(Bloomberg) --California legislators introduced a
The move comes after extended negotiations with Governor Gavin Newsom's administration, which had been advocating for measures that would bar insurers from suing utilities to recover payouts for property policyholders.
The legislation is the result of a compromise with Newsom and is intended to bolster the state's wildfire recovery response amid a rapidly warming climate. Newsom said the legislation will also speed up payouts to survivors, put new limits on hedge funds pursuing wildfire-related lawsuits against utilities and tighten safety accountability for utility executives.
"Nonetheless, this system needs full structural reform — not a partial one," Newsom said in a statement, calling on lawmakers to revisit the issue next year, after he leaves office due to term limits.
Lawmakers snubbed Newsom's push to bar insurance companies from suing utilities for wildfire-related claims through a process known as subrogation. Insurers had warned that such a move would drive up premiums, stinging homeowners and businesses already frustrated with rising rates for coverage in recent years.
Lawmakers, however, did include provisions favorable to utilities, such as barring hedge funds from buying up insurers' claims against electric companies and backing new limits on the fees lawyers can receive for handling such cases.
"We have come to an agreement that supports survivors in their recovery, curbs Wall Street practices that increase costs on consumers, and mitigates the destruction of these wildfires in the first place," state Senate President Pro Tempore Monique Limón, a Democrat, said in a statement.
PG&E said in a statement that it is reviewing the measure. Southern California Edison pointed to a statement from advocacy group Wildfire Victims First, which is funded in part by Edison and PG&E.
"Urgent action remains for full structural reform to ensure a fair recovery system," spokesperson Nathan Click said. "We will continue advocating for systemic change to make sure victims are never again at the back of the line in wildfire cases."
The proposed overhaul comes after the Los Angeles County Fire Department said in a report released in early August that Edison equipment ignited one of the most destructive fires in the state's history. The Eaton Fire killed at least 19 people and destroyed more than 9,400 structures in Altadena in January 2025.
The company, which has
As climate change increases wildfire risk across California and the West, utilities like Edison have sought to contain their mounting liabilities, pitting them against wildfire survivors seeking compensation, insurance companies trying to recover claims, and cities and counties battling mounting firefighting and infrastructure rebuilding costs.
How these costs are split among utility shareholders, ratepayers, insurance policyholders, taxpayers and fire survivors has become one of the most hotly contested issues in a legislative session set to end Tuesday.
A coalition of fire survivors, insurers, trial lawyers, consumer advocates and local government groups wrote to legislative leaders earlier in the month urging them to reject any proposal shifting wildfire costs away from utility shareholders.
The opposition included Every Fire Survivor's Network, which represents more than 10,000 people affected by the Eaton Fire and a separate blaze that decimated the wealthy Pacific Palisades neighborhood of Los Angeles.
The two January 2025 fires together caused $41 billion in insured losses, making them the costliest wildfires on record globally, according to insurance broker Aon Plc.
With PG&E Corp.'s 2019 wildfire-triggered bankruptcy still looming over the industry, utility chief executive officers have warned that inaction at the state level to protect the companies from the financial fallout of future fires could threaten their capital allocation plans and result in credit rating downgrades.
"If the legislature does not act, or if they act and don't actually solve the problem, then we're going to have to take action," PG&E CEO Patti Poppe said on a July 23 call with Wall Street analysts.
State Senator Ben Allen, whose district includes Pacific Palisades, separately wrote to PG&E and Edison's CEOs saying he was "astounded by the audacity" of reported threats to cut spending for California utility programs if lawmakers didn't act. Meanwhile, LA County Supervisor Kathryn Barger said that "any reforms that limit recovery, weaken accountability or shift costs onto survivors, local governments or taxpayers deserve serious scrutiny."
