EXHIBIT A

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Wildfires and Climate Change: 

California’s Energy Future

A Report from Governor Newsom’s Strike Force

April 12, 2019 

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Wildfires and Climate Change: California’s Energy Future

Executive Summary 

as u

Climate change has created a new wildfire reality for California. The state’s fire season is 

now almost year round. More than 25 million acres of California wildlands are classified 

nder very high or extreme fire threat. Approximately 25 percent of the state’s

population – 11 million people – lives in that high-risk area. 

Wildfires are not only more frequent but far more devastating. Fifteen of the 20 most 

destructive wildfires in the state’s history have occurred since 2000; ten of the most

destructive fires have occurred since 2015. The results are visible to all: lives lost, grave 

fire damage to homes and communities, rising gas and electricity rates, pressure on the 

home insurance market, and the threat of insolvency for California’s utilities. The largest 

investor-owned utility in the state has filed for bankruptcy protection and two other 

major investor-owned utilities in southern California have had their credit ratings 

downgraded. Financial experts have opined that these utilities are likely one major fire 

away from bankruptcy. Making matters worse, this year has all the conditions for 

devastating fires, with a very wet season leading to high vegetation density. During fire 

season, that vegetation dries out and becomes fuel. 

Since the first days of his administration, the Governor has taken decisive action to 

strengthen California’s emergency preparedness and response capabilities to mitigate 

wildfires and build community resilience. In response to instability in the energy sector 

and to PG&E’s decision to file for bankruptcy, the Governor created a strike force to

coordinate the state’s efforts relating to the safety, reliability, and affordability of energy,

as well as to continue progress to achieve the state’s climate commitments. As part of 

these efforts, sixty days ago, the Governor directed the strike force to develop a 

comprehensive roadmap to address the issues of wildfires, climate change, and the 

state’s energy sector. That roadmap is attached.

The strike force report sets out steps the state must take to reduce the incidence and 

severity of wildfires, including the significant wildfire mitigation and resiliency efforts the 

Governor has already proposed. It renews the state’s commitment to clean energy. It 

outlines actions to hold the state’s utilities accountable for their behavior and potential

changes to stabilize California’s utilities to meet the energy needs of customers and the 

economy. 

It is imperative that utilities not put profits ahead of safety and service. That is why the 

state has and will continue to advocate in PG&E’s bankruptcy proceeding for fair

treatment of fire victims, for California consumers, and for California policies and values. 

Preventing and Responding to Catastrophic Wildfires 

The report begins by setting out steps that the administration, the CPUC, local 

communities, and utilities must take to reduce the incidence and severity of wildfires and 

to step up both community resilience and the state’s response capabilities. To

accomplish this, it is critical that the state: 

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 Expand fire prevention activity by improving forest and vegetation management, 

accelerating fuel reduction projects on both public and private land, training the 

workforce needed to scale up these projects, investing in new technologies to model 

and monitor fire risk, and strengthening utility oversight so that they invest more in 

safety. 

 Make communities more resilient by considering updating codes that govern 

defensible space, encouraging cost-effective hardening of homes, strengthening 

evacuation, encouraging other emergency planning, and improving land use 

practices to reduce the damage to life and property from wildfires. 

 Invest in fire suppression and response by investing in new fire engines and aircraft, 

re-deploying National Guard personnel from the border to support fire suppression 

initiatives, purchasing detection cameras to provide advanced data tofirefighters, 

and investing in a statewide mutual aid system to pre-position resources in high-risk 

areas. 

 Call on the Federal Government to Better Manage Federal Forest Land. As the owner 

of 57 percent of California’s forestland, the federal government must also do its fair 

share to reduce fire risk. Specifically, the Governor has joined the governors of 

Washington and Oregon to call for the federal government to double the investment 

in managing federal forestlands in our states due to the high risk of wildfires. 

Renewing California’s Commitment to Clean Energy

Given that climate change is a core driver of heightened wildfire risk, California must 

continue its transition to clean energy. California has established ambitious greenhouse 

gas reduction targets and the utility sector has been critical to the significant progress 

our state has made. But, an unstable energy market presents new risks, and 

temperatures keep rising. Any solution must adapt to the changing market landscape 

while maintaining the state’s commitment to mitigating climate change. To do this, the 

state should consider: 

 Evaluating state-level resource backstop options to reduce gaps and inefficiencies 

that can result from an increasingly fragmented energy market – including the option 

of creating a state power procurement entity. 

 Increasing transparency and reliability protections for customers by establishing 

standards to make energy provider information more transparent and facilitate 

statewide planning. 

Allocating Responsibility for Wildfire Costs 

An honest assessment of the realities of current and future climate change tells us that 

no matter how committed we are to preventing and fighting fires and to reducing 

carbon emissions over the long-term, the state will experience further fire damage in the 

coming years. If we continue on our current legal and regulatory path, we will get similar 

results – more deadly and destructive fires that put utilities near insolvency. That is 

unacceptable for fire victims and utility customers and is incompatible with an economy 

that requires safe, reliable, and affordable power. Any real plan must allocate costs 

resulting from wildfires in a manner that shares the burden broadly among stakeholders, 

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including utilities (ratepayers and investors), insurance companies, local governments, 

and attorneys. Taxpayers have substantially increased their contribution to mitigating 

fire risk and fighting fires when they ignite. 

Any successful approach for allocating responsibility for wildfire costs should be based 

on the following principles: (1) maintaining safe and affordable power, (2) holding 

utilities accountable to prioritize safety, (3) treating wildfire victims fairly, (4) requiring 

equitable stakeholder contributions, (5) reducing overall costs from wildfire damage, 

(6) promoting California’s clean energy goals, and (7) recognizing the contribution of 

California taxpayers. 

The strike force has identified the following three concepts for evaluation against these 

principles: 

 A liquidity-only fund that would provide liquidity for utilities to pay wildfire damage 

claims pending CPUC determination of cost recovery potentially coupled with 

modification of cost recovery standards. 

 Adopting a fault-based standard that would modify California’s strict liability

standard to one based on fault to balance the need for public improvements with 

private harm to individuals. 

 Creation of a catastrophic wildfire fund coupled with a revised cost recovery 

standard to spread the cost of catastrophic wildfires more broadly among 

stakeholders. 

These concepts should be publicly debated, as each has impacts, tradeoffs, and 

consequences that must be addressed. Some concepts rely on voluntary contributions 

from utility investors, who in exchange will demand more clarity in the regulatory 

standard for cost recovery from ratepayers. 

The choices are difficult, the future is uncertain and the solutions are imperfect. But 

legislative action is necessary for the stability of the state’s energy market to meet the 

needs of Californians, and to achieve the state’s clean energy goals.

Under the status quo, all parties lose – wildfire victims, energy consumers, and 

Californians committed to addressing climate change. Victims face a great deal of 

uncertainty and diminished ability to be compensated for their losses and harm. 

Customers face rising rates and instability. California’s ability to achieve its climate goals

is frustrated. Utility vendors and employees face uncertainty and likely significant losses. 

The bottom line is that utilities either in or on the verge of bankruptcy are not good for 

Californians, for economic growth, or for the state’s future.

Strengthening Utility Market Regulation 

Utilities must be active participants in the quest for safe, reliable, and affordable power. 

This report recommends strengthening utility regulation by reforming the California Public 

Utilities Commission (CPUC) to: 

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 Expand safety expertise by improving the CPUC’s ability to review wildfire mitigation

plans, conduct inspections and audits, and enforce safety standards at investorowned utilities. 

 Clarify cost recovery standards by setting clear guidelines in statute for when the 

CPUC can pass on the costs of claims from wildfire damage to ratepayers. 

 Improve decision-making by overhauling procedures, delegating more decisions to 

technical staff so that judges and commissioners focus on core questions of ratesetting, and improving enforcement. 

 Review high-risk industry regulatory models and explore options for incorporating the 

latest climate impact research, in concert with the Governor’s Office of Planning & 

Research, as well as academic and industry experts in risk reduction. 

Holding PG&E Accountable for Safety 

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. Even today, PG&E is taking 

advantage of the bankruptcy process to promote the interests of investors over fire 

victims and other stakeholders. California will advocate for fair treatment of victims and 

employees, as well as to uphold the state’s clean energy commitments in the 

bankruptcy process. The state will: 

 Monitor – and intervene – in the bankruptcy proceedings to protect California’s

interests. PG&E is a private entity, but its misconduct has had grave consequences 

for the state and its people. 

 Evaluate options to satisfy wildfire claims from the last two years so fire victims are 

treated fairly. 

 Demand that a reorganized PG&E serve the public interest. After years of 

mismanagement and safety failures, no options can be taken off the table to reform 

PG&E, including municipalization of all or a portion of PG&E’s operations; division of 

PG&E’s service territories into smaller, regional markets; refocusing PG&E’s operations

on transmission and distribution; or reorganization of PG&E as a new company 

structured to meet its obligations to California. 

The status quo is unsustainable. A better future is possible – one grounded in clear rules, 

effective regulation, and a new emphasis on safety so every Californian can access 

safe, reliable, affordable power. As the climate changes and risks rise, California must 

once more lead the way. 

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0 10 .,, 

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Climate Change 

Wildfires without 

Climate Change 

1985 1990 1995 2000 2005 2010 

Source: Abatzoglou/Williams 2016, PNAS 113 

2015 

Wildfires and Climate Change: California’s Energy Future

Introduction 

California faces a dramatic increase in the number and severity of wildfires. Fifteen of 

the 20 most destructive wildfires in the state’s history have occurred since 2000; ten of 

the most destructive fires have occurred since 2015.1 While wildfires are a natural part of 

California’s ecology, the fire season is getting longer every year—with most counties 

now experiencing fire season from mid-May to mid-December and several counties 

facing fire danger year-round.2 Warmer temperatures, variable snowpack, and earlier 

snowmelt caused by climate change make for longer and more intense dry seasons, 

leaving forests more susceptible to severe fire. 

Figure-013 

At the same time that our climate is changing and fueling the devastating force of 

wildfires, increased development in the wildland-urban interface (WUI) has placed more 

1 See generally, CAL FIRE, Top 20 Most Destructive California Wildfires, (Mar. 2019), 

http://www.fire.ca.gov/communications/downloads/fact_sheets/Top20_Destruction.pdf) (last visited Apr. 10, 2019) (“Top

20 Most Destructive California Wildfires”).

2 See generally, CAL FIRE, 2018 Fire Season Incident Information, 

http://cdfdata.fire.ca.gov/incidents/incidents_seasondeclarations?year=2018 (last visited Apr. 10, 2019). 

3 Eberhard Faust & Markus Steuer, CLIMATE CHANGE INCREASES WILDFIRE RISK IN CALIFORNIA | MUNICH RE MUNICHRE.COM (2019), 

https://www.munichre.com/topics-online/en/climate-change-and-natural-disasters/climate-change/climate-changehas-increased-wildfire-risk.html (last visited Apr 11, 2019) (“Climate Changes Increases Wildfire Risk”).

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residents in the potential path of destruction. Today, approximately 25 percent of the 

state’s population (over 11 million people) lives in high fire-risk areas, including the WUI.4 

The combination of more powerful wildfires and more Californians living in their paths has 

resulted in enormous, incomprehensible loss. Last year, 85 people died in the Camp Fire 

alone and 19,000 homes and other structures were damaged or destroyed.5 According 

to data from Butte County, more than 60 percent of those victims were over 60 years 

old.6 Paradise and other towns were devastated. The Camp Fire was only one of 

approximately 7,600 wildfires in 2018. Damage estimates for the 2018 wildfire season are 

staggering, with insured losses alone exceeding $12 billion.7 Thousands of Californians 

who lost their homes, and their livelihoods in these fires, are still without permanent 

homes and struggling to rebuild their lives. 

The damages caused by wildfires are unsustainable for the directly impacted victims, for 

the state, which is spending hundreds of millions of dollars to respond, and for local 

communities trying to rebuild. In response to climate change and heightened wildfire 

threat, California is expanding resilience efforts through increased investments in fire 

mitigation and response, community hardening, and emergency preparedness. 

California’s electric utilities must be part of the solution to this problem. In the past four 

years, equipment owned by California’s three largest investor-owned utilities sparked 

more than 2,000 fires.8 Utility-caused fires tend to spread quickly and be among the most 

destructive. Hundreds of thousands of miles of electrical transmission and distribution 

lines snake across the California landscape, often igniting fires during extreme wind 

events and in remote areas, making early detection and fire suppression extremely 

challenging. Longer fire seasons make utility-caused fires even more likely. Hardening 

the electrical grid is thus a critical component to overall wildfire risk management.9 Our 

utilities—public and private—must make needed investments to reduce the risk of utilityignited fires and, with the new reality of climate change, must do so now. 

At the same time, 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 

4 LEVENTHAL CENTER FOR ADVANCED URBANISM, Cataloguing the Interface: Wildfire and Urban Development in California, (Spring 

2018), http://lcau.mit.edu/project/cataloguing-interface-wildfire-and-urban-development-california (last visited Apr. 10, 

2019). 

4 Top 20 Most Destructive California Wildfires. 

5 Cal Fire, Top 20. 

6 Los Angeles Times, Many victims of California's worst wildfire were elderly and died in or near their homes, new data 

show, (Dec. 13, 2018) (archived from the original on Dec. 14, 2018). 

7 CAL. DEP’T. INSUR., CALIFORNIA DEPARTMENT OF INSURANCE INSURED LOSSES FROM THE 2018 CALIFORNIA WILDFIRES, (Jan., 28, 2019), 

http://www.insurance.ca.gov/0400-news/0100-press-releases/2019/upload/nr14-2019Insured-Losses-2018-Wildfires.pdf (last 

visited Apr. 10, 2019). 

8 Carolyn Kousky, et. al., Wildfire Costs In California: The Role of Electric Utilities Wharton Risk Management and Decision 

Processes Center (Sept. 2018), riskcenter.wharton.upenn.edu/wp-content/uploads/2018/08/Wildfire-Cost-in-CA-Role-ofUtilities-1.pdf (last visited Apr. 10, 2019). 

9 Measures commonly used to harden the electrical grid include using insulated electrical lines in high-risk areas, 

replacing wood poles with steel, installing specialized monitoring equipment, and using new technologies that can 

reduce sparks or undergrounding lines when necessary in extreme high-fire areas. 

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utility customers and for our economy. Multi-billion dollar wildfire liabilities over the last 

several years have crippled the financial health of our privately and publicly owned 

electric utilities. Pacific Gas & Electric Company (PG&E) filed for bankruptcy in the face 

of massive potential liability for wildfire damages. Other investor-owned and public 

utilities have experienced recent credit ratings downgrades, with San Diego Gas & 

Electric (SDG&E) and Southern California Edison Company (SCE) now precipitously 

hovering just above junk status. Utilities rely on credit to finance ongoing infrastructure 

investments, including fire mitigation. As utilities’ credit ratings deteriorate, their 

borrowing costs increase and those costs for capital necessary to make essential safety 

improvements are passed directly tto customers. These downgrades, and the prospect 

of additional utility bankruptcy filings, directly impact Californians’ access to safe,

reliable and affordable electricity. 

In his State of the State Address, the Governor directed a strike force to develop a 

comprehensive strategy, within 60 days, to address the destabilizing effect of 

catastrophic wildfires on the state’s electric utilities. He charged the strike force with 

developing a strategy to ensure California’s “continued access to safe affordable 

power” and to “seek justice for fire victims, fairness for employees and protection for 

consumers.”10 

As the Governor stated, the crisis confronting California’s electric utilities comes “at a 

time when the entire energy market is evolving” and is exacerbated by “regulations and 

insurance practices created decades ago [that] didn’t anticipate these changes.” The 

Governor recognized the need to “map out longer-term strategies, not just for the 

utilities’ future, but for California’s future, to ensure that the cost of climate change 

doesn’t fall on those least able to afford it.”

