Last Thursday, the California Assembly passed AB 1054, the utility wildfire response bill requiring PG&E, SCE AND SDG&E to make $5 billion in aggregate safety investments (system hardening) without return on equity that would otherwise be borne by ratepayers.
AB 1054 Summary
AB 1054 includes numerous provisions related to addressing wildfires caused by utility infrastructure:
- Bolster safety oversight
- Recover costs from damages to third parties
- Establish a shareholder/ratepayer jointly funded wildfire fund to address future damages
- Provide utility employee protection
- Limit ratepayer exposure to PG&E liability during bankruptcy
Safety Oversight:
AB 1054 requires the state’s three main investor owned utilities (IOUs), PG&E, SCE AND SDG&E to make $5 billion in aggregate safety investments (system hardening) without return on equity that would otherwise borne by ratepayers.
The measure also establishes the California Wildfire Safety Advisory Board (CWSAB), consisting of seven members to advise and make recommendations related to wildfire safety for both IOUs and public owned utilities (POUs).
While the measure is far from perfect and costly from a ratepayer perspective, it appears to be a vast improvement over SB 901 enacted last year that left ratepayers exposed to significant liability costs. Under the current situation, ratepayers are exposed to significant costs associated with California’s strict liability standard for utility caused wildfires. Ratepayers are also currently exposed to significant costs relating to IOU credit rating downgrades due to wildfire risk that significantly increase utility borrowing costs. Finally, PG&E ratepayers are currently exposed to liability costs resulting from the PG&E bankruptcy, which under AB 1054, become the sole responsibility of PG&E shareholders. AB 1054 limits ratepayer exposure to $13.5 billion and ensures utility shareholders are picking up a portion of liability moving forward.
This bill has been signed into law by Governor Newsom.
Article contributed by the Agricultural Energy Consumers Association
