Governor Gavin Newsom is spending the final stretch of his last legislative session pushing a controversial plan to ease the financial burden wildfires have placed on California’s investor-owned utilities — a move that has reignited one of the most contentious policy battles of his tenure.
With just weeks left before lawmakers adjourn, Newsom’s administration has been quietly shopping a broad but still largely undefined set of proposals aimed at reducing how much money utility companies must pay out when their equipment sparks a wildfire. The effort has managed to unsettle nearly everyone with a stake in the issue.
Insurance companies have launched a statewide ad campaign warning that the plan amounts to a “utility bailout” that would strip them of their ability to recover costs from power companies after paying out policyholders’ claims. Attorneys who represent wildfire victims are bracing for cuts to their fees. Survivors fear they won’t be fully compensated for their losses and trauma. And local governments are pressing to ensure they still receive full reimbursement to rebuild roads, water systems and other infrastructure destroyed by fire.
On the other side of the debate are the state’s three major utilities — Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric — which together serve roughly three-quarters of California and have faced intense criticism for sparking some of the state’s deadliest and most destructive fires.
None of the three companies appears to be in immediate financial distress; all reported rising profits last year. But wildfire-related costs have helped push California’s electricity rates to the second-highest in the nation, and officials in Newsom’s office and the Legislature worry that continued financial strain on utilities could drive prices even higher — or trigger a bankruptcy that would leave fire victims waiting even longer for compensation.
Newsom and his allies argue that utilities are currently held responsible for too much after a fire, creating an opening for hedge funds and other investors to profit by purchasing victims’ claims.
“The status quo doesn’t work,” Newsom said at a press conference last week when asked whether his proposal serves fire survivors’ interests. “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.”
When CalMatters asked the governor’s office to clarify that timeline — given that the legislative session ends in just three weeks — a spokesperson said Newsom meant the remaining weeks of this year’s session, but did not say whether he might call a special session to keep the effort alive beyond that deadline.
As Newsom weighs a potential run for president, he has political incentive to strike a deal. Critics on the right have used California’s disaster costs and affordability struggles as talking points, and further rate increases — or another utility bankruptcy — would only fuel that narrative. But aligning with the utilities carries its own risks. Anger toward the companies remains raw: just last week, Cal Fire and the Los Angeles County Fire Department determined that Edison equipment was responsible for igniting the January 2025 Eaton Fire, which killed 19 people in Altadena.
Assemblymember Cottie Petrie-Norris, an Irvine Democrat who chairs a key Assembly committee, has expressed general support for Newsom’s direction. Senate leaders appear more cautious. Wildfire survivors are urging lawmakers to slow down and hold the debate in public rather than behind closed doors.
“You cannot be ‘there are some bad actors’ and therefore we will have a secret bill,” said Joy Chen, who leads a coalition of Los Angeles-area fire survivors. “Then your bill is the bad actor.”
A familiar fight
This isn’t the first time Newsom has waded into this territory. He took office not long after devastating wildfires tore through Northern California in 2017 and 2018 — fires that investigators later linked to PG&E equipment.
At the time, PG&E faced a legal and financial crisis. Under California’s strict liability standard, utilities are responsible for wildfire damage tied to their equipment even when they weren’t found negligent, and regulators had stopped allowing companies to pass those costs onto ratepayers in cases involving carelessness. Facing a wave of lawsuits, PG&E filed for bankruptcy in 2019.
Newsom quickly signed legislation intended to shield utilities from future financial collapse, prompting accusations that the state was bailing out the industry. That law created a $21 billion wildfire fund — financed equally by utility shareholders and a $2.50 monthly surcharge on customers’ bills — meant to compensate victims, provided utilities meet stricter safety standards.
Then came the Eaton Fire in January 2025. During a powerful windstorm, electrical arcing from an aging, decommissioned Edison transmission tower ignited dry brush in Eaton Canyon. The fire, burning simultaneously with the deadly Palisades Fire, killed 19 people and destroyed nearly 9,500 homes and other structures. UCLA researchers estimated total losses between $24 billion and $45 billion.
The state’s wildfire fund is expected to be exhausted once insurance claims, Edison’s voluntary settlements and pending lawsuits are all accounted for. Lawmakers extended the fund last year, stretching the ratepayer surcharge through 2045 to help cover future disasters. Meanwhile, some hedge funds have moved to buy up insurance claims tied to the fires, hoping to profit from settlements.
Newsom’s plan seeks to narrow who can file claims against the fund and how much they can receive. According to a policy outline released Tuesday and private briefings held last week, his proposal would pair those liability limits with measures to expand home-hardening programs, help homeowners exit the state’s insurer-of-last-resort program, tie utility executive compensation to safety performance, and require utility shareholders to cover rate relief for customers during two upcoming summers.
Specific legislative language has not yet been released.
