California approves bill to limit utility liability for wildfires, but not CAISO expansion
California state legislators put in a lot of work last week to advance a number of policy priorities impacting utilities, working right up to midnight on Friday, when the 2018 legislative session ended.
While a number of bills were approved, including a 100% renewable portfolio standard (RPS) by 2045, one of the key policy priorities of Democratic Gov. Jerry Brown did not reach the Senate floor.
State term limits have prevented Brown, who served 16 non-consecutive years as governor, from seeking reelection. As this year's legislative session came to an end, Brown voiced strong support for two controversial measures: to address costly utility wildfire liability and to integrate the California Independent System Operator (CAISO) into a larger Western regional power market. Only the former passed, with amendments.
Win: Utility wildfire liability
In July, Brown put forward a proposal regarding how the state handles wildfire liability for utilities, which would have marked a major victory for Pacific Gas & Electric (PG&E) and other California investor-owned utilities (IOUs). PG&E had already raised the potential for bankruptcy earlier this summer based on its potential liability stemming from the deadly 2017 wildfires.
Two weeks ago, legislators had abandoned one of the most controversial portions of Brown's proposal: changing utility fire liability rules and the state's interpretation of "inverse condemnation."
California courts use a "strict liability" interpretation of the doctrine that holds utilities accountable for wildfires caused by their equipment, even if a company is not found negligent. Despite the change, opponents continued to view the vehicle for Brown's proposal, SB 901, as a "bailout" for utilities.
"Although efforts to address inverse condemnation with respect to utility wildfire liability seem to have failed this legislative session, it does appear that many California lawmakers still want to limit the level of potential utility wildfire exposure," Paul Patterson, a financial analyst in the energy sector at Glenrock Associates, wrote Utility Dive via email. "However, the level of such exposure could also in large part, be left up to the California Public Utilities Commission," or CPUC.
Without fully addressing inverse condemnation, SB 901 still addresses IOU exposure to wildfire damage liability in eight provisions, ClearView Energy Partners LLC noted, including: creating conditions that would allow IOUs to file with the CPUC and recover some costs retroactively (from the 2017 wildfires); establishing a new standard for determining "just and reasonable" costs that IOUs seek to recover going forward for wildfire incidents starting in 2019; and expanding requirements for IOU wildfire mitigation plans.
On Friday, the Assembly voted 49-14 in favor with 17 absent votes and the Senate voted 29-4 with 7 absent votes. "The high level of absentee legislators may reflect the controversy surrounding the bill," Timothy Fox, Vice President at ClearView, wrote in the analysis.
On Wednesday, the legislature also unanimously approved SB 819, which ClearView called a complementary bill to SB 901. The bill would prohibit utilities from recovering wildfire damage expenses if the CPUC determines the utility did not adequately construct, manage or operate its electric facility.
While SB 901 received a vote before midnight on Friday, another controversial measure did not. AB 813 which provided a pathway to expand CAISO's jurisdiction, was denied a vote after a similar bill was rejected the year before, despite Brown's support.
The two-year bill was a regionalization vehicle that would have created a committee and stakeholder process for expanded ISO governance.
Opponents raised concerns about how a market expansion could hamper progress on the state's aggressive climate goals and how it could mean a loss of control over the energy California consumes.
The debate expanded to other concerns such as "whether regionalization would give over too much power to the federal government," according to a statement from Sarah Kozal, a Sacramento-based attorney involved with issues related to interconnection processes at Stoel Rives.
In July, a Next10 report had also reiterated what proponents of interconnection said: Regional Transmission Operators (RTOs) are limited in their ability to affect state policies. CAISO is already subject to Federal Energy Regulatory Commission (FERC) jurisdiction. The report also showed a Western RTO would bring more energy jobs to the state among other benefits, while noting that the state might initially shed some jobs to surrounding states.
According to reporting by Inside EPA/Climate, Brown attempted to increase support for the controversial bill and his other priorities by holding back from issuing his support of a major climate legislation, SB 100, which passed last week, according to.
Now that AB 813 did not pass, Brown can support SB 100, the major landmark clean energy legislation passed on Wednesday, or refuse and risk marring his climate leadership legacy in the state.
The 100% clean energy target is the latest in a number of commitments in California this year to lower greenhouse gas emissions.
SB 100 would set a state goal to supply 100% of retail electricity sales from carbon-free resources by 2045 and direct state agencies to begin planning for the target. The bill would also boost the state's current 50% renewable portfolio standard to 60% by 2030 and mandate that California's actions do not "contribute to greenhouse gas emissions increases elsewhere in the western grid."
Utilities in the state oppose the effort, which would force them to move away from natural gas generation — PG&E told the Wall Street Journal the legislation is "poorly timed."
Last week, the legislature also passed a bill that prioritizes electric vehicle (EV) expansion and a bill expanding support for energy storage.
AB 2127 seeks to promote better planning for EV infrastructure build-out across all vehicle classes. It also gives the California Energy Commission authority to issue statewide assessments of infrastructure needs to keep up with Brown's goal of 1.5 million zero-emission vehicles on the state’s roads by 2025.
The legislature also approved SB 700, which extends the state's leading program for behind-the-meter storage five years to 2026. The bill adds nearly 3 GW to the Self Generation Incentive Program and refreshes funding to the $800 million level. The storage program is poised to fill a gap left by the expiration of a solar installation program wherein customers received cash for installing solar rooftop systems on their home or business.
Follow Iulia Gheorghiu on Twitter