The Governor directed his strike force to develop a comprehensive strategy that 

achieves the following objectives: 

1. Assure access to safe, reliable and affordable power for all Californians. 

2. Reduce the severity of wildfires through continued investments in fire mitigation, 

vegetation management and other strategies to reduce fuels. 

3. Develop and implement technologies to more quickly identify and respond to 

wildfires. 

4. Reduce the number of utility-sparked wildfires through smart investments in increased 

safety, prevention, grid-hardening, and vegetation management around electrical 

lines. 

5. Facilitate fair and prompt treatment for wildfire victims and allocate the burden of 

wildfire damage responsibly and fairly across all stakeholders. 

6. Ensure that California continues to make progress toward its clean energy goals. 

10 OFFICE OF GOV. GAVIN NEWSOM, Governor Newsom Delivers State of the State Address, (Feb. 12, 2019), 

https://www.gov.ca.gov/2019/02/12/state-of-the-state-address/ (last visited Apr. 10, 2019). 

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7. Provide sufficient certainty to investors and credit ratings agencies to avoid 

downgrades of utilities that could cause further bankruptcies and/or drive up 

borrowing costs, each of which raises prices for utility customers. 

8. Hold utilities accountable for improving safety and preventing wildfires and for 

damages if their misconduct causes a wildfire. 

9. Avoid a band-aid approach and instead set a path for the energy market of the 

future. 

10. PG&E serves 40 percent of California electricity customers and has an egregious 

safety record. The state must hold PG&E accountable and demand systemic 

reforms and a commitment to safety. 

This Report provides a roadmap to confront the challenges of catastrophic wildfires: 

Part 1: Catastrophic Wildfire Prevention and Emergency Response 

Part 2: Mitigating Climate Change through Clean Energy Policies 

Part 3: Fair Allocation of Catastrophic Wildfire Damages 

Part 4: A More Effective CPUC with the Tools to Manage a Changing Utility Market 

Part 5: Holding PG&E Accountable & Building a Utility that Prioritizes Safety 

It will take a comprehensive approach to mitigate and prepare for wildfires, as well as to 

advance our climate goals. That said, the most vexing public policy challenge 

addressed in this Report is the equitable distribution of wildfire liability. The Report sets 

forth three concepts to address this central question--the imminent wildfire liability issues 

facing California’s utilities--each as described further in Part 3: 

 Concept 1: Liquidity-Only Fund. This concept would create a fund to provide 

liquidity for utilities to pay wildfire damage claims pending CPUC determination of 

whether or not those claims are appropriate for cost recovery and may be coupled 

with modification of cost recovery standards. 

 Concept 2: Changing Strict Liability to a Fault-Based Standard. This concept 

would involve modification of California’s strict liability standard under inverse 

condemnation to one based on fault to balance the need for public improvements 

with private harm to individuals. 

 Concept 3: Wildfire Fund. This concept would create a wildfire fund coupled 

with a revised cost recovery standard to spread the cost of catastrophic wildfires 

more broadly among stakeholders. 

California needs to think creatively to find new ways to apportion the cost of 

catastrophic wildfires—ones that treat victims fairly and compassionately, that are 

sustainable for consumers, and that spread the burden equitably. 

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Part 1: Catastrophic Wildfire Prevention and Response 

Catastrophic wildfires pose an urgent threat to lives, property, and resources in 

California. The 2017 and 2018 wildfire seasons were the most destructive in California’s 

history.11 More than 9,000 wildfires ignited across California in 2017 and 7,571 wildfires 

ignited in 2018, burning more than 2.8 million acres combined.12 These fires caused the 

loss of 139 lives and destroyed tens of thousands of homes and businesses.13 They also 

poisoned the air across vast swaths of the state and harmed public health.14 

Additionally, catastrophic wildfires compounded the challenge of reducing our 

greenhouse gas emissions by emitting millions of carbon particles into the air.15 

Climate change, widespread tree mortality, weak utility infrastructure, and the 

proliferation of homes in the WUI magnify the wildfire threat and place substantially more 

people and property at risk than ever before. 

Today, as illustrated in Figure-02 below, California’s WUI is home to approximately

4.5 million homes and 11 million people. 

Figure-02 

Number of Houses 

1,500,001 – 3,000,000 

Number of Houses in the WUI by State16 

500,001 – 1,000,000 

5,058 – 500,000 

1,000,001 – 1,500,000 

3,000,001 – 4,457,884 

11 CAL FIRE, Incident Information as of Jan. 24, 2018, http://cdfdata.fire.ca.gov/incidents/incidents_stats?year=2017 (last 

visited Apr. 10, 2019). 

12 Id. 

13 CAL FIRE, Top 20 Most Destructive California Wildfires, (Mar. 14, 2019), 

http://www.fire.ca.gov/communications/downloads/fact_sheets/Top20_Destruction.pdf (last visited Apr. 10, 2019); CAL 

FIRE, Top 20 Deadliest California Wildfires, (Feb. 19, 2019), 

http://calfire.ca.gov/communications/downloads/fact_sheets/Top20_Deadliest.pdf (last visited Apr. 10, 2019); CAL FIRE, 

Top 20 Largest California Wildfires, (Mar. 14, 2019), 

http://www.fire.ca.gov/communications/downloads/fact_sheets/Top20_Acres.pdf (last visited Apr. 10, 2019). 

14 STATE OF CALIFORNIA GOVERNOR’S OFFICE OF PLANNING AND RESEARCH, et al., California’s Fourth Climate Change Assessment:

Statewide Summary Report at 38, http://www.climateassessment.ca.gov/state/docs/20190116-StatewideSummary.pdf) 

(last visited Apr. 10, 2019). 

15 CALIFORNIA DEPARTMENT OF INSURANCE, New Analysis Shows 2018 California Wildfires Emitted as Much Carbon Dioxide as an 

Entire Year's Worth of Electricity (Nov. 30, 2018), https://www.doi.gov/pressreleases/new-analysis-shows-2018-californiawildfires-emitted-much-carbon-dioxide-entire-years) (last visited Apr. 10, 2019) (“Fourth Climate Assessment”).

16 CAL. DEP’T. INSUR., The Availability and Affordability of Coverage for Wildfire Loss in Residential Property Insurance in the 

Wildland-Urban Interface and Other High-Risk Areas of California: CDI Summary and Proposed Solutions, (Dec. 2017), 

http://www.insurance.ca.gov/0400-news/0100-press-releases/2018/upload/nr002-

2018AvailabilityandAffordabilityofWildfireCoverage.pdf (last visited Apr. 10, 2019). 

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More than 25 million acres of California wildlands are now classified as under very high or 

extreme fire threat, extending that risk to over half the state--a high-risk area that will 

likely grow over time.17 Decades of fire suppression have disrupted natural fire cycles 

and added to increased wildfire risk. 

Figure-03 

Proportion of Dwelling Units with High / Very High Average Risk Scores18 

Proportion of Dwelling Units with 

High/Very High Avg. Risk Scores (%) 

80.10% - 100.00% 

60.01% - 80.00% 

40.01% - 60.00% 

20.01% - 40.00% 

0.00% - 20.00% 

The state’s major study on climate impacts, the Fourth Climate Assessment, projects that 

California’s wildfire burn area likely will increase by 77 percent by the end of the 

century.19 The growing risk of catastrophic wildfires has created an imperative for the 

state to act urgently and swiftly to expand preemptive fire prevention and bolster 

wildfire response efforts to help protect vulnerable communities and reduce the severity 

of wildfires in our state. 

All levels of government, communities, utilities, and residents must share in this 

responsibility in order to better defend California from this devastating threat. 

17 See CALIFORNIA DEPARTMENT OF FORESTRY AND FIRE PROTECTION, Community Wildfire Prevention & Mitigation Report (Feb. 22, 

2019), http://www.fire.ca.gov/downloads/45-Day%20Report-FINAL.pdf (last visited Apr. 10, 2019). 

18 Ibid. 

19 Fourth Climate Assessment at 9. 

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Wildfire Reduction and Mitigation Action Plan 

Recognizing the need for urgent action, the Newsom administration has placed a high 

priority on fire prevention and recovery measures, as well as on identifying ways the 

state can become more resilient in the face of future fires. 

On January 9, the Governor issued Executive Order N-05-19, directing CAL FIRE to 

recommend immediate, medium and long-term actions to help prevent destructive 

wildfires. With an emphasis on taking immediate actions to protect vulnerable 

populations, and recognizing a backlog in fuels management, the Executive Order 

called for a strategic approach to focus actions on California's most vulnerable 

communities to realize the greatest returns on reducing risk to life and property in the 

most fire-prone areas of the state. 

To further augment fire prevention, the Governor signed a General Order in February 

rescinding previous authorization for California National Guard operations at the U.S.-

Mexico border and redeploying personnel to prepare for the upcoming fire season by 

supporting CAL FIRE in fire prevention and fire suppression efforts. 

The state needs to continue to build on this work with a focus on four specific areas: 

11. General Prevention and Fire Suppression 

12. Building Safer Utilities 

13. Emergency Response 

14. Land Use, Building Codes and Community Resilience 

General Prevention and Fire Suppression 

In response to Executive Order N-05-19, CAL FIRE released the Community Wildfire 

Prevention and Mitigation Report (CAL FIRE Report) on March 5. The CAL FIRE Report 

outlined a suite of actions to substantially reduce wildfire risk to 200 of California’s most 

vulnerable communities this fire season. 

On March 22, the Governor, citing the extreme peril posed by wildfire risk, issued an 

Emergency Proclamation directing CAL FIRE to immediately implement 35 emergency 

projects identified to protect lives and property. CAL FIRE will utilize existing funding 

totaling $30 million from the Forest Health and Fire Prevention Program to immediately 

execute the priority fuel reduction projects. 

The proclamation suspends certain requirements and regulations. To ensure 

environmental protection, CAL FIRE requested input from regulatory agencies, and will 

employ a set of best management practices designed to identify and avoid sensitive 

natural and archaeological resources. 

As discussed below, the state has numerous new initiatives to prevent and suppress fires. 

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Improving Vegetation Management and Forest Health 

After decades of disinvestment, the state has committed hundreds of millions of dollars in 

recent years to improve the health and resiliency of the state’s forests.

Despite these increases, much work remains to be done. Over the next five years, the 

state will commit over $1 billion for critical fuel reduction projects, to support prescribed 

fire crews, forest thinning, and other forest health projects. In addition, the Governor 

redeployed the National Guard to support fire prevention efforts and is proposing to 

expand the California Conservation Corps to focus on forest management. 

Since 2010, California has nearly doubled the number of acres treated annually by fuel 

reduction, and has tripled the number of acres treated by prescribed burning. However, 

these efforts—less than 33,000 treated acres in 2017-18—are dwarfed by the number of 

acres that require attention. California’s Forest Carbon Plan sets a goal of treating 

500,000 acres of private land every year. 

As the owner of 57 percent of California’s forestland, the federal government must do its 

fair share to reduce fire risk. Specifically, the Governor has joined the governors of 

Washington and Oregon to call for the federal government to double the investment in 

managing federal forestlands in our states due to the high-risk of wildfires.20 

Support for Regional Projects 

In March 2019, the California Natural Resources Agency and Department of Conservation 

announced the award of $20 million in block grants for regional projects to improve forest 

health and increase fire resiliency. The Regional Forest and Fire Capacity Program helps 

communities prioritize, develop and implement projects that strengthen fire resiliency. 

Suppression 

In recent years, the state has added additional year-round fire engines and firefighters 

to address longer, more severe fire seasons. The state has also launched a major 

initiative to replace Vietnam War-era helicopters with new state-of-the-art helicopters 

with enhanced firefighting capabilities. The Governor’s Budget proposes to further 

expand the state’s firefighting surge capacity by adding additional crews and engines.

The Budget also includes funding to operate C-130 federal air-tankers. 

To spur engagement from innovators in fire safety technologies and more effectively 

fight fires, Governor Newsom signed Executive Order N-04-19 to modernize the state 

contracting process for goods and technology systems. The “Innovation Procurement 

Sprint” will enable CAL FIRE to identify solutions to more effectively detect wildfire starts 

and predict the path of wildfires. 

20 Letter from Gov. Gavin Newsom to Pres. Donald J. Trump (Jan. 8, 2019), https://www.gov.ca.gov/wpcontent/uploads/2019/01/1.8.19-Joint-Letter.pdf 

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Figure-04 

Additional Recommendations on Prevention21 

Implement Additional Recommendations from the Community Wildfire Prevention and Mitigation 

Report: The strike force recommends that the following additional actions from the CAL FIRE 

Report be considered and, when appropriate, expedited. 

A. Create Incentives for Fuel Reduction on Private Lands 

 Small non-industrial private landowners make up approximately 25 percent of 

California’s forestland owners and managers, almost twice as much as privateindustrial 

forestlands. These private landowners may not have the resources to actively manage 

their forests and are subject to the same fire risk as other Californians. 

 The Board of Forestry and Fire Protection should consider changes in regulations, 

through an emergency rule-making process as needed, to encourage private 

landowners to engage in fuel reduction projects. 

B. Develop Methodology to Better Assess At-Risk Communities 

 The methodology used to identify priority projects provides a robust assessment of nearterm projects that can be implemented before the 2019 fire season. This methodology 

should serve as the basis for ongoing assessment methods to evaluate short- and longterm wildfire risk reduction strategies across the state, with specific attention to 

identifying vulnerable communities noting that long-term planning and decision-making 

efforts to reduce wildfire risk require consideration of additional factors, including more 

robust integration of climate risk factors into fire vulnerability assessments. 

 The Forest Management Task Force should establish an interagency team with 

experience in spatial analysis, technology support, environmental management, public 

health, climate change, and social vulnerability to develop the methodology 

enhancements needed to inform the long-term planning needs of both state and local 

agencies. 

C. Jumpstart Workforce Development for Forestry and Fuel Work 

 The California Natural Resources Agency should identify specific opportunitiesto 

develop and encourage workforce training programs. 

 The goal should be to increase the number of properly trained and compensated 

personnel, with an emphasis on providing opportunities for local residents, available to 

perform fuel reduction and forest management and restoration work in the private 

sector. These training programs should be implemented before the end of 2019. 

D. Develop a Mobile Data Collection Tool for Project Reporting 

 The California Natural Resources Agency should procure a mobile fuel reduction data 

collection application to be used by all land management departments and agencies 

to increase accuracy and ease of data collection in the field. 

21 See CALIFORNIA DEPARTMENT OF FORESTRY AND FIRE PROTECTION, Community Wildfire Prevention & Mitigation Report (Feb. 22, 

2019), http://www.fire.ca.gov/downloads/45-Day%20Report-FINAL.pdf (last visited Apr. 10, 2019. 

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E. Develop a Scientific Research Plan for Wildfire Management and Mitigation, with 

Funding Recommendation 

 The Forest Management Task Force should develop a research plan withprioritized 

funding. 

 Topics that should be considered include: 

 Leverage the Governor’s Request for Innovative Ideas (RFI2). 

 Best management practices in the face of a changing climate and developing an 

understanding of forest health and resilience. 

 Use of LIDAR, satellite, and other imagery and elevation data collection, processing 

and analysis for incorporation into state management plans and emergency 

response. 

