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Utility Wildfire Liability Bill Package Passed by the Legislature and Approved by the Governor

The substantially amended AB 1054 and accompanying trailer bill AB 111, were approved by Gov. Gavin Newsom on July 12.

July 12, 2019
The recently approved wildfire liability legislation, AB 1054 (Holden, Burke, Mayes), was significantly amended last week to include protections for employees of investor-owned utilities (IOU) in the case that they are sold or municipalized, stronger language around obtaining a safety certification, and provisions clarifying that any successor agencies must follow the same rules laid out in the bill.
 
The recent amendments to AB 1054 removed language that sets up the California Catastrophe Council and the Wildfire Advisory Division at the California Public Utilities Commission (CPUC) and placed that language into AB 111.
 
AB 1054 is an urgency bill meaning that it required a two-thirds vote to pass and will take effect immediately upon the Governor’s signature. AB 1054 passed off the Senate floor on a 31 to 7 vote and off the Assembly floor with a 63 to 8 vote. AB 1054 then made its way to the Governor’s desk, where he signed the bill on Friday, July 12. With the passage of both AB 1054 and AB 111, the Legislature has met the Governor’s deadline of passing wildfire related legislation before summer recess begins on July 12. 
 
Summary of AB 1054 Amendments
The key contents of the amendments are below: 
  • Protection of Workers: Includes intent language that declares it is in the interest of the state to have a qualified workforce to minimize the risk of wildfires and includes requiring the size of the workforce be preserved or increased. Changes existing law by prohibiting any successor employer from reducing or not honoring negotiated wages, hours, and other terms and conditions from 2 to 3 years after their acquisition of an entity or their assets.
  • CPUC Safety Certification: The executive director of the Wildfire Safety Board shall issue this safety certification which is required for utilities to have access to the new cost recovery standard. To obtain a safety certification, an electrical corporation must establish an executive incentive compensation plan, approved by the Wildfire Division, linked to safety performance metrics, including tying 100% of incentive compensation to safety performance.
  • Cost Recovery: The previous language put the onus on third parties to demonstrate that an electrical corporation’s actions were not reasonable. Third parties now need to create “serious doubt” that an electrical corporation’s conduct was not reasonable. It is then the utilities’ burden to dispel that doubt in proving that their conduct was in fact reasonable.
  • Change in Ownership of Assets: These amendments would require the CPUC to authorize any voluntary or involuntary change in ownership of assets from an electrical or gas cooperation to a public entity. The mayors of Oakland, San Francisco, and San Jose have raised concerns over this provision as they have considered municipalizing IOUs within their service areas.
  • Insurance Fund: The insurance fund is expected to total $40 billion funded by an initial combined Surplus Money Investment Fund loan of $21 billion, $10.5 billion from IOU rate pass-throughs, $7.5 billion from IOU initial contributions, and $300 million from IOU annual contributions.
  • Deletions: Removes the establishment of the California Catastrophe Council and the Wildfire Safety Division within the CPUC.
Summary of AB 111
The key contents of this budget trailer bill are below. This language was taken from the original version of AB 1054:
  • Establishes the California Catastrophe Response Council: This council will oversee the California Earthquake Authority and the “Wildfire Fund Administrator” who oversees and operates the Wildfire Fund.
  • Creates the Wildfire Safety Division and Advisory Board at the CPUC: Starting Jan. 1, 2020, the Wildfire Safety Division will oversee and enforce investor owned utilities’ safety compliance, and evaluate all electrical utilities’ compliance with their wildfire mitigation plans. As of July 1, 2021, all functions of the Wildfire Safety Division are transferred to the Office of Energy Infrastructure and Safety.
  • Creates the Office of Energy Infrastructure Safety, within the Natural Resources Agency: The director of Office of Energy Infrastructure Safety is appointed by the Governor, and confirmed by the Senate. Effective July 1, 2021, the Office is the successor to the Wildfire Safety Division at the CPUC. The Office and CPUC shall enter into a memorandum of understanding to work cooperatively with each other.


 
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