation’s president, emphasized that utilities should remain accountable for their actions, stating, “Being responsible for your actions is something that parents tell children.”
Fire survivors have expressed their discontent with the plan, arguing that it effectively transfers liability away from the utilities. Joy Chen, executive director of Every Fire Survivor’s Network, criticized the proposal, asserting that it represents a major shift of financial responsibility to the for-profit utility monopolies that have historically jeopardized communities in California.
The California Professional Firefighters union has expressed support for Newsom’s proposal, highlighting the need to balance the stability of utilities, insurance plans, and recovery funds with the imperative that wildfire victims receive adequate support to rebuild their lives. The legislative session deadline is set for August 31, and if a deal is not reached, Newsom may call for a special session to further address the issue.
Democratic leaders in the legislature acknowledge the necessity of addressing the wildfire damage compensation dilemma but have not specified the details of any prospective agreement. Last year, Newsom proposed an additional $18 billion to supplement the wildfire fund, which the legislature subsequently approved.
Economists are calling for a reevaluation of California’s long-standing liability framework, which holds utilities accountable for wildfire damages regardless of negligence. Meredith Fowlie, an economist at the University of California, Berkeley, argues that as climate change exacerbates the frequency and severity of wildfires, it is crucial to reconsider how the escalating costs of wildfire recovery are distributed. She points out that while utilities may ignite fires, they are not solely responsible for the resulting catastrophic impacts, which often stem from inadequate vegetation management and insufficient fire-resistant infrastructure.
Ultimately, Newsom recognizes the complexity of the issue and is determined to address it before leaving office. He has stated, “I’m not going to walk away and hand a real mess to the next governor,” indicating his commitment to resolving the challenges posed by California’s wildfire crisis and its financial implications for utilities and victims alike.