 Funding for collaborative research to address the full range of wildfire-related 

topics. Important research investments could include both basic and applied 

research as well as social science to better understand social vulnerability, human 

behavior, land use, and policies that support resilience in communities that coexist 

with fire and mitigate impacts on life and property. 

 Research and development on new WUI building test standards in futureresearch 

programs including the use of damage inspection reports from recent fires. 

F. Develop Models and Best Management Practices for Evacuation Planning 

 CAL FIRE and the Governor’s Office of Emergency Services (Cal OES) and the 

Standardized Emergency Management System Advisory Committee should develop 

robust local evacuation planning models for high or very high Fire Hazard Severity Zones 

based upon best practices from within California. 

Explore Public Private Partnerships and Capital Investment in Forest Waste Management 

Businesses: Public-private partnerships that find secondary uses for forest waste and increase 

fuel reduction can be a constructive part of the solution. Fostering innovation and 

entrepreneurship, these could include biomass facilities, especially those that use the energy 

on-site or as an “alternate fuel” for electric vehicles, cross-laminated timber using beetle kill 

wood, wood chips or pellets, or composting practices for soil restoration. 

Expanding small scale businesses around forest waste, like micro-mills or carpentry using “Alpine 

Blue” (beetle kill) wood, will help scale-up forest treatment on small, private land. The strike 

force recommends that the Natural Resources Agency explore how best to facilitate these 

types of partnerships, recognizing the critical role they play in both forest management and 

community economic development. 

Building Safer Utilities 

The state’s most destructive wildfires have been sparked by utilities. Electrical fires tend 

to ignite during extreme wind events in remote areas with limited access for first 

responders. To reduce the overall risk of catastrophic wildfires for vulnerable 

communities, public and private utilities must make needed investments in grid 

hardening, vegetation management, and fire detection technologies. 

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Current Process for Utility Safety Investment 

Regulatory review of safety investments follows the same general approach as discussed 

in Part 4 of this Report. Historically, this meant that investment in fire safety and mitigation 

was driven largely by the utilities. The California Public Utilities Commission (CPUC) 

adopted safety regulations for overhead electrical systems in Rule 35 of CPUC General 

Order 95. Utilities were required to comply with those regulations but set their own 

priorities for safety investment. 

This largely utility-defined fire mitigation program resulted in inconsistencies in investment 

among the state’s investor-owned utilities. SDG&E engaged in a robust fire mitigation 

and safety program after experiencing devastating fires in its service territory in 2007 and 

has become a recognized leader in wildfire safety. 

More recently, SCE implemented a wildfire safety program designed to mitigate the 

challenges of wildfires, including the development of operational practices and 

inspections, vegetation management activities, and community outreach. 

PG&E has begun to implement wildfire safety measures, but its efforts lag behind the 

other IOUs, which is particularly troubling given that it serves 40 percent of California’s 

utility customers and many counties in high-risk areas. 

CPUC and Wildfire Mitigation Plans 

As the scale of utility-sparked wildfires increased, the CPUC, through statutory changes 

and on its own initiative, increased oversight of utility wildfire mitigation efforts. Each IOU 

is now required to prepare and submit a wildfire mitigation plan (WMP) annually to the 

CPUC for review and approval.22 The CPUC, in consultation with CAL FIRE, will evaluate 

the WMPs.23 As part of this process, the CPUC held a public workshop and two days of 

technical workshops on wildfire mitigation. A comparison of the WMPs submitted by 

PG&E, SCE and SDG&E is attached as Annex A to this Report. The CPUC expects to 

approve the WMPs in May 2019 and thereafter oversee compliance with the WMPs. The 

CPUC intends to develop and refine the content of and process for review and 

implementation of wildfire mitigation plans to be filed in future years. 

While substantial efforts are underway to build safer utilities, the strike force has identified 

areas for immediate improvement. 

Recommendations 

Establish a More Rigorous WMP Process: The WMP requirements should be revised to 

include a section on long-term fire management and a process to ensure faster 

compliance with the proposed plan. WMPs should also include specific performancebased risk mitigation metrics that are independently and scientifically verified as well as 

22 Cal. P.U.C. § 8386. 

23 The IOUs that are required to submit WMPs are PG&E, SCE, SDG&E, Liberty Utilities/CalPeco Electric, Bear Valley Electric 

Service, and Pacific Power. 

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cost-effective. Further, to hold IOUs accountable, California should consider putting in 

place an auditing system tied to financial incentives. 

 Safety Incentives: Consider other CPUC reforms to better align IOU incentives with 

safety, including: 

 Adjust the allowed return on equity (ROE) based on wildfire safety performance 

 Align compensation and stock options of executives with wildfire safety 

performance 

 Make Board composition contingent on wildfire safety performance 

 Require Board-level reporting to CPUC on wildfire safety issues 

 Invest in Technology and Innovation: New technologies, including weather stations, 

drones, and artificial intelligence have tremendous potential as tools to more 

effectively prevent, detect and respond to wildfires. The CPUC convened the state's 

first Wildfire Technology Innovation Summit in March 2019 to gather national and 

international thought leaders and practitioners from state and local governments, 

academia, industry and other areas to inform and collaborate as to innovative 

technological solutions to wildfire risk, including: 

 Statewide deployment of weather stations and cameras paired with 

meteorology and fire behavior modeling 

 Artificial Intelligence-based visual recognition technology to analyze satellite 

imagery to determine fuel conditions and vegetation risks in proximity to utility 

lines 

 Fire modeling tools to support all fire departments and emergency responders 

across the state 

 Machine learning and automation inspections for increased safety assurance 

and regulatory compliance 

 Widespread adoption of aerial patrols, LIDAR and advanced imaging for 

vegetation management and utility infrastructure inspections 

 Update Models to Reflect Climate Change: Climate change has rendered many 

assumptions about California’s climate outdated. Historical records for humidity, 

wind, rain, and temperature are regularly broken. CPUC regulations—such as 

General Order 95 governing electrical lines—are premised on historical climate 

trends which may no longer be accurate. The state should work with experts to 

update their models on climate change, using the existing Adaptation 

Clearinghouse and Climate Assessment process as a central location for data, maps, 

and information. The state should also facilitate cross-learning with utilities, which 

often make capital investments in physical infrastructure over decades. 

 More Cost-Effective Financing for Wildfire Mitigation Safety Investments: A critical 

element of mitigating utility-sparked wildfires is substantial and immediate investment 

in electrical grid safety. The state may be able to mitigate the rate impact of this 

investment by offering a lower cost financing alternative through a dedicated rate 

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stream. Where IOUs fall behind on making needed investments, a reduced return on 

equity for this deferred maintenance can further reduce ratepayer impact. 

Emergency Response 

In a matter of hours, 52,000 people from rural Paradise and surrounding communities 

evacuated onto roads built for a fraction of that capacity and converged on Chico, 

overwhelming the recovery system. The scale and speed of catastrophic, wind-driven 

wildfires, like the Camp Fire, incapacitate existing emergency response systems, local 

infrastructure and planned recovery efforts. Many California communities designed their 

fire emergency response and recovery systems decades ago, using old technology and 

outdated fire modelling. A clear overhaul of the California emergency response systems 

and the underlying infrastructure is needed. 

The lack of broadband in rural communities and access to cell service make it difficult to 

communicate clear emergency evacuation orders to residents or locate residents who 

are in trouble. Roads in rural counties were often designed around old gold-rush tracks 

that were not designed to accommodate the number of residents using those roads, the 

ability of emergency vehicles to access the roads, or the need for defensible space. 

Evacuation plans assume that residents can evacuate and do not identify safe havens 

and shelter-in-place options for residents. 

The state should partner with local government to encourage updates to local 

emergency plans, to increase resident awareness of those plans, and to otherwise 

improve emergency prevention and response efforts. Further, the state should 

encourage local governments to adopt recently issued guidelines to improve 

communications during an emergency. 

On February 13, the Governor signed AB 72 (Assembly Committee on Budget, Chapter 1, 

Statutes of 2019), which appropriated $50 million for an emergency preparedness 

campaign focused primarily on California’s most vulnerable populations, including the 

elderly, disabled, and those in disadvantaged communities. The California for All 

Emergency Preparedness Campaign—a joint initiative between California Volunteers 

and Cal OES—will augment the efforts of first responders by ensuring at least one million 

of the most vulnerable Californians are connected to culturally and linguistically 

competent support. 

The Emergency Preparedness Campaign will provide: 

 $24.25 million in grants to community-based organizations across the state to prepare 

residents for natural disasters through education and other resources designed to 

bolster resiliency. 

 $12.6 million to support community efforts to build resiliency and respond to disasters 

by dispatching expert disaster teams to key regions and expanding citizen 

emergency response teams (CERT). 

 $13.15 million to assist community groups in the development of a linguistically and 

culturally appropriate public awareness and outreach campaign, directed 

specifically at the most vulnerable California communities. 

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Recommendations 

 Governor’s Emergency Preparedness Summit: By the end of June 2019, Cal OES, in 

partnership with the League of California Cities and the California State Association 

of Counties, will convene first responders, government agencies, local governments, 

community residents, and technical experts to develop plans for the state’s

emergency preparedness. The summit will highlight best practices of local 

communities, share resources that have worked around the world, and develop the 

networks necessary for ongoing preparedness improvements. 

 Develop Models and Best Management Practices for Evacuation Planning: Cal OES, 

in collaboration with CAL FIRE, the Standardized Emergency Management System 

Advisory Committee, and local governments should develop evacuation planning 

models for high or very high Fire Hazard Severity Zones based upon best practices. 

These models can be a tool for local governments to use when developing location 

specific evacuation plans. Cal OES should consider how adoption of these models 

can be incorporated into County Operational Area plans of jurisdictions that also 

receive FEMA program grant dollars. 

 Develop Methodology to Better Assess Communities At-Risk: The Forest 

Management Task Force should establish an interagency team with experience in 

spatial analysis, technology support, environmental management, public health, 

climate change, and social vulnerability to develop methodology improvements to 

inform the long-term planning needs of both state and local agencies. 

Land Use, Building Codes, and Community Resilience 

According to the Fourth Climate Assessment, the average area burned statewide will 

increase by an estimated 77 percent by 2100. At the same time, the housing 

affordability crisis is forcing more Californians to move farther from urban areas, and 

often into high-risk areas. An additional outcome of these land use patterns is the yearby-year increase in driving, or “vehicle miles traveled” (VMT), which in turn increases 

carbon emissions and vehicle pollution across the states. California’s housing 

affordability crisis is increasingly fueling the dangers of climate change and wildfire. 

Reducing fire risk to these areas will require changes in how higher-risk areas are 

designed, planned, built, served by utilities, and allowed to grow, and will require people 

across the state to participate in the solution. 

The Governor has made housing production and affordability a key priority. California 

already has strong standards to reduce VMT. The strike force recommends that at the 

state and regional level, governments and planners incorporate CAL FIRE’s fire risk 

projections and the fire projection information in the Adaptation Clearinghouse and 

Fourth Climate Assessment into short-term and long-term planning, and begin to deprioritize new development in areas of the most extreme fire risk. In turn, more urban and 

lower-risk regions in the state must prioritize increasing infill development and overall 

housing production. 

California has made progress in developing and adopting stringent wildland building 

codes. Since 2008, new construction in California’s wildlands must use ember-resistant 

building materials. For homes built before the 2008 standards, CAL FIRE is working to 

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develop a list of low-cost retrofit steps homeowners can take. In addition, the Office of 

the State Fire Marshal (OSFM) maintains an advisory committee of fire and building 

officials that continuously considers building code updates to improve fire safety. Most 

recently, OSFM advanced building code changes including sealing of garage door 

gaps, sealing skylights and safety improvements to outbuildings. 

Developing new housing in Very High Fire Hazard Severity Zones presents challenges. 

Since 2015, CAL FIRE has assisted local governments in land use planning. CAL FIRE is 

working to identify subdivisions at significant fire risk without secondary evacuation routes 

and to make recommendations to improve access. 

Homeowners are encouraged to actively maintain defensible space, which is defined 

as a minimum 100-foot area around a home. Maintenance is an ongoing task. California 

inspected more than 217,600 homes for defensible space compliance in 2017-2018 

alone. 

It is critical that roads and other infrastructure be more fire defensible and evacuation 

ready for the populations in the WUI. All levels of government must establish clear 

contingency plans with local communities to identify and create temporary refuge 

areas and shelter-in-place procedures to help fire evacuees survive when unable to 

escape a wildfire. 

Cal OES, in coordination with local communities and the Standardized Emergency 

Management System Advisory Committee, should consider developing local 

evacuation planning models for high or very high fire hazard severity zones based on 

best practices in California. 

Recommendations 

 Prioritize Building In Less Fire-Prone Areas: The strike force recommends that at the 

regional level, governments and planners incorporate CAL FIRE’s fire risk projections 

and the fire projection information in the Adaptation Clearinghouse and Fourth 

Climate Assessment into short- and long-term planning, and consider how to 

encourage more urban and lower-risk regions in the state to provide an alternative 

for those otherwise shut out of the state’s housing market. 

 Local General Planning: The strike force recommends that the safety element of 

local general plans be strengthened in high-risk areas, specifically for local 

governments to include fire risk projections into general and specific plans, including 

through zoning and design standards. Additionally, OPR should prioritize providing 

technical assistance support to these communities, many of which are rural and lack 

planning resources. 

 Cost-Effective Home Retrofits: While California has stringent building standards and 

requirements for defensible space, the intensity of the wildfire threat in California now 

warrants higher levels of fortitude. 

 CAL FIRE should consider options to encourage cost-effective home 

hardening to create fire resistant structures within the WUI and with a focus on 

vulnerable communities. 

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 The Forest Management Task Force should work with the Department of 

Insurance to seek input from the insurance industry on potential rebates or 

incentives for homeowners. 

 CAL FIRE and the Department of Housing and Community Development 

should develop a list of low-cost retrofits that provide comprehensive fire risk 

reduction to protect structures from fires spreading from adjacent structures or 

vegetation and to prevent vegetation from spreading fires to adjacent 

structures. 

 Consideration should be given to implementing a funding mechanism to assist 

individuals with cost-effective home retrofits. The model used by the California 

Earthquake Authority provides an example of such a mechanism. 

 Defensible Space and Forest and Rangeland Protection: Compliance and 

enforcement is key to ensure that defensible space standards are met. CAL FIRE 

should review and make recommendations to increase defensible space. 

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Part 2: Mitigating Climate Change through Clean 

Energy Policies 

California’s recent experience with catastrophic wildfires confirms the critical

importance of climate change mitigation efforts. As discussed in Part 1 of this report, the 

devastating impacts of climate change, predicted for years, are now a reality. As the 

state moves quickly to respond to these impacts and become more resilient, we must 

remain focused on addressing climate change through clean energy policy. 

The state’s IOUs have played a significant role in moving California away from fossil

fuels—from enabling the renewable energy markets to mature with continuing 

decreasing costs to carrying out energy efficiency mandates and demand response 

and storage programs. While other retail providers have entered the energy market and 

helped advance clean energy, IOUs still play a critical role in the state’s efforts to

address climate change. To continue the state’s progress in reducing greenhouse gas

emissions in the energy sector, California needs investment-worthy IOUs. 

California’s efforts to mitigate and adapt to climate change must remain an 

overarching priority for the state and for the IOUs. Action must be taken to facilitate 

progress toward a 100 percent clean energy grid. We also must ensure that the state’s 

current system of oversight keeps up with the evolving energy market so that reliability, 

affordability, and continued progress toward California’s climate goals is not 

compromised. 

