Newsom pushes lawmakers to cap utility wildfire liability before he leaves office

Governor Gavin Newsom is pressing California lawmakers, in the final week of this year's legislative session, to scale back how much money the state's investor-owned utilities must pay out when their equipment sparks a wildfire, reopening one of the most contentious fights of his time in office as he enters his final months as governor. The push, first reported in detail this week, would not affect victims of fires that have already happened. It would instead set new limits on utility liability for fires that break out after the law takes effect, a distinction Newsom's office says is necessary to keep California's largest power companies financially stable.

The proposal has split Sacramento along an unusual line: the state's three big utilities, Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric, are backing the plan, while fire survivors' groups and the insurance industry are fighting it. Lawmakers have until Aug. 31 to act before the regular session ends; if they don't, Newsom has signaled he could call a special session to force the issue before he leaves office.

The numbers

The fight centers on the state's Wildfire Fund, a roughly $21 billion pool created early in Newsom's tenure and financed jointly by utility shareholders and ratepayers, which utilities can draw on to pay wildfire claims if they meet state safety requirements. The Legislature approved an additional $18 billion for the fund last year after a string of major fires strained its balance. Newsom's new proposal would go further by capping what utilities owe directly to insurance companies, hedge funds and disaster attorneys pursuing subrogation claims, and by limiting how much money local governments can recoup from utilities to rebuild burned communities. It would also cut the other way for utility executives: under the plan, a company's CEO would have to forfeit bonuses in any year a fire sparked by that utility's equipment causes more than $1 billion in damage, and utility shareholders could face fines of up to $10 million for violations of state wildfire-prevention rules.

A fight Newsom has waged before

This is not the first time Newsom has intervened to shield utilities from the full cost of wildfire liability. He signed SB 254, the law that created the current version of the Wildfire Fund, to replace a patchwork of lawsuits and settlements with a more predictable claims process, arguing that without it, utilities facing billions of dollars in fire-related liability could be pushed toward bankruptcy, as PG&E was in 2019. Since then, the fund has already been tapped repeatedly, and last year's $18 billion top-up showed how quickly claims from major fires can draw it down. Newsom's office has cast the current proposal as the next step in that same effort: protecting ratepayers from utility bill spikes tied to fire liability while keeping the companies solvent enough to keep the lights on and invest in grid safety upgrades.

Who would be affected

The immediate stakes fall on several groups at once. Utility shareholders and, indirectly, the roughly 25 million Californians who get electricity from PG&E, Edison or SDG&E would be affected by whatever balance lawmakers strike between liability costs and rate increases. Insurance companies that pay out claims to homeowners after a wildfire, then sue utilities to recover those costs through subrogation, would see that avenue narrowed under the proposed caps. Disaster attorneys who represent fire victims in mass litigation, and the local governments in fire-prone areas that rely on utility settlements to help rebuild roads, schools and water systems, would also see their potential recoveries reduced under the plan as described so far.

Reaction: 'a massive transfer of liability'

Fire survivors' advocates have been the sharpest critics. Joy Chen of the Every Fire Survivor's Network, a group formed by people who lost homes in recent California wildfires, argued the plan tilts the system further toward the utilities that caused the damage in the first place.

"This is overall a massive transfer of liability for the three for-profit utility monopolies," Chen said.

The insurance industry has been equally blunt. Rex Frazier, president of the Personal Insurance Federation of California, a trade group representing major home insurers, framed the proposal as an attempt to let utilities avoid consequences for their own equipment failures. "Being responsible for your actions is something that parents tell children," Frazier said, arguing insurers should not be forced to absorb costs that utilities' own negligence created. The utilities, for their part, have argued privately that without predictable limits on liability, the cost of insuring against wildfire risk will keep climbing and get passed on to ratepayers regardless of who technically pays first. Coverage from E&E News and other outlets tracking the negotiations reported that the governor's office has not yet released full legislative text, leaving both supporters and opponents reacting to a broad outline rather than a finished bill.

What happens next

Lawmakers face a hard deadline: California's legislative session ends Aug. 31, and any bill Newsom wants signed this year needs to clear both chambers before then. Legislative leaders have not said whether they have the votes to pass a liability package in the time remaining, and the opposition from fire survivors and insurers gives wavering Democrats, who control large majorities in both the Assembly and Senate, political cover to slow-walk it. If no deal emerges by the deadline, Newsom would have to decide whether to call lawmakers back for a special session, an option he has used before on utility and insurance-market legislation, or leave the fight to his successor, since term limits bar him from seeking a fourth term as governor. Whichever path he takes, the outcome will shape how the state's largest utilities, and the millions of ratepayers and disaster survivors tied to them, absorb the cost of wildfires for years after Newsom leaves Sacramento.