Senator Bill Dodd Addresses Fire Issues, PG&E, Cost Recovery and Need for Advance Planning
State Senator Bill Dodd (D-Napa) was the Sonoma County Alliance’s guest speaker at the July 10, 2019 general membership meeting. He focused on issues surrounding wildfire liability reform, cost recovery and utility wildfire mitigation. He described steps leading to new approaches enhancing the state’s ability to prevent, prepare and respond to the growing wildfire threat across California.
Elected in 2016 to represent California’s 3rd Senate District, Sen. Dodd is a fifth-generation Californian and lifelong resident of the district, where he grew up on a small family farm in Napa County.
The district he represents includes all of Napa and Solano counties and portions of Contra Costa, Sacramento, Sonoma and Yolo counties. He co-chaired the 2018 conference committee on wildfire safety and prevention and authored a number of bills signed into law to protect Californians from future infernos and accompanying utility rate hikes.
Sen. Dodd serves as the chair of the Governmental Organization Committee and is a member of the Transportation Committee, the Energy, Utilities and Communications Committee and the Insurance Committee. He is co-chair of the Senate Select Committee on California’s Wine Industry and is a member of the Legislative Delta Caucus.
“On October 7, 2017, I woke up as wildfire raged around us. Some 151 of my neighbours lost homes. For me it was personal,” Sen. Dodd recalled.
He said we went from the best of times to the worst of times for fire victims as insurance companies, utilities, first responders, mutual aid providers and those engaged in early warning communications systems faced major challenges on a scale never seen before. Building in rural or remote areas and near Wildlife Urban Interfaces has also increased the possibility of losses due to fires.
Referring to bans on setting backfires, he said: “More money needs to be invested enabling us to prepare ahead of time, not just for fire suppression after the fact. That ship has sailed, backfires are needed, and the smoke they produce has less environmental impact than smoke from major wildfires.”
Sen. Dodd noted that there are no more utility-caused fires today than 10 years ago, but climate changes are contributing to more fires due to high winds, drought and ground fuel load buildups.
At the same time, he said environmental rules in California have hampered efforts by private property owners to clear debris from forests and help reduce the threat. He has also been instrumental in streamlining the permit process to expedite clearing operations.
Sen. Dodd become the lead author of SB 901, along with Assembly Member Chris Holden (D-District 41), that was signed into law on September 21, 2018. This is the state’s first comprehensive wildfire legislation addressing immediate wildfire mitigation, cost recovery and new rules for investor-owned utilities.
“This law is not a bailout for utilities, but rather a bailout for rate payers who might have faced double-digit utility rate hikes in the future,” he said. “Credit and rating agencies are scared to death. If utilities, such as PG&E, are not kept strong, bond rating agencies could reduce their ranking to junk bond status and ratepayers would get hammered.”
With public utility credit ratings going down, private utility credit ratings are also impacted. Credit rating agency officials came to Sacramento to meet with legislators. They said that if we did not take action by summer, utility rates could go up by 40% to 50% for rate payers.
Sen. Dodd said PG&E has $30 billion in outstanding bonds today, and credit agencies were nervous about additional liabilities north of $10 to $15 billion for the Tubbs fire combined with similar liabilities for the Campfire in Paradise. According to Dodd, the prospect of seeing PG&E fall off a financial cliff was real. Faced with potential mounting liabilities, PG&E filed for Chapter 11 bankruptcy protection on January 29, 2019.
“We developed a plan that included how much cash PG&E come up with before rates would have to be increased. Our goal was to create a new model based somewhat on the California Earthquake Authority that includes early warning systems, monitors, cameras and other tools.”
He said a team of consultants worked for four-to-six weeks to develop a plan that includes a $10.5 billion insurance backstop put in by stakeholders in all utilities to help prevent dilution of shares. A rate payer neutral “liquidity fund,” financed solely by continuing the $2.50 per month charge for the next 15 years already on utility bills (initially used to address the 2001 energy crisis). This charge will be re-purposed to help provide a fund to compensate future fire victims.
This bill also includes $5 billion earmarked for use by utilities in “hardening” their lines and making the electric grid more resilient. The bill marked the beginning of a one-year period for PG&E to come out of bankruptcy, however, Sen. Dodd said in addition to PG&E, all utilities must be made whole.
In addition, SB 901 allocates $200 million per year for five years from the state’s Greenhouse Gas Reduction Fund in order to provide funding to CalFire for forest health and fire prevention and prescribed burns and other fuel reduction activities.
He commented on the proposal from some who want to buy the assets of PG&E in their communities.
“Senator Mike McGuire and I want to protect our ratepayers. If some assets go away, this can lead to higher rates for those that are left. Our goal is to protect everyone. While no plan is perfect the plan developed is a step in the right direction. The next question is how will credit rating agencies respond?”