While working to increase carbon-free energy resources, utilities are also improving 

wildfire prevention and safety planning practices. Investments in safety at a level 

necessary to stay ahead of volatile climate conditions come at a cost, and this cost is 

being incurred at a time when maintaining low electricity rates is vital to meeting 

California’s climate goals, as the next steps in carbon reduction involve electrifying the 

transportation and building sectors of the economy. 

Safety investments have many benefits. A modern transmission and distribution system 

will create high-quality jobs and long-term economic stability, in addition to making us 

more resilient to the impacts of climate change and protecting the millions of residents 

living in fire-prone areas. 

Renewable Energy Development 

California has made extraordinary progress in meeting its energy sector climate goals. 

The state is a leader in replacing conventional forms of electric generation with cleaner 

sources using wind, solar, and other renewable resources instead of fossil fuels. Currently 

approximately 34 percent of retail electric sales are served by renewable resources and 

over 55 percent of sales are covered by carbon-free resources, including hydroelectric 

and nuclear energy. Figure-05 illustrates the progress toward renewable and carbonfree energy development. 

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Figure-05 

■ 

■ 

Actual 

Statutory Target 

II 

State Carbon-Free Energy 

Goals 

100% 

2045 

60% 

2030 

50% 

2026 

34% 

2018 

32% 

2017 

29% 

016 

26% 

2015 

25% 

2014 

22% 

2012 

22% 

2013 2

L---------------

California’s renewable energy industry is a powerful economic force in the state. Wind 

and solar energy projects brought over $70 billion in capital investments to California, 

establishing the state as a leader in renewable generation and spurring broader 

innovations.24 Future electrification of buildings and transportation offers even more 

benefits, as those sectors represent the most cost-effective opportunities to 

decarbonize.25 

Over $22 billion in clean technology venture capital funding was invested in California 

from 2007 to 2017.26 One 2015 study shows that from 2003-2014, approximately 52,000 

jobs were created in California due to the construction of renewable energy facilities.27 

The construction of those facilities also created and facilitated a number of indirect jobs 

and opportunities. In total, approximately 130,000 jobs were created. The study also 

projected that increasing California’s renewable portfolio standard to 50 percent could

24 AMERICAN WIND ENERGY ASSOCIATION, Wind Energy in California, 

https://www.awea.org/Awea/media/Resources/StateFactSheets/California.pdf (last visited Apr. 10, 2019); SOLAR ENERGY 

INDUSTRIES ASSOCIATION, Solar State By State, https://www.seia.org/states-map (last visited Apr. 10, 2019). 

25 California Energy Commission, Deep Decarbonization in a High Renewables Future, (June 2018), 

https://www.ethree.com/wp-content/uploads/2018/06/Deep_Decarbonization_in_a_High_Renewables_Future_CEC-500-

2018-012-1.pdf (last visited Apr. 10, 2019). 

26 NEXT 10, 2018 California Green Innovation Index (10th Ed.), (2016) (https://www.next10.org/sites/default/files/2018-cagreen-innovation-index.pdf (last visited Apr. 10, 2019). 

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27 UC BERKELEY LABOR CENTR., INST. FOR RESEARCH ON LABOR AND EMPLOY’T., Job Impacts of California’s Existing and Proposed

Renewables Portfolio Standard, (Aug. 2015), laborcenter.berkeley.edu/pdf/2015/job-impacts-ca-rps.pdf (last visited Apr. 

10, 2019). 

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create an additional 354,000 to 429,000 direct jobs from the construction of new 

renewable generation, and hundreds of thousands of indirect jobs and opportunities. 

Today, we have both a challenge and an opportunity: a challenge to continue progress 

toward 100 percent carbon-free energy generation and an opportunity to transform the 

state’s economy. During this transition period, we need to make sure we have effective 

tools and protections to manage costs to consumers, ensure reliability, and reduce risks. 

Challenges in the Evolving Electric Sector 

Maintaining Reliability with Less Centralized Control 

As more IOU customers install rooftop solar and storage, migrate to community choice 

aggregators (CCAs) and purchase energy from energy service providers (ESPs), IOUs are 

focusing on providing electric transmission and distribution service. New CCAs and ESPs 

are entering the market, acquiring energy in the wholesale market from electric 

generating companies, and selling energy to customers at retail. As a result, IOUs 

increasingly are becoming “poles and wires”--companies that are responsible for 

constructing, maintaining, and operating the facilities over which electric energy is 

delivered to customers. Figure-06 illustrates the CCA load growth over time. 

Figure-06 

CCA Load Growth Over Time28 Market Share by LSE Type28 

50,000 

GWh 

DCE 

40,000 

30,000 

20,000 

10,000 

PIO 

RCEA 

PCE 

LCE 

MCE 

SCP 

 

 

 

 

I I I IOUs CCAs Other 

10% 

27% 

2018 

64% 

0 

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 

MCE: MCE Clean Energy RCEA: Redwood Coast Energy 

SCP: Sonoma Clean Power PIO: Pioneer Community Energy 

LCE: Lancaster Choice Energy DCE: Dessert Community Energy 

Between rooftop solar, Community Choice Aggregators (CCAs) and Direct Access providers (ESPs), as much 

as 85% of Investor Owned Utility (IOU) retail electric load will be effectively unbundled and served by a nonIOU source or provider by the middle of the 2020s”.

The IOUs delivery electricity and perform other important functions, such as metering 

and billing (including collecting fees from consumers to fund certain public-interest 

programs). CCAs typically do not have credit ratings which can limit their ability to 

28 See UCLA Luskin Center for Innovation’s The Growth in Community Choice Aggregation, dated July 2018. CCA annual

load data from each CCA’s respective implementation plan. “Other” category represents the difference between the

California Energy Commission’s statewide load estimation and the IOU and CCA loads.

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obtain the financing necessary to enter into long-term contracts at the scale needed to 

achieve a zero-carbon grid by 2045 and to meet Resource Adequacy (RA) 

requirements. 

Meeting Provider of Last Resort (POLR) Obligations 

Customers who choose not to obtain retail service from a CCA or an ESP, or who may 

be subject to a failure by a CCA or ESP to provide service, currently are protected by 

the requirement that an IOU must step in to provide energy under the IOUs’ POLR 

obligation.29 If IOUs become primarily “poles and wires” businesses, it raises the question

as to whether the IOUs should continue to provide POLR service or whether another 

entity should assume this responsibility. 

Avoiding Significant Rate Increases and Addressing the Need for Investment 

Major investments will be needed in the electric transmission and distribution system in 

California to make the system less susceptible to wildfires, to otherwise modernize it, and 

to accommodate changes in generation and demand. It will be important to have 

financially strong utilities so they can attract the capital necessary to make these 

investments at low rates (since the cost of capital is passed along to consumers). 

Keeping capital costs down is particularly important in light of potential increases in 

other costs, including the cost of large wildfire liabilities. 

Continuing Progress in Reducing Certain Carbon Emissions 

As shown in Figure-07 below, California has made significant progress in reducing 

carbon emissions. In the energy sector, the IOUs have been instrumental in reducing 

carbon emissions. Their long-term contracts for renewable energy resources have driven 

prices down as new technologies have been deployed at commercial scale. Some 

CCAs have more aggressive renewable targets than the IOUs, and benefit from the 

early IOU renewables projects because they are benefitting from today’s lower solar

and wind energy prices. New CCAs are required to collect an adjustment charge from 

their customers to reflect the cost of older, long-term contracts that IOUs entered into on 

their behalf. 

29 The IOUs have a duty to provide distribution service on a non-discriminatory basis to the customers in their service territory. 

This currently includes the POLR obligation to sell energy at retail to those customers who opt out of obtaining service from 

a CCA. This POLR obligation also would extend to any situation in which a CCA or ESP were to cease providing service for 

some reason such as in the case of a bankruptcy. 

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million tonis. carbon dioxide (CO2) ,equivalent 

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Wildfires and Climate Change: California’s Energy Future

Figure-07 

California Greenhouse Gas Emissions by Sector30 

Distributed Resources 

California utilities provide a means to implement various Distributed Energy Resources 

(DER) initiatives throughout the state.31 California has experienced phenomenal growth 

in electric generation by customers on a distributed basis (in contrast to obtaining 

energy from large, central generating stations), particularly in the form of rooftop solar 

generation. In the future, it is expected that more customers will install battery storage on 

a distributed basis. 

Many of these programs grew as a result of state mandates carried out by IOUs. Few of 

the programs (with the notable exception of net energy metering) directly involve CCAs, 

ESPs or publicly-owned utilities (POUs). Additionally, the California Independent System 

Operator (CAISO) has developed an innovative mechanism to allow distributed 

resources to join together and bid into the wholesale market, providing revenue for 

distributed resources as well as a benefit to the electrical system. Distributed resources, 

however, contribute to the fragmentation of the energy supply, and need to be 

managed to ensure they continue to benefit the electricity system. 

Adapting to Intermittent Electric Generation 

Today, almost two-thirds of California’s renewable energy generation capacity is from

intermittent sources such as wind and solar. The output from these sources vary 

30 See U.S. Energy Information Administration, based on California Air Resources Board data. 

31 Those initiatives include (i) providing rebates to customers that install self-generation facilities or storage; (ii) these are 

funded by a charge that the IOUs collect from their consumers; mandating that IOUs (and to a lesser extent CCAs and 

POUs) directly procure battery storage technologies that connect at the distribution grid level; and (iii) developing pilot 

projects to test the ability of DER to offset the need to build new distribution lines; and developing programs within the RPS 

that target distributed solar resources. 

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Wildfires and Climate Change: California’s Energy Future

depending on the weather, season, and time of day. This imposes challenges on electric 

grid operations. Generation output from wind and solar sources is not controlled by the 

grid operator and can increase or decline rapidly, which requires adjustments in 

generation from other sources (or adjustments in demand) to keep supply in balance 

with demand. In particular, large amounts of low-cost solar electric generation during 

the middle of the day has created a situation where on some days there can be an 

overproduction of electricity and on many days generation from other sources must 

ramp up rapidly in the afternoon. 

Overproduction can be a good problem to have since that energy, coupled with the 

right policies, can be harnessed to electrify other parts of the economy, such as 

transportation and buildings. A diverse portfolio of renewable resources and policies, 

including time-of-use rates, demand response programs, storage, energy efficiency, 

increased regional coordination, and electric vehicle charging, will continue to be 

critical to reduce the need for the carbon-intensive resources generally used to meet 

the afternoon ramp and overnight demand. 

Reliability 

Several factors, including flat demand for electricity and growth in renewable energy 

generation, have contributed to substantial retirements of fossil-fueled electric 

generation (mainly natural gas). Stricter environmental standards have accelerated this 

trend. Yet flexible resources continue to be needed in the near term to quickly ramp up 

as solar generation resources go off-line or load increases, and during extended cloudy 

periods. Over the long-term, it will be critical to ensure that cost-effective clean energy 

resources are available for reliability and other grid services. 

Resource Adequacy Requirements 

California has responded to energy shortages in the past by requiring that load-serving 

entities (LSEs) contract to purchase sufficient electric generation (or distributed resources 

or storage) to meet their forecasted peak demand plus a pre-set reserve margin. 

Several factors caused some LSEs to experience difficulty meeting their RA 

requirements.32 Some LSEs have had to obtain temporary waivers from the CPUC and 

others have been penalized. Additionally, IOUs have taken on procurement of some 

resources needed for reliability that other LSEs may not want to procure. In some cases, 

the CPUC required IOUs to enter into long-term contracts needed for reliability, including 

contracts for battery storage. This option is less effective as IOUs have fewer and fewer 

retail customers. 

Maintaining Public Purpose Programs; Promoting Energy Efficiency and Demand 

Response. 

California has been a leader in energy efficiency, with electricity use per capita 

remaining virtually flat over the past four decades despite substantial economic growth 

32 Challenges in the RA market include (i) a growing number of LSE competing to buy the same existing resources, (ii) a 

shrinking pool of resources LSE can procure as the planned retirement dates of older natural gas plants approach, and (iii) 

the inability/unwillingness of LSEs to enter into long-term contracts for some needed resources. 

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Wildfires and Climate Change: California’s Energy Future

during that period.33 The state has had success with programs that align the incentives of 

utilities and consumers in using less energy, including programs providing financial 

incentives or rebates, incorporating efficiency requirements in various codes and 

standards, and providing education and technical assistance. 

Demand response programs, which provide incentives for customers to adjust their 

consumption during certain periods, have also been successful. Similarly, time-of-use 

rates provide incentives for customers to adjust their energy use to optimize renewable 

resources. New demand response programs are being developed that can increase 

loads at times when there is an abundance of solar generation. 

California has relied on the IOUs to implement public-purpose programs to fund energy 

efficiency and demand response, as well as reducing rates for low-income customers 

and renewable energy incentives. If the IOUs become “poles and wires” companies, it 

will be important to ensure that this change does not threaten these public-purpose 

programs. 

Electric Vehicle Integration 

A critical component of California's efforts to meet its goals to reduce carbon emissions 

is to replace vehicles that use gasoline or diesel fuel with electric vehicles or hydrogen 

vehicles. The CPUC and other agencies in California support this effort by promoting 

deployment of charging stations, providing rate incentives (encouraging charging at 

off-peak hours), and other programs. Growth in vehicle electrification will result in 

increases in electric consumption over time and further increase the dependence of 

Californians on the electrical grid and the utilities that own and operate it. Over half of 

California’s greenhouse gas emissions are from the transportation sector. Thus, the 

success of transportation electrification programs is essential to meeting the state’s 

climate goals, and will depend on electricity being clean and available, and a less 

expensive option to fuel vehicles than gasoline. This provides one justification, among 

many, for efforts to minimize increases to electric rates. Figure-08 illustrates the California 

vehicle forecast. 

33 Energy efficiency helps to reduce the need for electric generation, including from sources that emit carbon and other 

greenhouse gases. Targeted energy efficiency, as well as programs such as demand response and time-of-use pricing, to 

reduce energy use at periods of high prices or demand, contributes to a more reliable electric grid with less need for 

physical improvements to the grid. 

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Wildfires and Climate Change: California’s Energy Future

Figure-08 

California Electric Vehicle Adoption Forecast34 

Recommendations 

Evaluate Resource Adequacy Back-Stop Options Through the Legislative Process: 

Procurement by the IOUs, under supervision by the CPUC, has been effective over 

time. But as the state transitions to more LSEs, gaps and inefficiencies could emerge. 

To manage this transition, new procurement support models, including a new state 

procurement entity that could enter into long-term contracts, provide credit support 

or otherwise facilitate purchases of electric energy, should be explored. Procurement 

support could have a number of benefits, including providing back stop resource 

adequacy procurement and ancillary services needed to support reliability. To 

maintain cost-effectiveness and achieve rate benefits, it will be important to 

continue to focus on procurement through integrated resource planning or a similar 

framework. In addition, the POLR obligation discussed above and the responsibility 

for implementing public purpose programs could also be examined. 

 Increase Transparency for Load-Serving Entities and State Coordination of 

Procurement: Customers in California should have access to complete and 

accurate information about the energy they are procuring, regardless of whether the 

procurement is from an IOU, POU, CCA, or ESP. This should include transparent 

information about prices, compliance with resource adequacy requirements, and 

the sources of energy being procured (including reliance on renewable energy 

sources). To the extent that customers have a choice regarding their retail electric 

provider, transparency is required so that they are able to make informed choices. 

