© Reuters. FILE PHOTO: Governor of U.S. state of California Gavin Newsom visits the premises of a migrant assistance office in San Salvador

(Reuters) – California Governor Gavin Newsom on Friday proposed a new fund to pay for wildfire liabilities, while holding the state’s largest utility more accountable for the growing number of blazes in the state.

The creation of a fund that would allow utilities to pay for wildfire damage claims sent PG&E Corp shares soaring nearly 12 percent before closing 3.95 percent higher on Friday.

“PG&E is a textbook example of what happens when a utility does not invest in safety after numerous deadly reminders to do so over many years,” a report released by Newsom said.

PG&E said in a statement that it is “embracing the calls for change,” adding “we are committed to resolving wildfire victims’ claims fairly and expeditiously, continuing to deliver safe and reliable energy to our customers, and supporting the state’s bold clean energy goals.”

Newsom’s report calls for shifting liability for wildfire damage to a fault-based system. The current system, known as inverse condemnation, exposes the state’s utilities to liabilities from wildfires regardless of their negligence, as long as their equipment is involved.

The current system pushed PG&E to seek bankruptcy protection in January, as it faced liabilities in excess of $30 billion related to the deadliest wildfires in the state’s history.

“Under the status quo, all parties lose – wildfire survivors, energy consumers and Californians committed to addressing climate change. The imperative now is on action,” Newsom said.


The governor’s report proposed creating two funds to help utilities pay for wildfire damage claims and spread the cost more widely among stakeholders.

In March, investigators found that the devastating Thomas Fire northwest of Los Angeles was sparked by power lines owned by Southern (NYSE:) California Edison Co.

The utility said in a statement it “is encouraged by the broad scope” of Newsom’s report, which reflects the need to address wildfire liability and regulatory reform”.

Shares of Edison International (NYSE:), the parent company of Southern California Edison, rose 7.2 percent.

The report was harshly critical of PG&E, saying it is “taking advantage of the bankruptcy process to promote the interests of investors over fire victims and other stakeholders.”

The state will monitor and intervene in the bankruptcy proceedings to protect California’s interests, it said.


Damage estimates for the 2018 wildfire season are staggering, with insured losses alone exceeding $12 billion, the report said.

“The current system for allocating costs associated with catastrophic wildfires – often caused by utility infrastructure, but exacerbated by drought, climate change, land-use policies and a lack of forest management – is untenable both for utility customers and for our economy,” the report said.

The report calls on the federal government to better manage its forests, as the owner of 57 percent of California’s forest lands.

U.S. President Donald Trump in January threatened to cut off federal relief to California for wildfires for what he called mismanagement of the state’s forests.

The Federal Emergency Management Agency has been providing assistance to survivors after wildfires in November collectively damaged or destroyed more than 20,000 structures and killed at least 89 people.

The largest blaze was the Camp Fire that destroyed most of the Northern California town of Paradise, killing at least 86 people – the deadliest wildfire in the United States in at least a century.

The state’s fire season is now almost year round. More than 25 million acres of California’s wildlands are classified as under very high or extreme fire threat. About a quarter of the state’s population, or 11 million people, lives in that high-risk area, the report said.

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