A bill signed into law July 12 by Gov. Gavin Newsom will require Southern California Edison customers to pay more than $3 billion toward a wildfire fund over the next 15 years.
The $21 billion fund is designed to reduce the liability burden faced by SCE and the state’s two other investor-owned utilities – Pacific Gas & Electric Co. and San Diego Gas & Electric Co. – resulting from wildfire damage lawsuits that have already forced PG&E into bankruptcy and could threaten Edison to follow suit.
“I want to thank the Legislature for taking thoughtful and decisive action to move our state toward a safer, affordable and reliable energy future, provide certainty for wildfire victims and continue California’s progress toward meeting our clean energy goals,” Newsom said in his bill signing statement.
The bill, AB 1054, which was introduced by Assemblyman Chris Holden, D-Pasadena, was rushed through the Legislature to give enough time to set up the fund before the expected peak of the fire season this fall. Also, Wall Street rating agencies have warned that without a solution to the wildfire liability issue, they would lower bond ratings for the utilities, thereby significantly increasing borrowing costs.
Hundreds of lawsuits have already been filed against Southern California Edison – whose parent company is Rosemead-based Edison International – seeking damages from the Thomas Fire of late 2017 and the Woolsey Fire last fall. The utility’s total liability from the Thomas Fire alone has been estimated at $4 billion. Edison’s total 2018 revenue was $12.6 billion.
Under the new law, utilities must choose by the end of July one of two plans to contribute towards the wildfire fund: either using a total of $10.5 billion from ratepayers as a line of credit to pay for damages that exceed their liability coverages or contributing another $10.5 billion in nonratepayer funds (most likely drawing from profits).
Each utility will also have to earn a safety certification from the state. Among the steps they will have to take is to tie executive compensation to safety performance and create safety committees on their respective boards.
All three utilities must collectively spend $5 billion to fireproof transmission lines and related equipment.
Southern California Edison will have to pay roughly $2.5 billion into the fund within 60 days of opting in, which would put that payment deadline around the end of September.
SCE said in a statement issued July 11, when the bill cleared the Legislature, that it generally supported the measure.
“The state must ensure careful implementation and make some refinements in the future to ensure success; we will work hard to see those changes made,” SCE said in the statement.
Edison International shares rose 69 cents, or 1%, to $70.64 on July 12.
Education, energy, engineering/construction and infrastructure reporter Howard Fine can be reached at firstname.lastname@example.org. Follow him on Twitter @howardafine.