Of course, transparency also is required for the appropriate government agencies to 

34 See International Council on Clean Transportation, May 2018 Briefing. 

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Wildfires and Climate Change: California’s Energy Future

ensure compliance with applicable RPS, resource adequacy, and other 

requirements. Additionally, new programs or legislation may be needed for 

coordination of purchasing by CCAs and ESPs to ensure they continue to meet 

California’s standards for integrated resource planning, resource adequacy, clean 

energy progress, consumer protection, and hedging risk. 

 Addressing Variability in Generation and Consumption: Addressing variability in 

electric generation and consumption will require efforts on a number of fronts. The 

afternoon ramp—the period when solar and wind energy decline and demand goes 

up—is increasing. Traditionally, flexible resources, such as natural gas-fired 

generators, have been used to provide a reserve margin, to ensure that generation 

and consumption stay in balance, and to provide other ancillary services needed for 

reliability. In the near term, a limited number of natural gas resources are still needed. 

In the longer term, more innovative solutions will be required. Further progress in timeof-use rates, demand response programs, storage, energy efficiency, increased 

regional coordination, and electric vehicle charging can help to ensure that 

demand at any given moment is at a level that can be accommodated by the 

amount of available electric generation. Proper infrastructure and incentives can be 

developed to facilitate and encourage integration of electric vehicles into the 

electric system in a manner that can enhance reliability and reduce costs. The strike 

force recommends that the CPUC use its Integrated Resource Planning process and 

other related proceedings to address these issues. 

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25 ~ ----------------------------~ 

• Nominal overall losses 

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2010 2011 2012 2013 2014 2015 2016 2017 2018 

Wildfires and Climate Change: California’s Energy Future

Part 3: Fair Allocation of Catastrophic Wildfire Damages 

Climate change, forest management practices, and real estate development patterns 

in the WUI have dramatically increased the risk and magnitude of wildfire damage. All 

stakeholders, public and private, must invest in mitigation, suppression and emergency 

response to reduce the incidence of catastrophic fire and to protect lives and property. 

At the same time, communities need electricity—including communities in remote, high 

fire-risk areas. As long as electrical lines run through tinder-dry forests, California can 

mitigate but not eliminate utility-sparked fires. California also must support wildfire victims 

and communities as they work to rebuild. These often competing imperatives require a 

new policy framework to responsibly and fairly allocate the cost of wildfire damage in 

an era of climate change. No single stakeholder created this crisis, and no single 

stakeholder should bear its full cost. 

Developing workable solutions to equitably share the burden of compensating victims 

for wildfire damages is made more challenging by uncertainty regarding the future 

effects of climate change and the efficacy of mitigation efforts. The staggering wildfire 

damages of 2017 and 2018 highlight the potential severity of wildfires in the future. 

Figure-09 

Wildfire Damages35 

We do not know whether this magnitude of damage is a new normal, or if recent years 

were aberrational. Experts consulted by the strike force believe climate change, 

development patterns, deferred utility equipment maintenance, and other factors 

suggest much heightened risk going forward but predicting how much risk and how 

35 Climate Changes Increases Wildfire Risk 

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Wildfires and Climate Change: California’s Energy Future

consistently is more difficult. There is also uncertainty about the level of success we can 

expect in reducing the frequency and severity of wildfires. 

Another challenge to a durable solution is that liability for wildfires ignited by utility 

equipment is governed by California’s inverse condemnation law, which holds a utility

strictly liable for wildfire damages if the utility’s equipment ignites a wildfire, even if the 

utility’s design and maintenance of infrastructure were not unreasonable or negligent.

While a utility faces strict liability for all damages caused by its equipment, it can recover 

those costs through rates only by proving to the CPUC that its conduct was prudent. This 

regime—strict liability for wildfire damage coupled with uncertain ability to recover those 

damages in rates—increases the risk of bankrupt utilities, which in turn drives up costs for 

consumers, threatens fair recoveries for fire victims, undermines the state’s ability to

mitigate and adapt to climate change, and creates uncertainty for utility employees 

and contractors. 

Under the status quo, all parties lose – wildfire victims, energy consumers, and 

Californians committed to addressing climate change. Victims face a great deal of 

uncertainty and diminished ability to be compensated for their losses and harm. 

Customers face rising rates and instability. California’s ability to achieve its climate goals

is frustrated. Utility vendors and employees face uncertainty and likely significant losses. 

Bottom line --- utilities in or on the verge of bankruptcy are not good for Californians, for 

economic growth or for the state’s future.

Strike Force Deliberations 

The strike force has identified and intensively researched several approaches to address 

wildfire liabilities. Each of the approaches evaluated by the strike force has benefits and 

tradeoffs. 

Much work remains to be done to evaluate these concepts and determine which 

alternative or combination of alternatives will best support safe, reliable, and affordable 

energy for Californians, further clean energy goals, and enable fair treatment for wildfire 

victims. The strike force recommends that the Commission on Catastrophic Wildfire Cost 

and Recovery (SB 901 Commission) jointly appointed by the Governor and the 

Legislature, evaluate these concepts and report back to the Governor and the 

Legislature on its findings. 

Principles Underlying a New Approach to Stabilizing and Sharing Costs 

California’s approach to wildfire mitigation must be grounded in principles that further

the imperative to provide safe, reliable, and affordable power on a sustainable basis. To 

that end, the strike force has identified the following principles against which any 

proposal must be measured: 

1. Maintaining Safe, Reliable, and Affordable Power. California residents and businesses 

require a safe and reliable electrical system, the achievement of which requires 

ongoing investment in new equipment, systems, and workforce. At the same time, 

steep rate increases would have adverse consequences for consumers, businesses, 

and California’s climate goals. Thus, rate increases must be mitigated. 

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Wildfires and Climate Change: California’s Energy Future

2. Hold Utilities Accountable to Prioritize Safety. Any changes in the liability rules should 

provide incentives for utilities and their management to prioritize and invest in safety 

and impose penalties for failure to do so. Any changes also must continue to hold a 

utility’s shareholders—not its customers—responsible for failures to operate safely. 

3. Treat Wildfire Victims Fairly. California wildfire victims deserve fair disposition of their 

claims so that they can move forward with their lives. 

4. Require Equitable Stakeholder Contributions. The burdens of wildfire damages 

brought on by climate change are too great to be borne by any one stakeholder. 

A fair distribution of the burden requires utilities (ratepayers and investors), insurance 

companies, local governments, and attorneys representing victims to contribute. 

5. Reduce Overall Costs. We must reduce wildfire damages as well as the financial 

claims that arise from them. This means prioritizing and paying for safety. It also 

means structuring the process by which claims are made and paid to assure the 

highest proportion of resources to pay for the actual losses victims suffer. And it 

means not creating a “free rider” problem or creating incentives for people notto 

act responsibly (e.g. by not properly insuring property against the risk of fire 

damages). 

6. Promote California’s Clean Energy Goals. Any solution must be consistent with 

California’s long-term climate and clean energy goals and minimize the risk that 

wildfire liabilities will prevent utilities from having the resources to advance those 

goals, both in the near-term and over time. 

7. Recognize the Contribution of Taxpayers. As described elsewhere, taxpayers have 

substantially increased their contribution to mitigating fire risk and fighting fires when 

they ignite. Any consideration of a fair burden of costs must recognize the 

substantial contribution the state and its taxpayers have already made and are 

continuing to make. 

Current Framework for Allocating Costs of Utility-Caused Wildfires 

In California, when a utility’s equipment causes a wildfire, the utility may be held liable to

pay for damages through (1) inverse condemnation lawsuits for property damages36 

brought by property owners or insurance companies (which seek compensation for 

payments they make to insured property owners); (2) tort lawsuits by a harmed party; 

and/or (3) recovery of fire suppression costs from third parties.37 California’s application

36 Inverse condemnation is limited to property damage caused by utility equipment, so not all utility wildfire liabilities are 

actionable under inverse condemnation. For example, wildfire liabilities caused by a utility company employee, rather 

than utility equipment, are not recoverable under inverse condemnation. In practice, litigation pursuing subrogation 

recovery will include multiple liability theories, including inverse condemnation, some of which apply a strict liability 

standard and some of which apply other standards, such as negligence. 

37 When a utility is found to be a cause of a wildfire, the utility can be required to pay for three primary types of losses: (i) 

property damage and damages for personal injury, death, and related impacts, (ii) suppression expenditures incurred by 

government entities, including Cal FIRE and the United States Forest Service, and (iii) other economic and natural resource 

damages. The first two categories are direct costs (e.g. damage to structures, fire-fighting expenditures, injury and 

mortality) and are well defined, whereas the third category represents indirect damages (e.g. business interruption, 

temporary housing costs). 

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Wildfires and Climate Change: California’s Energy Future

of inverse condemnation to utilities places 100 percent of the cost of wildfire property 

damage on a utility if its equipment caused the fire—regardless of fault and without 

consideration of the contributing role of climate change, forest management, land-use 

policies and other factors. 

California is unique in extending the concept of inverse condemnation to IOUs.38 

Nonetheless, California courts have reasoned that “the nature of the California 

regulatory scheme demonstrates that the state generally expects a public utility to 

conduct its affairs more like a governmental entity than a private corporation.”39 The 

primary purpose of inverse condemnation is to spread costs to relieve individuals from 

bearing a disproportionate share of the economic burden of a governmental action. 

Inverse condemnation claims have two unique features that create challenges for 

California’s IOUs:

1. Fault is Irrelevant. In an inverse condemnation claim, the plaintiff need not allege or 

prove that the utility behaved unreasonably or negligently. An entity may be held 

strictly liable for damages so long as the plaintiff proves that the utility was a 

substantial cause of such damage--even if it was only one of several concurrent 

causes. 

2. Attorney’s Fees and Expenses are Part of the Claim. The California Code of Civil 

Procedure provides that in any inverse condemnation proceeding the plaintiff is 

entitled to recover the reasonable costs, disbursements, and expenses, including 

reasonable attorney’s fees and expert costs.40 These costs can besubstantial. 

The combination of strict liability and statutory attorney’s fees exposes California utilities

to significant potential liabilities. 

Insurance companies play an important role in the practical application of inverse 

condemnation to utilities in California. Insurance companies write insurance and collect 

premiums to cover property owners for fire losses. In the event of a fire, the insurance 

company pays an insured property owner’s claim and absorbs the loss. If the fire was

ignited by a utility’s equipment, the insurance company seeks reimbursement from the 

utility for the damage claim it paid to homeowners, typically through an inverse 

38 Only Florida and Alabama have applied the doctrine of inverse condemnation to utility companies and only Alabama 

has extended the doctrine to privately-owned utilities. Similar to California, under Alabama law, a non-governmental 

entity can be subject to a claim for inverse condemnation. As such, in Schultz v. SE. Supply Header, LLC, No. CA 09-0055-

KD-C, 2009 WL 3075671 (S.D. Ala. Aug. 20, 2009), the property owners' claim for inverse condemnation against the private 

utility company did not fail by virtue of the utility company's non-governmental status. In that case, the property owners 

gave the utility company a permanent easement to their property for the installation of a natural gas pipeline to run 

underground, but in the process of construction, the utility company flooded the property and caused the property 

owners' septic system to malfunction, reducing the property to a swamp. Since the utility company was expressly 

authorized to exercise the power of eminent domain for installation of the natural gas pipelines, the property owners 

could avail themselves of the remedy of inverse condemnation for damage of the property by the company. 

39 Barham v. Southern California Edison Company, 74 Cal. App. 4th 744, 753 (1999). 

40 CA Civ. Pro. Code § 1036 (2017). 

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Wildfires and Climate Change: California’s Energy Future

condemnation claim.41 These claims from the insurance company are known as 

subrogation claims.42 

Cost Recovery and Wildfire Damages 

While a public utility found liable under inverse condemnation spreads the costs by using 

its rate-setting power to pass the costs to customers, investor-owned utilities can recover 

inverse condemnation damages in rates only if the CPUC separately determines that 

they may do so. California law requires that any rates charged by a utility must be “just 

and reasonable”. 43 A utility may pass through and recover non-routine costs as a result 

of third-party litigation or inverse condemnation only if the IOU demonstrates to the 

CPUC that it acted reasonably and prudently (i.e., met a “prudent manager”

standard).44 

To meet this prudent manager standard in the context of extraordinary wildfire 

expenses, the CPUC requires that a utility affirmatively prove that it: (1) behaved 

reasonably and prudently in managing its facilities before and during the fire and 

(2) behaved reasonably and prudently in settling any litigation claims, if applicable. 

The CPUC has wide latitude as to the applicable evidentiary standard—typically 

applying a preponderance of the evidence standard—which generally requires 

evidence that “when weighed with that opposed to it, has more convincing force and 

greater probability of truth.”45 

Recent Application of Utility Wildfire Cost Recovery Standards 

In October 2007, three large wildfires occurred in the service area of SDG&E. The ignition 

of those fires was attributed to the company’s equipment. After 7 years of litigation,

SDG&E settled legal claims for $2.4 billion in costs and legal fees to resolve third-party 

damages arising from the fires. After collecting from other responsible parties and under 

liability insurance policies, SDG&E sought recovery from ratepayers for the remaining 

41 Inverse condemnation is limited to property damage caused by utility equipment, so not all utility wildfire liabilities are 

actionable under inverse condemnation. For example, wildfire liabilities caused by a utility company employee, rather 

than utility equipment, are not recoverable under inverse condemnation. In practice, litigation pursuing subrogation 

recovery will include multiple liability theories, including inverse condemnation, some of which apply a strict liability 

standard and some of which apply other standards, such as negligence. 

42 Generally, insurance company subrogation recoveries are not 100 percent reimbursement for claims paid to property 

owners. Limited public information suggests that subrogation settlements equal about 50 percent of the claim. 

Specifically, SCE’s general auditor stated that wildfire subrogation claims have in the past settled at “historical levels” of 

“around 50 percent” at a meeting of the Commission on Catastrophic Wildfire Cost and Recovery on April 3, 2019.

43 CAL. P.U.C § 451. 

44 The prudent manager standard means that “at a particular time any of the practices, methods, and acts engaged in

by a utility follow the exercise of reasonable judgment in light of facts known or which should have been known at the 

time the decision was made.” The prudent manager standard is a standard of care that demonstrates all actions were 

well planned and properly supervised and all necessary records are retained. See See In re: San Diego Gas & Electric 

Co., Order Denying Application for Decision 17-11-033 at p.5 (Cal. Pu. Util. Comm’n) (Nov. 30, 2017).

45 Decision Implementing a Safety Enhancement Plan and Approval Process, Decision 14-06-007 [D.14-06-007] 

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Wildfires and Climate Change: California’s Energy Future

$379 million in damages it had paid. In October 2017, the CPUC denied SDG&E’s

request, ruling that the utility had not met required standards of prudency.46 

The CPUC decision in the San Diego case was the first time a utility had incurred costs 

that exceeded its insurance coverage. The decision raised concerns in the capital 

markets that investors in California utilities were more exposed to wildfire liabilities than 

previously thought. 

In late 2017, shortly after the CPUC’s decision in the San Diego fires, California suffered 

one of its worst wildfire seasons on record. Combined, these events created uncertainty 

in the capital markets regarding the safety of investing in California utilities. 

Senate Bill 901 (Dodd, Chapter 626, Statutes of 2018) (SB 901) 

After the utility market destabilization, California enacted SB 901, which requires the 

CPUC to consider “conduct of the electric grid and relevant information submitted into 

the commission record” when determining whether a utility is permitted to recover costs 

related to wildfires. The statute outlines 12 categories of information for consideration, 

which are set forth on Annex B. SB 901 also incorporated a “stress test” that provided the 

CPUC additional flexibility to allow utilities to recover their costs in respect of wildfire 

liabilities from ratepayers where the denial of cost recovery could negatively impact the 

IOUs’ financial condition.

