Governor to release report on wildfires, utility bankruptcy

FILE – In this Nov. 9, 2018 file photo, firefighter Jose Corona sprays water as flames from the Camp Fire consume a home in Magalia, Calif. A report expected Friday, April 12, 2019, from Gov. Gavin Newsom’s administration aims to address a host of problems related to wildfires, including how to maintain a safe, affordable electricity supply for California in the wake of Pacific Gas & Electric Corp.’s bankruptcy and the growing cost of wildfires. Noah Berger, File AP Photo

SACRAMENTO, Calif.

A report Gov. Gavin Newsom’s administration will release Friday aims to address a host of problems related to wildfires, including how to maintain a safe, affordable electricity supply for California in the wake of Pacific Gas & Electric Corp.’s bankruptcy and the growing cost of wildfires.

Newsom announced a “strike team” on wildfires in his February State of the State address and gave it a 60-day deadline to produce a report.

“We must map out longer-term strategies, not just for the utilities’ future, but for California’s energy future, to ensure that the cost of climate change doesn’t fall on those least able to afford it,” he said then.

Two of California’s deadliest and most destructive wildfire seasons in state history hit in 2017 and 2018, with 85 killed in a single Northern California wildfire last November. Insurance losses for that fire alone topped $8 billion.

PG&E, the nation’s largest utility, filed for bankruptcy in January over concerns it couldn’t afford potentially billions of dollars in liability from fires caused by its equipment. Officials haven’t determined what caused the November fire, but PG&E has acknowledged its equipment likely sparked the blaze.

Lawmakers have struggled with how to distribute those costs in a way that keeps utilities afloat without passing massive costs on to electricity customers.

Newsom’s office released a memo on Wednesday that ominously warned electricity rates would double if California’s wildfire seasons continue to be as destructive as in recent years. It was put together by Steven Weissman, a lecturer at the University of California-Berkeley, at the request of Newsom’s office.

Topics on the strike team’s agenda included the company’s bankruptcy, the effect of climate change on wildfires, how to protect ratepayers from cost spikes and whether the state’s regulatory system needs to be modernized. The team includes representatives from state agencies including the Public Utilities Commission, Department of Insurance, Office of Emergency Services and the California Department of Forestry and Fire Protection.

Newsom has also hired the high-powered law and investment firms O’Melveny and Myers and Guggenheim Securities to provide expertise at a cost of more than $6 million over six months, according to contracts obtained through the California Public Records Act.

Guggenheim Securities was hired to evaluate PG&E’s financial situation and whether state regulations make it harder for utilities to access capital. In addition to PG&E’s bankruptcy, ratings agencies recently downgraded the bond ratings of Southern California Edison and San Diego Gas and Electric, the state’s other investor-owned utilities.

California law makes utilities pay for wildfire damages caused by its equipment, regardless of whether the company acted negligently. Utilities have tried unsuccessfully to change that standard in recent years.

O’Melveny, meanwhile, was hired to provide legal advice to the state on the utility’s bankruptcy.

The state has no formal role in the bankruptcy proceeding. But Newsom has inserted himself into the debate over PG&E’s future by slamming the company’s safety record and criticizing its choice of new board members.