California to create $21-bn fund to fight wildfires
12 July 2019
California, which is bedeviled by wildfires that even endanger human settlements, plans to create a $21 billion fund to help power utilities in the state pay for claims arising from wildfires sparked by their equipment.
Lawmakers in the western US state on Thursday voted to approve the legislation that would create a $21 billion fund to help utilities in the state pay for claims arising from future wildfires sparked by their equipment.
The issue came up after power supplier PG&E Corp, faced with expected $30 billion in wildfire liability claims arising from wildfires in 2017 and 2018 caused by its equipment, filed for bankruptcy.
California governor Gavin Newsom had, in June this year, proposed the setting up of a fund after S&P Global Ratings called on California’s leaders to take “concrete actions” to reduce credit risks posed by wildfires to the state’s utilities
The state’s power utilities came under intense scrutiny after two years of extensive losses to life and property caused by wildfires sparked by San Francisco-based PG&E’s equipment.
S&P warned it could lower its ratings on the state’s two other major power providers, Edison International’s Southern California Edison and Sempra Energy’s San Diego Gas & Electric as well, to below investment-grade on or about 12 July.
“Strengthening our state’s wildfire prevention, preparedness and mitigation efforts will continue to be a top priority for my administration and our work with the legislature,” the Democratic governor added.
State Senator Bill Dodd, a Democrat who co-authored the legislation, said he expects Newsom will approve the bill soon. “All that’s left is the governor’s signature,” Dodd said.
The proposed fund will have participation from investor-owned utilities, allowing them to draw funds in return. The utilities would evenly split the cost of supporting the fund with consumers. Payments from consumers will come over a 15-year period from an existing rate increase.
PG&E would make the lion’s share of payments into the fund among the power providers, after emerging from bankruptcy. PG&E will also have to compensate victims of wildfires in 2017 and 2018 caused by its equipment.
“In order for PG&E to access this fund, they have to exit bankruptcy within a year,” Dodd said.
All utilities will have to put a combined $5 billion toward improvements in their electrical grids, Dodd said.
PG&E filed for Chapter 11 bankruptcy protection in January on the back of expected claims from the 2017 and 2018 blazes, including November’s Camp Fire that killed more than 80 people and leveled the town of Paradise.
California is now bracing for fire season, with PG&E working on a plan to remove 375,000 trees around its power lines in areas at high risk of wildfires this year. It is also speeding up equipment repairs and safety inspections.
California, the most populous state in the United States, stretches from the Mexican border along the Pacific for nearly 900 miles. Its terrain includes cliff-lined beaches, redwood forest, the Sierra Nevada Mountains, Central Valley farmland and the Mojave Desert.
It also houses the city of Los Angeles, the seat of the Hollywood entertainment industry.