In a cost recovery action, the CPUC must first find that utility equipment ignited the 

wildfire. Then the CPUC must determine whether the utility acted prudently both in the 

behavior causing the wildfire and in the settlement of any claims. If it acted prudently, 

the utility may recover the costs by charging higher rates to customers. If it did not act 

prudently, the utility would be required to bear those costs itself, in effect by reducing 

the returns paid to its equity investors. SB 901 attempted to provide the CPUC guidance 

on application of the cost recovery rules that would create more certainty around cost 

recovery. 

After passage of SB 901, the credit rating agencies (Moody’s, Standard & Poor’s and 

Fitch) immediately began to downgrade California’s three large IOUs, opining that the 

measure failed to adequately address the risks to the utilities’ financial health posed by 

inverse condemnation. Two months later, the Camp Fire occurred. Two months after 

that, PG&E stated its intention to seek chapter 11 bankruptcy protection. 

The rating agencies followed with an additional series of downgrades that now leave SCE 

and SDG&E with close to non-investment grade ratings. 

46 See Order Denying Application [D. 17-11-033] (Cal. Pu. Util. Comm’n) (Nov. 30, 2017); Order Denying Rehearing of

Decision (D.) 17-11-033 [D. 18-07-025] (Cal. Pub. Util. Comm’n) (July 12, 2018); Order Denying Writ for Review, No. D074417,

Cal. Ct. of Appeal, 4th District, Div. 1 (Nov. 13, 2018) 

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Increasing wildfire risk coupled with uncertainty surrounding cost recovery for wildfire liabilities has 

resulted in credit ratings downgrades for all California IOUs 

S&P Ratings 

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Pacific Gas and Electric [PG&E) -- Southern California Edison [SCE) -- San Diego Gas & Electri c [SDG&E) 

0 

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C=:J Investment Grade C=:J Non-investment Grade 

: Ratings below BBB- (S&PI or Boa3 (Moody's) are considered non-investment grade , 

·-----------------------------------------------------------------------------------' 

October, 2017 - Tubbs Fire, the second most destructive 

wildfire in California history, burns 36,810 acres 

September 24, 2018 - Former Governor Jerry Brown signs SB 

901 as an attempt to address outstanding wildfire liabilities 

e 

e 

November, 2018 - Camp Fire, the most destructive wildfire in 

California history, burns 153,336 acres 

January 14, 201, - PG&E announces its intent to file for bankruptcy, 

providing the required IS day advance notice to their employees 

Sou1ce: Moody's and S&P. 

Wildfires and Climate Change: California’s Energy Future

Figure-10 

Ratings downgrades increase utilities’ cost of capital (including capital raised for 

investment in fire mitigation and safety) and those additional costs are generally passed 

on to consumers. 

The capital markets concluded that too much uncertainty regarding cost recovery 

remained following passage of SB 901. Their key concerns were that it left the CPUC with 

extensive discretion to determine whether catastrophic wildfire damages could be 

passed through to the ratepayers.47 In addition, investors raised concerns that SB 901 did 

not address the significant time period between the occurrence of a catastrophic 

wildfire, the payment of damages arising from that wildfire, and the CPUC’s final

47 California’s cost recovery process contrasts with the framework employed for federally-regulated transmission rates by 

the Federal Energy Regulatory Commission (FERC). Pursuant to section 205 of the Federal Power Act (FPA), public utility 

rates for transmission services in interstate commerce must be “just and reasonable,” which includes a requirement that

the utility is prudent in incurring costs. This statutory standard is similar to the standard in the California Public Utilities Code, 

however, FERC applies the standard differently than the CPUC applies its similar statutory standard. In practice, FERC 

generally presumes that a utility’s expenditures have been prudent unless a third party raises a formal complaint that

casts a serious doubt on the utility’s prudency, in which case the utility has the burden to prove that its conduct and 

expenditures were prudent. FERC will consider a utility’s conduct prudent if the utility acted as any other reasonable utility 

in its position would have acted, given the same circumstances and the same facts known to the company at the time. 

FERC precedent in evaluating the prudency standard affords considerable latitude as FERC, in reviewing a decision, does 

not look for a single correct result or require the evaluation of every possible alternative. Thus, the FERC standard is far 

more predictable. 

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determination of whether those payments can be recovered in rates. Under current 

timelines, a utility does not file an application for cost recovery until after it resolves all 

litigated claims, which in the case of San Diego took more than seven years from the 

time of the fires. The CPUC’s cost recovery process can take 18 months to two years. This

time lag creates financial stress on a utility which may need to raise additional capital to 

pay billions of dollars of wildfire claims without knowing whether it will be able to recover 

the costs of that capital in future rate increases. This can lead to lower credit ratings, 

higher borrowing costs and, therefore, higher rates paid by utility customers. Ultimately, 

as we have seen with PG&E, it can lead a utility to seek protection under the federal 

bankruptcy laws. 

Consideration of Insurance Impacts 

Before discussing potential concepts, it is important to consider the current impact of 

climate change and catastrophic wildfire damage on the availability and affordability 

of insurance and the risk that any proposed changes to liability for wildfire damage 

could exacerbate those impacts. 

Insurance pricing and availability is responsive to a very basic principle: as risk increases, 

the cost of insurance increases and the availability of insurance coverage decreases. 

With record high losses from catastrophic wildfires, insurers are responding by filing for 

rate increases and retrenching their coverage eligibility standards. According to the 

California Department of Insurance (CDI), many regions of the state face insurance 

availability and affordability constraints. This is evidenced by increasing non-renewals 

and significant insurance premium increases in the areas of the state affected by 

wildfires. Investments that increase resiliency to climate-related catastrophes will add 

stability to insurance options. Without affordable insurance, regions throughout the state 

will find homes decreasing in value. 

Current Trends in Insurance Availability and Affordability 

Insurance rates are principally based on recent loss experience. According to CDI, in 

California, the loss experience resulting from catastrophes is not loaded directly into the 

rates but instead placed in a catastrophe load that is an average of at least 20 years of 

catastrophe experience. Despite that fact, rates are beginning to increase. 

According to the CDI: 

 Carriers have submitted applications to CDI for over 100 rate increases for 

homeowners insurance in the last two years, more than double the filings in the 

previous two years; 

 Homeowners in areas with heightened wildfire risk are receiving double-digit rate 

increases; 

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 There has been a significant uptick in policy counts at the California Fair Access to 

Insurance Requirements Plan (FAIR Plan)48 for homes located in areas of high wildfire 

risk, by 50 percent in the last five years (from 22,000 policies for homes with wildfire risk 

exposures to 33,000 such policies), although the FAIR Plan only insures about 130,000 

homes in total out of approximately 13 million residences in the state; 

 The number of homeowners who have purchased insurance from surplus lines insurers 

has also increased, though the total remains fewer than 60,000 statewide. Surplus 

lines coverage is available only to consumers who cannot find coverage with an 

admitted insurer. The rates are not regulated nor is the coverage backed by the 

California Insurance Guarantee Association; and 

 Consumer complaints about non-renewals in high risk counties have also doubled in 

the last two years. 

According to CDI, the overall number of adverse actions that are reflected in available 

data are relatively low compared to the California homeowners’ insurance market as a

whole. After two consecutive years of massive homeowners insurance loss ratios of 

insurers—201 percent in 2017 and 170 percent in 2018–there is a sense of urgency about 

the decreasing availability and affordability in 2019, especially for regions with high 

wildfire risk. 

The strike force recommends that the Governor and Legislature, in consultation with the 

Insurance Commissioner, consider the following: 

 Should all insurers be obligated to offer insurance to homeowners living in the WUI if 

the insured conducts specific wildfire mitigation? 

 Should all insurers be obligated to offer reduced rates for those homeowners and 

communities that implement prescribed wildfire mitigation measures? 

 Should insurers be obligated to offer consumers who are ineligible for a homeowners’

policy either a “difference in conditions” policy or a “premises liability policy” as

complementary coverage for a FAIR Plan fire policy? 

 The California Insurance Guarantee Association policy limits have not been 

increased for at least two decades. Is it time to increase the current limit of $500,000 

to recognize current construction costs? 

Concepts for a Solution 

The strike force heard from experts and stakeholders about alternative approaches. 

Based on this input, research and evaluation of the strengths and weaknesses of 

alternative approaches, we identified three concepts for consideration: 

 Concept 1: Liquidity-Only Fund. This concept would create a fund to provide 

liquidity for utilities to pay wildfire damage claims pending CPUC determination of 

48 The FAIR Plan was created in July 1968 as an insurance pool established to assure the availability of basic property 

insurance to people who own insurable property in the State of California and who, beyond their control, have been 

unable to obtain insurance in the voluntary insurance market. See https://www.cfpnet.com. 

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whether or not those claims are appropriate for cost recovery and may be 

coupled with modification of cost recovery standards. 

 Concept 2: Changing Strict Liability to a Fault-Based Standard. This concept 

would involve modification of California’s strict liability standard under inverse 

condemnation to one based on fault to balance the need for public 

improvements with private harm to individuals. 

 Concept 3: Wildfire Fund. This concept would create a wildfire fund coupled 

with a revised cost recovery standard to spread the cost of catastrophic wildfires 

more broadly among stakeholders. 

Given the inherent uncertainty we face and the number of foundational policy 

questions that must be addressed, the strike force recommends that the Commission on 

Catastrophic Wildfire Cost and Recovery, the Legislature, and the Governor’s strike force 

continue working over the next two months to develop a solution for consideration by 

the Governor and the Legislature that most effectively addresses wildfire liability 

consistent with the principles that the strike force has outlined. 

Each of the three concepts requires statutory changes to clarify the prudent manager 

standard and the requisite burden of proof related to when an IOU is permitted to 

recover costs and expenses of wildfires from its customers. To achieve a result that meets 

the principles outlined in this Report, utilities will have to make significant contributions to 

the benefit of ratepayers. 

Concepts 1 and 3 rely on voluntary contributions from utility investors to different extents. 

The larger the contribution required, the more clarity utility investors will demand in the 

regulatory standard for cost recovery from ratepayers. 

Concept 1: Liquidity-Only Fund 

The liquidity-only fund involves a modest modification to the current SB 901 framework to 

address the delay between when a utility pays wildfire claims and when the CPUC 

makes its rate recovery determination. This concept would create a fund to provide 

bridge financing for utilities to pay wildfire liability claims pending the CPUC’s decision on

cost recovery under a modified standard. The liquidity-only fund does not reduce the 

burden on utility customers or re-distribute the costs of wildfires among stakeholders. As 

such, it does not address certain principles set forth above. In combination with changes 

to the CPUC cost recovery process, a liquidity-only fund could stabilize the credit ratings 

of utilities. 

The liquidity-only fund could be capitalized by utility investors and ratepayers, potentially 

through a continuation and securitization of the Department of Water Resources (DWR) 

charge implemented during the power crisis in 2001 and expected to be fully repaid 

before the end of 2020. All or a portion of that securitization charge could be extended 

and dedicated to the liquidity-only fund. 

The fund would then be available to provide funds for utilities to pay claims after a 

determination of cause and before a determination of cost recovery. When the CPUC 

makes a cost recovery determination, the fund then works as follows: 

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 If the CPUC determines that the utility met the cost recovery standard and therefore 

can recover the costs in rates, then the utility would charge the ratepayers and 

reimburse the fund for the amounts drawn. 

 If the CPUC determines that the utility did not meet the cost recovery standard and 

therefore cannot recover costs in rates, then the utility would be required to repay 

the amounts drawn from the fund such that ratepayers would not bear the cost of 

such amounts. 

This concept does not shield utility customers from uncapped liability for wildfire 

damages. In fact, if cost recovery changes increase the certainty that utilities can 

recover damages from their customers, ratepayers will pay more. 

Further Research. 

Several questions and policy considerations must be addressed to evaluate the liquidityonly fund and the impact it would have on reducing and socializing costs, and its 

ultimate impact on consumers: 

 Can the fund provide sufficient liquidity to pay claims in a timely manner while 

allowing the CPUC to evaluate wildfires? 

 Can this concept, in combination with necessary changes in the CPUC rate recovery 

process, provide enough certainty to the capital markets to stabilize ratings and the 

perception of a utility’s credit quality? 

 How durable can the liquidity fund be while the utilities address their safety 

deficiencies? 

 How much can we expect from this simplified solution if we don’t address thefactors 

that turn massive wildfires into massive damage claims? 

 What does this option mean for rates and affordability? 

 What shareholder contribution, if any, would be required to capitalize the fund? 

Concept 2: Changing Strict Liability to a Fault-Based Standard 

A second concept is to change California’s strict liability standard to one based on fault. 

Applying a fault-based standard—utilities pay for damage if caused by their 

misconduct—would balance the need for public improvements (i.e. an electrical 

distribution system) with the private harm to individuals occasioned by those 

improvements. This change would impact only claims for property damage, since 

California already applies a negligence standard to personal injury, wrongful death, and 

other tort claims. 

Moving to a fault-based standard would shift the risk of property loss to insurance 

companies and uninsured or underinsured property owners in cases where the utility was 

not a bad actor. Where the utility acted negligently, recklessly, or with intentional 

misconduct, it would still be responsible for paying damages, including possible punitive 

damages. 

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As with Concepts 1 and 3, a solution that changed to a fault-based liability standard 

would be accompanied with modifications to clarify the prudent manager standard 

and the requisite burden of proof related to when an IOU is permitted to recover costs 

and expenses of wildfires from its consumers. 

Shifting more of the direct financial burden of wildfires to insurance companies may also 

affect the cost and availability of property insurance in the WUI. Whether a reform of 

inverse condemnation would affect the cost and availability of insurance is unclear. If 

such an impact occurred, a variety of policy responses might be considered, including 

creating a catastrophic pooled insurance fund or reforms to the FAIR Plan, which 

provides last-resort fire insurance when homeowners or dwelling coverage is unavailable 

in the voluntary market of admitted insurers.49 Admitted insurers are obligated to share in 

any losses suffered by the FAIR Plan. 

Further Research. 

Several questions and policy considerations must be addressed to evaluate the impact 

moving to a fault-based system would have on reducing and spreading costs, and its 

ultimate impact on consumers: 

 How much would moving to a fault-based system reduce the settlements that utilities 

pay for wildfire claims? 

 Would availability and affordability of property insurance in the state, particularly in 

the WUI be affected? If so, are there policy options to mitigate that impact? 

 Would this approach yield certainty in the needed timeline given the potential legal 

risks and challenges? 

Concept 3: Wildfire Fund 

A third concept is to establish a well-capitalized wildfire fund that would create a buffer 

to absorb a significant portion of the wildfire liability costs that might otherwise be 

passed on to ratepayers under existing law and regulation while providing time for 

mitigation efforts to be advanced. The wildfire fund would also provide the utilities a 

source of immediate funding for the claims asserted against them for catastrophic 

wildfire damages and ensures prompt payment of those claims. 

This concept could accomplish each of these objectives if utility shareholders were 

prepared to make a substantial contribution to the fund’s claims-paying resources and if 

insurers were willing to accept a cap on their subrogation claims (their claims for 

reimbursement from the utilities of the payments to their insurance policyholders). If the 

wildfire fund is not sufficiently capitalized and/or the other stakeholders are not willing to 

49 The Commission on Catastrophic Wildfire Cost and Recovery is tasked with, among other matters, evaluating the 

impact of wildfire damage on insurance availability and affordability. The Commission is expected to deliver its report by 

July 1. 