CalMatters reached out to all three major utilities for comment. San Diego Gas & Electric did not respond. PG&E and Edison directed questions to Nathan Click, a spokesperson for the utility-backed campaign Wildfire Victims First, which has flooded the state with advertising urging residents to pressure lawmakers to act. Click, who also does political work for Newsom, declined to answer specific questions — including whether utility representatives are negotiating directly with legislators — and instead provided statements from business groups and a major electrical workers’ union supporting the liability changes.
The chief executives of PG&E and Edison have also warned that they may take unspecified action to protect shareholders if lawmakers fail to reduce their wildfire liability exposure.
Over the past four years, the three utilities have spent a combined $5.2 million on political campaigns, lawmaker travel and charitable donations tied to elected officials, according to CalMatters’ Digital Democracy database. PG&E ranked among the top lobbying spenders in Sacramento during the current legislative session, and the three companies together spent nearly $7 million in the first half of this year lobbying the Legislature, the governor’s office and utility regulators.
Limiting damages
Newsom’s proposal seeks to reduce utility liability in several ways: capping attorneys’ fees, limiting how much local governments can recover for rebuilding public infrastructure, and restricting damages for certain categories of victims.
The plan includes a state-run “fast pay” system that would prioritize payouts to survivors who lost loved ones, suffered injuries or had their homes destroyed. But to use that system, claimants would likely have to forfeit their right to sue the utility — trading the possibility of a larger settlement through litigation for a quicker payment.
For other affected residents, the proposal floats a cap of $150,000 in damages.
Petrie-Norris, who supports the broader framework, said she does not want to restrict emotional distress claims for survivors she considers legitimate victims, but believes those claims should be limited for people who weren’t directly affected.
“If you were part of a disaster no one’s going to say you can’t make a claim,” she said. “If you did not actually experience a disaster, what non-economic damages should you be entitled to?”
Newsom and Petrie-Norris say they’re especially concerned about attorneys who solicit clients through advertising to sue utilities, noting that legal fees can consume 30% to 40% of a victim’s payout, according to one academic study. But advocates for survivors argue that determining who qualifies as a “real” victim isn’t so simple — someone who didn’t lose a home but suffered smoke inhalation from miles away, for instance, could still have been seriously harmed.
Chen said she was taken aback during a briefing with the governor’s office, when officials indicated that only people who evacuated and lost their homes would qualify for non-economic damages.
“Let’s say someone was out of town, but their house burned down so they didn’t evacuate,” she said. “But they lost everything, so they have to rebuild. So you won’t compensate them for pain and suffering?”
Newsom’s office has also said it wants to prevent investors from purchasing wildfire claims and prioritize small businesses over large corporations, though it hasn’t detailed how that would work in practice.
Graham Knaus, chief executive of the California Association of Counties, said he’s skeptical of the framing that some claimants are gaming the system.
“The utilities are finding a lot of creative ways to avoid responsibility. That’s it,” Knaus said. “We should not be opening the door for them to escape accountability.”
Shifting costs
Another element of the proposal could ripple across the state’s insurance market. Newsom is considering limiting — or eliminating — insurers’ ability to recover costs from utilities after paying out claims tied to utility-caused wildfires, a legal process known as subrogation.
Utilities and insurers have clashed over this issue for years. In 2018, utilities unsuccessfully pushed legislation to weaken California’s strict liability standard, which holds power companies responsible for wildfire damage near their equipment regardless of fault.
“We’re a well-resourced industry, but not like [the utilities],” said Rex Frazier, president of the Personal Insurance Federation of California. “Their lobbying spend was just crazy.”
Denni Ritter, vice president of the American Property Casualty Insurance Association, warned that eliminating subrogation could undercut progress made under insurance reforms California adopted last year to stabilize the market. Those reforms allowed insurers to factor catastrophe modeling and reinsurance costs into their pricing, prompting some companies to resume writing new policies statewide and slowing growth in the state’s FAIR Plan, the insurer of last resort.
Ritter and Frazier warned that if insurers can’t recoup wildfire-related claim costs from utilities, they’ll likely raise premiums broadly — even in areas with minimal fire risk.
“We don’t understand how they’re not embarrassed to suggest that the answer to their problem is to shift their costs over to other people,” Frazier said. “Why should a homeowners insurance customer in a dense urban environment have to pay considerably more?”
Sen. Ben Allen, a Santa Monica-area Democrat who chairs the Senate’s utilities committee and is running for state insurance commissioner, said he’s wary of that tradeoff unless the broader package includes clear benefits for consumers and taxpayers.
Petrie-Norris, however, said the exchange might ultimately be worthwhile.
“If I can save you $2 on your utility bill and your insurance bill goes up by $1, that seems like a smart thing for us all to do,” she said. “But we’ve got to make sure that’s true and whether there are unintended consequences.”
Original source: CalMatters