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compromise their claims, then the wildfire fund will be exhausted more quickly and 

ratepayers will be responsible for costs thereafter. 

The CPUC would retain jurisdiction to impose penalties on utilities that fail to prudently 

manage their wildfire risks, and those penalties would be paid to the fund to enhance its 

claims paying resources. Like the liquidity-only fund, an extended DWR charge could be 

dedicated to support the claims paying resources of the wildfire fund. 

The following are reasonable elements of a wildfire fund that, depending on additional 

research, analysis, and development, may warrant consideration in the future. 

3. Pooled Capital: The wildfire fund would include pooled capital from all IOUs 

including each of SDG&E, SCE and PG&E and be accessible by each of those 

utilities to pay catastrophic wildfire claims. Municipally owned utilities may 

participate at their option. 

4. Only Catastrophic Fires: The fund would be limited to paying claims of utility-caused 

catastrophic wildfire liabilities only (as such fires would be defined in legislation 

establishing the fund). Smaller utility-caused fires and the first-dollar costs of 

catastrophic wildfires would be paid by a utility’s commercial liability insurance 

policy and/or self-insurance reserve. 

5. Claims Administration Trust. A wildfire fund could use a trust for the administration of 

claims. The trust could pay all subrogation claims to insurance companies and 

reimburse utilities for the costs of judgments on or settlements of uninsured and 

underinsured victims’ claims. All insurance companies writing insurance in the state 

could be required to agree that subrogation claims arising out of catastrophic 

wildfire claims will be asserted against the trust. A potentially valuable feature of the 

wildfire fund could be that subrogation claims will receive settlements at a stated 

percentage of the validated amount of their claim. Utilities could be responsible for 

litigating or settling claims brought by uninsured and underinsured victims. They 

could then seek reimbursement from the trust for the settlement amounts or final 

judgments. The reimbursement process could provide incentives for the utilities to 

settle promptly with victims, while also ensuring that they settle for fair, but not 

excessive, amounts. 

6. Automatic Access to the Fund. A utility could seek to pay wildfire claims from the 

fund upon determination that the fire was a catastrophic utility-caused wildfire 

without pre-determination by the CPUC whether or not the utility acted prudently, 

reasonably, or without negligence. 

7. Penalties to Discourage Behavior by Fund Participants that Violates Regulatory 

Requirements or is Imprudent: Regulatory reforms could incorporate penalties that 

would create disincentives for negligent or unreasonable behavior by fund 

participants. Penalties could be paid into the fund to further extend claims paying 

capacity. 

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Further Research. 

 How large would the fund need to be to be durable over the anticipated period of 

time necessary for utilities to make material progress in containing catastrophic 

wildfire risk? 

 How can we design a fund that provides the proper incentives for utilities to invest in 

prevention to reduce wildfire damages and claims and for property owners to 

protect themselves by purchasing adequate insurance? 

 After emerging from bankruptcy and providing for adequate compensation to its 

pre-petition wildfire victims, how will PG&E raise the necessary capital to make its 

contribution to the fund? 

 How much time will it take to form and capitalize a wildfire fund? How should liability 

for wildfires that may occur in 2019 prior to the fund’s formation be treated? Can the 

fund be established before PG&E emerges from bankruptcy? 

 Capping subrogation claims moves the upper range of risk from the utility to the 

insurers, who will pass it on to customers. What would be the long-term impact on the 

availability of insurance? 

 Would the subrogation cap apply to both property claims and casualty claims, 

which are different rights under the law? 

 Should insurers or insureds contribute to fund capitalization? 

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Part 4: A More Effective CPUC with the Tools to 

Manage a Changing Utility Market 

California’s changing energy market and the need to mitigate and adapt to climate 

change require a state utility regulator that is effective in today’s reality.

The CPUC has a long history as a regulator of rates. It manages complex, participatory, 

and time-consuming proceedings to set energy rates for the state’s utilities. Its structure 

and deliberative processes flow from the California Constitution, which authorizes the 

CPUC to fix rates and charges and allows utilities to raise rates or charges if justified.50 The 

CPUC has an imperative to balance the financial health of utilities and the need to keep 

rates as low as possible. 

The current structure of the CPUC does not align with California’s need for a regulator

that can effectively address wildfire safety and can be nimble in today’s changing 

energy market. The CPUC has assumed a greater role in safety regulation, as well as in 

protecting consumers. However, its structure has not fundamentally changed. Further, its 

other obligations, including regulation of some transportation industries, 

telecommunications, and other industries has grown as the demands on the Commission 

as the state’s regulator of utilities have increased and become more complicated.

The Commission needs to strengthen its efforts as an evaluator of risk reduction and as a 

key line of defense to prevent wildfires caused by utility infrastructure. It must also be 

more nimble and provide necessary certainty more quickly than it does today in light of 

the changing energy market and heightened fire risk. Implementing a comprehensive 

strategy to improve safety, keep costs down and reach California’s clean energy goals

requires a regulator that applies and enforces regulation in a predictable, timely, and 

fair way. 

The Current CPUC Process 

The CPUC has three primary roles: quasi-legislative, rate-setting, and adjudicatory 

disputes. Under current law and practice, the CPUC uses different processes depending 

on the role it is performing. All types of proceedings are record based and governed by 

either an Assigned Commissioner or an Administrative Law Judge (ALJ). All involve 

extensive consultation and public input. 

The CPUC typically addresses policy issues and capital expenditures in separate 

proceedings. For example, the issue of wildfire mitigation is being handled in two 

separate proceedings in front of the CPUC--one specific to the WMPs and the second as 

part of the general rate case (GRC). As wildfires become more frequent and larger, and 

as the state’s energy market changes, the CPUC needs a decision-making process that 

is responsive to these developments. 

50 Article XII Public Utilities, CAL. CONS. [SECTION 1 - SEC. 9]. 

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IOUs file GRCs with the CPUC every three years for prospective costs. Between GRC 

proceedings, the IOUs often file for approval for recovery of unexpected costs incurred. 

Except for certain minor matters, a highly structured legal process applies to decisions on 

these filings. The process insures that the filing party and opposing parties have an ability 

to be heard, including by submitting pleadings and testimony. The testimony and filings 

are important because the Commission must base its decisions on evidence in the 

record. The process provides other parties the ability to present views that are contrary 

to those of the IOUs. While it has value, the existing process can be time-consuming.51 

If the Assigned Commissioner is not the presiding officer, the statutory structure of the 

CPUC’s decision-making process often leaves ALJs with more control over the timing of 

the process than the Commissioners. That can lead to delays in proceedings even when 

the Commissioners wish to prioritize the decision-making. 

In its rate-setting mode, the CPUC faces a difficult balancing act. On the one hand, the 

CPUC wants the IOUs to make appropriate investments and expenditures so they can 

provide safe and reliable service to their customers. On the other hand, an IOU’s only

source of income is its customers. Consumers have an interest in avoiding unnecessary 

costs and investments and keeping borrowing costs down. IOUs operate their business 

by collecting a return on investment, but the investments and the return are closely 

regulated by the CPUC. When the IOUs are financially healthy, utility customers benefit 

from lower cost of capital. When utilities are financially unhealthy, the inverse occurs as 

evidenced today in the case of PG&E. 

In rate-setting and cost recovery cases, the burden falls on the utility to prove that its 

requests or its past actions were reasonable or prudent. In some instances, the utility may 

face difficulty proving that past actions meet this burden, which can create financial 

uncertainty for the utility. To avoid this, utilities may elect not to make expenditures unless 

the cost recovery was pre-approved by the CPUC. 

The CPUC sometimes is tasked with new responsibilities that fall outside its traditional 

function of ensuring that rates are just and reasonable. After the San Bruno and Aliso 

Canyon events, safety has become a much more significant issue for the CPUC. The 

recent expansion of the Commission’s role into reviewing WMPs under SB 901, as

described above, is a further example of the CPUC’s expanded role.

The CPUC’s statutory and Constitutional responsibilities go beyond the rate-making 

cases. In developing and overseeing clean energy programs and in its role in 

51 As an example, SCE filed its most recent GRC on September 1, 2016, and it is still pending today, more than 2 years later. 

See In re: San Diego Gas & Electric Co., Test Year 2018 General Rate Case Application of So. Cal. Edison Co A 16-09-001 

(Cal. Pu. Util. Comm’n) (Sept. 1, 2016); When SDG&E filed to recover its third-party damage claims in connection with its 

2007 wildfires, it took 2 years for the CPUC to issue its decision denying recovery, and it took 6 months for the CPUC to issue 

its rehearing order after SDG&E filed its rehearing request. See Application of San Diego Gas & Elec. Co. (U 902 E) for 

Authorization to Recover Costs Related to the 2007 Southern California Wildfires Recorded in the Wildfire Expense 

Memorandum Account, In re: San Diego Gas & Electric Co., Decision Denying Application, A 17-11-033 (Cal. Pu. Util. 

Comm’n) (Dec. 6, 2017); In re: San Diego Gas & Electric Co., Order Denying Rehearing of Decision 17-11-033 (Cal. Pu. Util. 

Comm’n) (Jul. 13, 2018).

. 

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developing and enforcing safety regulations, the CPUC can also be a policy-setting 

body and a quasi-judicial body. At times, the ALJ-led process the CPUC utilizes does not 

lend itself to public accessibility or speedy development of new policies. This may 

contrast with the public’s expectation that the Commissioners be the ultimate decision

makers who should be held accountable for the timing of developing new rules and 

programs. 

While there is merit in existing CPUC processes, the lack of flexibility and inefficiency 

frustrates the ability of the CPUC to effectively regulate utilities in a way that best meets 

the needs of Californians from a safety and financial standpoint. To more effectively 

meet the state’s needs in today’s environment, the CPUC must be reformed. The 

recommendations set forth below represent near-term steps that can be taken to 

improve CPUC efficiency and effectiveness. Longer-term, the state should evaluate a 

more comprehensive overhaul of the CPUC in an effort to better serve the changing 

needs of California. 

Recommendations 

 Expand Safety Expertise: Provide resources to the CPUC for meaningful review of 

WMPs or alternatively create a wildfire safety division in another agency. The CPUC 

must—on a priority basis—develop appropriate processes and expertise to handle 

matters involving safety. This should cover the CPUC’s responsibilities for setting safety

standards, conducting inspections and audits, and enforcing the standards. A good 

starting point would be to look at safety-related programs used by regulators in other 

industry sectors that involve high risks to property and human health and safety, such 

as the nuclear, aviation, and refinery industries. While the 2016 reforms made a small 

step toward an increased focus on safety, more is needed. Building the CPUC’s 

capabilities related to safety may require organizational changes, budget increases, 

and a concerted effort to hire, contract for, or obtain through cooperative efforts 

with other agencies, the expertise needed to handle these new responsibilities. If 

experts are not available, then the CPUC should consider entering into grants or 

contracts with universities or consulting firms that could conduct research and 

develop standards and training programs to create the necessary expertise. 

 Overhaul Decision-Making Processes. The CPUC should overhaul and reform its 

procedures to implement safety related initiatives and requirements more efficiently. 

Given the potentially large financial implications of such determinations as related to 

wildfire-related costs, it is particularly important that the CPUC put in place a process 

that is both timely and fair, while maintaining public input and transparency as 

appropriate. To achieve this goal, the strike force recommends that the Legislature 

consider directing the CPUC to do the following: 

 Streamline procedural designations for simpler cases. Many proceedings that 

could be quasi-legislative are currently subject to full rate-setting procedures. 

 Increase authority to delegate lower-level decisions to technical staff to free up 

time for administrative law judges and commissioners to focus on traditional ratesetting matters. 

 Eliminate unnecessary steps in proceedings and provide Commissioners with 

discretion to shorten timelines. 

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 Streamline enforcement procedures and increase enforcement authority, 

including delegating more enforcement authority to the Commission’s safety

division staff. 

 Review of High-Risk Industry Regulatory Models. The Governor's Office of Planning 

and Research, in consultation with experts from academia, industry, and other 

research institutions, should review models of agencies that regulate high-risk 

industries, such as nuclear power and refineries, and summarize best practices that 

could be applied to the CPUC. These practices could include structural or 

procedural models and necessary expertise. 

 Industry Best Practices. The CPUC should develop and adopt industry best practices 

for utilities as a resource. It should regularly monitor and update those practices to 

reflect learning, changing technology, and the latest assessment of climate change. 

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Part 5: Holding PG&E Accountable and Building a 

Utility that Prioritizes Safety 

On January 29, PG&E filed voluntary chapter 11 petitions in the United States Bankruptcy 

Court for the Northern District of California--PG&E’s second bankruptcy filing in the last 

18 years.52 PG&E attributed its chapter 11 filing to claims resulting from the 2018 wildfires, 

including the Camp Fire which PG&E has since stated was likely ignited by its 

equipment.53 PG&E justified the filing, in part, by citing the need to provide fair 

compensation for fire victims. Yet consistent with its historic culture, PG&E failed to honor 

scheduled settlement payments to victims of the Butte Fire in the days leading up to its 

bankruptcy. PG&E’s willingness to use the bankruptcy process to the advantage of its 

investors, and at the expense of Californians, cannot be repeated. 

PG&E’s decision to voluntarily seek the protection of a chapter 11 bankruptcy court 

punctuates more than two decades of mismanagement, misconduct, and failed efforts 

to improve its safety culture. Prior to its filing, PG&E already was on criminal probation, 

having been convicted of five felony counts for safety violations in connection with the 

San Bruno gas explosion in 2010. That explosion resulted in eight deaths, approximately 

58 injuries and 38 homes destroyed.54 PG&E was also convicted of obstruction of justice, 

fined over $4.6 million, and sentenced to substantial community service as a result of the 

same incident. 

In addition to the incidents described above, PG&E has been investigated in 

connection with or settled claims related to numerous wildfires and explosions in the last 

25 years including: 

 The Trauner Fire (1994) 

 The Pendola Fire (1999) 

 The Sims Fire (2004) 

 Fred’s Fire (2004) 

 The Rancho Codova gas explosion (2008) 

 The 2009 San Francisco electrical explosion 

 The 2014 Carmel gas explosion 

 The Butte Fire (2015) 

 Numerous electrical and substation fires (e.g. 1996, 1999, 2003). 

52 PG&E previously filed for bankruptcy in 2001 in an effort to undermine the jurisdiction of the CPUC. That multi-year 

bankruptcy resulted in substantial rate increases for PG&E customers. 

53 PG&E, PG&E Publicly Releases Supplemental Report on Electric Incidents Near the Camp Fire,” the Camp Fire, (Dec. 11, 

2018) 

https://www.pge.com/en/about/newsroom/newsdetails/index.page?title=20181211_pge_publicly_releases_supplementa 

l_report_on_electric_incidents_near_the_camp_fire (last visited Apr. 10, 2019). 

54 See CAL. PUB. UTILITIES COMM., The San Bruno Catastrophe and Its Aftermath, (May 2012), 

https://www.in.gov/iurc/files/Zeller_-_San_Bruno_Catastrophe_Aftermath.pdf (last visited Apr. 10, 2019). 

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Despite repeated assurances from management that the company would change, 

PG&E has failed to implement the fundamental management and cultural reforms to 

prioritize safety and reliable service. 

Californians deserve better, and we will demand better. The state simply will not accept 

a situation where 40 percent of Californians are served by a company that cannot be 

trusted to provide safe and affordable power. PG&E must be radically restructured and 

transformed into a responsible and accountable utility. 

PG&E’s bankruptcy proceedings will have direct and profound impacts on the people 

of California. The state must participate in the proceedings to protect its interests, 

including those of wildfire victims who have claims against the company that must be 

resolved fairly and equitably, PG&E employees who are vital to maintain energy delivery 

and protect the safety of communities, and the company’s customers who deserve 

clean, safe, reliable, and affordable energy. We expect and demand that PG&E will, as 

it is obligated to do, comply with state law, including CPUC safety directives and 

renewable energy mandates. 

Recommendations 

PG&E’s stakeholders have the primary responsibility for filing a plan of reorganization or 

otherwise formulating an exit from chapter 11. For a plan of reorganization to be 

confirmed in the bankruptcy proceedings, it must meet the criteria set forth in the 

Bankruptcy Code, including that the plan be feasible and that PG&E be in compliance 

with law. To meet those standards, PG&E will have to demonstrate that it has sufficient 

funds available to make fund distributions provided under the plan and comply with its 

WMP and demonstrate that is in compliance with state and federal laws, rules and 

regulations, including laws and regulations related to clean energy. Given the 

importance of PG&E to California, the state must work to assure that any resolution of 

that proceeding achieves the near, medium and long-term goals of the state and its 

people over opportunistic investors. 

The strike force recommends that the state actively monitor and evaluate the PG&E 

bankruptcy proceeding to assure that the state’s interests are being protected. Where 

appropriate and necessary, the state should participate in the bankruptcy proceedings 

and be heard on particular issues of interest to California. The strike force specifically 

recommends the following: 

 Evaluate Any Proposals to Satisfy 2017-2018 Wildfire Claims. PG&E must satisfy the 

claims against it from the 2017-2018 wildfires. To that end, the state should evaluate 

the structure and amount of any trust or other mechanism to satisfy those claims to 

assure victims are fully and fairly treated. In addition, the state must evaluate any 

plan of reorganization to assess whether provisions of that plan could disadvantage 

existing and future wildfire victims. 

 Assure that PG&E Treats Its Employees Fairly. PG&E’s employees are a critical part of 

the future of the company and must be treated fairly in the bankruptcy proceeding. 

The state should monitor the bankruptcy proceedings to assure that employees are 

treated fairly. 

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Wildfires and Climate Change: California’s Energy Future

 Require that PG&E’s Investors Contribute to a Solution. Part 3 of this report identified 

certain conceptual approaches to the wildfire liability framework applicable to IOUs. 

While PG&E would be a beneficiary of any of those constructs, PG&E’s investors must 

contribute to any solution adopted by the state to address wildfire liabilities in a way 

that benefits consumers. Those contributions could take a variety of forms, including 

investing in wildfire mitigation and safety or providing funding for other solutions. 

 Require PG&E Meet Conditions to Participate in Changes to the Wildfire Liability 

Structure for IOUs. PG&E must meet conditions to participate in any approach to 

address wildfire liabilities, including fully remaking its corporate and safety culture 

and prioritizing governance that recognizes the public trust placed in PG&E. 

 Assure That PG&E Meets Its Obligations to Decommission Diablo Canyon. PG&E must 

move forward with plans to safely and expeditiously decommission the Diablo 

Canyon Nuclear Power Plant. Trust funds and other moneys collected by consumers 

must not be diverted from that effort and additional funds must be provided by 

PG&E as needed. The state should evaluate the filings in the PG&E bankruptcy 

proceeding including the plan to assure that such filings require PG&E to meet its 

obligations with regard to Diablo Canyon. 

 Evaluate the Impact of PG&E Bankruptcy on Clean Energy Goals. PG&E is party to 

numerous power purchase agreements that could be impacted by the chapter 11. 

The state should evaluate the impact of any decisions made by PG&E in its chapter 

11 with regard to those agreements in light of California’s clean energy goals. 

 Assure Plan is Compliant with Law and Feasible. The state should evaluate any plan 

of reorganization to assure that the emerging company will be in compliance with 

law and that the plan will be feasible. 

 Continue Appropriate Regulatory Oversight. Although PG&E is in chapter 11, the 

CPUC also has a substantial say in the future of PG&E (as it does for all IOUs). For 

example, the CPUC has the power to review PG&E’s WMP and its compliance with 

that plan, as well as to review PG&E’s safety culture assessment. The CPUC also has

the authority to impose substantial penalties on PG&E for failure to comply with 

applicable regulations. Moreover, through the rate-setting function, the CPUC may 

provide incentives for PG&E to make prudent expenditures on, and investments in, 

safety. This can include actions, such as adjusting the allowed return on equity, that 

directly affect investors and management. The CPUC should continue to provide 

appropriate regulatory oversight. 

While regrettable, the company’s chapter 11 filing offers an opportunity to build a new,

responsible, and accountable utility for Northern California. 

Given the long history of safety failures and the critical interests at stake, the state can 

take no options off the table, including municipalization of all or a portion of PG&E’s

operations; division of PG&E’s service territories into smaller, regional markets; refocusing 

PG&E’s operations on transmission and distribution; or reorganization of PG&E as a new 

company structured to meet its obligations to California.. 

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Wildfires and Climate Change: California’s Energy Future

Conclusion 

Catastrophic wildfires present tremendous challenges for California. The Governor’s

strike force makes numerous recommendations throughout this report to address those 

challenges. The strike force recommended immediate next steps are below. 

Figure-11 

Next Steps 

Catastrophic 

Wildfire 

Prevention and 

Response 

 Publicize the Ready, Set, Go app – Wildfire prevention depends on 

each of us. To help educate property owners and residents in areas 

most at risk, CALFIRE has developed an app called “Ready, Set,Go!” 

that breaks down actions needed to be ready for wildfire. CALFIRE 

should work with leaders in vulnerable communities on outreach and 

provide technical assistance. Every Californian should download the 

Ready Set Go App. 

 Monitor and assess mitigation efforts – CALFIRE is pursuing a number 

of aggressive wildfire mitigation efforts, including distributing local 

community grants for mitigation. Metrics will be developed to 

measure the effectiveness of these programs and the community 

reach for local grant recipients. 

 Convene Governor’s 2019 Emergency Preparedness Summit – The 

Governor’s Office of Emergency Services will, by June 2019,convene 

first responders, government agencies, local governments, 

community residents, and technical experts to develop plans for the 

state’s emergency preparedness. The summit will highlight best

practices of local communities, share resources that have worked, 

and develop the networks necessary for ongoing preparedness 

improvements. 

 Prepare for state response to utilities reducing fire risks – Utilities are 

reportedly considering expanded de-energization of specific areas 

during high-risk periods to reduce the risk of wildfires. OES and the 

CPUC will lead an effort to assess utility plans to de-energize andwill 

work with utilities, local governments, first responders, critical 

providers, businesses and residents to manage the potential of deenergization. 

 Implement emergency preparedness campaign and continue to 

pursue necessary resources for wildfire prevention and response. 

Mitigating 

Climate 

Change through 

Clean Energy 

Policies 

 Work with the Legislature, Cal ISO, and the CPUC on a legislative and 

regulatory agenda to ensure that California simultaneously addresses 

the impacts of climate change, including increased wildfires, and the 

root causes of climate change. Such work must include review of 

emissions from the electricity and transportation sectors. We must 

plan for a multi-year reform agenda, working in collaboration with 

the Legislature. 

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 Convene academics, private foundations, stakeholders, and 

government to assist in the development of a multi-year agenda to 

ensure that California simultaneously addresses the impacts of 

climate change. 

Fair Allocation 

of Catastrophic 

Wildfire 

Damage 

 Significant policy development work, legal analysis, and financial 

simulations have all informed the liability concepts included in the 

report. However, additional analysis is needed. Request the SB 901 

commission to review and analyze major liability concepts presented 

in report and solicit public comment regarding the different options. 

 Direct the Governor’s Strike Force to continue its work developing 

these options for consideration by the Governor and theLegislature 

by no later than this summer. 

 Request the Department of Insurance to monitor, study, and issue 

recommendations to maintain an accessible and affordable 

insurance market throughout the state. 

Increasing 

Capacity of the 

CPUC with the 

Tools to 

Effectively 

Manage a 

Changing Utility 

Market 

 Focus on building internal CPUC capacity to evaluate and help 

strengthen the IOU’s wildfire mitigation plans immediately. 

 Direct the CPUC to immediately assess regulatory and legislative 

changes to make their proceedings more expeditious. Identify and 

draft regulations and legislation needed to expedite their 

administrative proceedings. Such proposals should be reviewed with 

stakeholders and pursued as soon as possible. 

Accountable by 

Building a Utility 

that Prioritizes 

Safety 

Holding PG&E  Push for Safety Changes. The CPUC should continue to provide 

appropriate regulatory oversight on utility safety. The CPUC has the 

power to review PG&E's wildfire mitigation plan and its compliance 

with that plan, as well as to review PG&E's safety culture assessment. 

The CPUC also has the authority to impose substantial penalties on 

PG&E for failure to comply with applicable regulations. These tools 

should be actively used to help create the safest utility possible. 

 Actively Monitor and Appear in the Bankruptcy Proceedings. The 

state will actively monitor the PG&E bankruptcy proceedings to 

assure that California’s interests are being protected. Where 

appropriate and necessary, the state will participate in the 

bankruptcy proceedings and be heard on particular issues of interest 

to California, including fair treatment of fire victims and employees, 

issues relating to safety, and factors affecting the state’s progress to

achieve climate commitments. 

 Require PG&E's investors to contribute to any solution adopted bythe 

state to address wildfire victim claims. Those contributions could take 

a variety of forms including investing in wildfire mitigation and safety 

or providing funding for the wildfire fund. 

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Wildfires and Climate Change: California’s Energy Future

Wildfires have always plagued California. Climate change has made--and will continue 

to make--the fires hotter, bigger, more frequent, and more destructive. The costs of 

these fires is unbearable. The loss of human life, property, economic opportunities, 

community life, exacerbated by the costs to rebuild communities – cannot be sustained. 

Yet, we know we cannot avoid all fire risks. This level of disaster touches every 

Californian. All Californians must share in the responsibility to mitigate wildfires. Paying for 

the costs of wildfires is also a problem that requires shared responsibility and shared 

sacrifice. All stakeholders must come together to address the cumulative liability of 

uncontrolled fires. The status quo is not an option. Doing nothing is unacceptable. 

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Annex A 

Comparison of Wildfire Mitigation Plans 

Estimated 2019 Costs ($ in millions) 

Wildfires and Climate Change: California’s Energy Future

PG&E SCE SDG&E 

O&M: $849 O&M: $507 O&M: $24 

Capital: $1,623 Capital: $1,027 Capital: $178 

Total: $2,472 Total: $1,535 Total: $202 

Plan Priorities 

PG&E 

 Vegetation Management

& Enhanced Inspections

 Wildfire Response

 System Hardening

 Situational Monitoring

 Operational Practices

(e.g., de-energization)

 Tech Research /

Development

SCE 

 Ignition Reduction in HighRisk Areas

 Fire Suppression

 System Hardening

 Communication

SDG&E 

 Ignition Reduction in HighRisk Areas

 Fire Suppression

 Wildfire safety and

recovery

High-Risk Exposure (% of Service Territory) 

PG&E 

52% 

SCE 

35% 

SDG&E 

54%55 

System Hardening (Est. 2019 % of Circuit Miles Hardened in High-Risk Threat District) 

PG&E 

0.6% 

SDG&E 

N/A56 

SCE 

0.5% 

Vegetation Management (Est. 2019 removals / % of total trees) 

PG&E 

375,000 trees 

(0.375%) 

SCE 

51 

7,500 trees 

(0.500%) 

SDG&E 

9,000 trees 

(1.935%) 

55 Percentage of SDG&E’s overhead circuit miles that reside in High Fire Threat Districts. Percentage of Service Territory figures 

were not available. 

56 SDG&E uses an execution metric which expects that 90-100 percent of its system will be hardened by the end of 2019. 

This includes system miles hardened and percentage of poles replaced 

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Weather Stations in High-Risk Threat District 

PG&E 

2019 Install: 400 

(1.10 per 100 mi2) 

Cumulative: 600 

(1.65 per 100 mi2) 

SCE 

2019 Install: 315 

(1.70 per 100 mi2) 

Cumulative57: 440 

(2.38 per 100 mi2) 

SDG&E 

N/A 

Cumulative: 175 

(6.21 per 100 mi2) 

Cameras in High-Risk Threat District 

PG&E SCE SDG&E 

2019 Install: 71 2019 Install: 62 N/A (0.20 per 100 mi2) (0.34 per 100 mi2) 

Cumulative: 79 Cumulative58: 160 Cumulative: 107 

(0.22 per 100 mi2) (0.87 per 100 mi2) (3.79 per 100 mi2) 

De-Energization 

PG&E 

 PG&E has implemented 

the Wildlife Reclosing 

Disable program to 

manage circuit breakers if

necessary 

 PG&E targets an increase 

in its Public Safety Power 

Shutoff program from 

~7,000 mi of lines to 

~25,000 mi of lines in 2019 

SCE 

 SCE has broadly outlined 

its plans to install 

additional remote 

automatic reclosers 

 SCE will conduct Public 

Safety Power Shutoffs 

based on the judgement 

of the incident 

management team and 

has a contingency 

operating plan in place 

SDG&E 

 SDG&E has deployed 

overhead distribution 

reclosers focusing on HighRisk Threat Districts 

 To determine whether to 

employ a Power Shutoff, 

SDG&E considers multiple 

variables such as weather 

conditions, vegetation, 

field observations, flying 

debris, expected duration 

of conditions and location 

of existing fires/wildfire 

activity 

57 Weather stations reflect 2018 + 2019E installations. 

58 Cameras reflect 2018-2020E installations. 

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Annex B 

SB 901 Factors 

1. The nature and severity of the conduct of the electric grid and its officers, 

employees, contractors, and other entities with which the electric grid forms a 

contractual relationship, including systemic corporate defects. 

2. Whether the electric grid disregarded indicators of wildfire risk. 

3. Whether the electric grid failed to design its assets in a reasonable manner. 

4. Whether the electric grid failed to operate its assets in a reasonable manner. 

5. Whether the electric grid failed to maintain its assets in a reasonable manner. 

6. Whether the electric grid's practices to monitor, predict, and anticipate wildfires, and 

to operate its facilities in a reasonable manner based on information gained from its 

monitoring and predicting of wildfires, were reasonable. 

7. The extent to which the costs and expenses were in part caused by circumstances 

beyond the electric grid's control. 

8. Whether extreme climate conditions at the location of the wildfire's ignition, including 

humidity, temperature, or winds occurring during the wildfire, contributed to the fire's 

ignition or exacerbated the extent of the damages. The electric grid shall provide 

the CPUC with specific evidence and data demonstrating the impact of climate 

conditions on the severity of the wildfire. 

9. The electric grid's compliance with regulations, laws, CPUC orders, and its wildfire 

mitigation plans prepared pursuant to Section 8386 of the PUC, including its history of 

compliance. 

10. Official findings of state, local, or federal government offices summarizing statutory, 

regulatory, or ordinance violations by any actor that contributed to the extent of the 

damages. 

11. Whether the costs and expenses were caused by a single violation or multiple 

violations of relevant rules. 

12. Other factors the CPUC finds necessary to evaluate the reasonableness of the costs 

and expenses, including factors traditionally relied upon by the CPUC in its decisions. 

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